Christopher Janz, from Point Nine Capital, has been creating the now infamous SaaS napkin since 2016. In this post I have visualised what’s changed for founders raising capital over the last 6 years. You can also view the raw data.
Round size
The round sizes have unsurprisingly grown significantly, with some tapering off in 2022. Pre-seed rounds in 2016 ranged from $200k to $500k, whereas they now range from $1–$2m. Series A have grown from $3m to $12m in 2016 to $6m and $18m in 2022 showing no sign of drop off in spite of the macro economic situation.
Valuation
Valuations have materially increased across the board, with some signs this is rebounding this year. Pre-seed valuations in 2022 are up to $12m from $3m in 2016, and Series B valuations are up to $270m last year up from $100m in 2016.
Comparing this to public SaaS multiples, it’s clear that Series B valuations more closely track the markets, whereas Seed and Series A valuations seem to be bump upward regardless of the market.
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Data I would love to see is how each annual cohort performed for investors i.e. what returns did investors get based on which year they invested in and the valuations at the time. Unfortunately I don’t have access to this data.
ARR
The ARR expectations for seed companies has not shifted much, up from $0 to $0.6m to now $0 to $1m. Series A has shown significant change with the expectation in 2016 being $1.2m to $3m, in 2021 being $0.5m to $4m, and this year being $0.5m to $2.5m showing that Series A companies can certainly raise with less ARR today. Series B mins have dropped too from $4.2m to $3m.
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Capital Efficiency
2022 is the year where every VC suddenly started talking about capital efficiency in every meeting with their portfolios. It’s not surprising given access to capital is no longer cheap given the wider economic shift in the markets and the “silent” VC crash. Predictably this year Christopher Janz added capital efficiency to the SaaS Napkin as a new metric you now need to think about at Series A (3.5x) and Series B (2.5x). If your investors have not asked you about capital efficiency yet, they must be living under a rock. If you don’t know what it is:
The Capital Efficiency Ratio is the ratio of how much a company has spent growing revenue and how much they’re receiving in return. It is the broadest measure of company effectiveness in generating ARR
What next?
I honestly don’t know what’s coming next, I am not sure anyone really knows either. However, what I can clearly observe is that interest rates continue to climb resulting in downward pressure on equity multiples, and all startup and growth businesses around me are tightening their belts and extending their runways in anticipation of a bumpy fundraising ride ahead. If you’re looking to fundraise now but have the option to delay, my advice would be to hold off until there is more stability in the market and access to money eases.