What revenue multiple do investors pay?
Founders asked for a median 2.5× their yearly revenue; deals closed at 1.0×.
Asked 2.5×, paid 1× (median)
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A revenue multiple is the company’s valuation divided by its yearly revenue. For 197 pitches we know both the ask and the revenue. When a founder gave several figures, we took the largest yearly one (a monthly figure counts 12 times). The median founder (the middle value) asked for 2.5× their revenue. The middle half asked for 1.2× to 6.7×.
In the 128 of these pitches that closed a deal, the median deal valued the company at 1.0× its revenue, with the middle half between 0.5× and 2.8×. The stage changes the price. Growing companies closed at a median 0.9×, established ones at 0.4×. Companies that had only started selling closed at 2.8×, because their revenue was still small.
Revenue here is what the founder said on air, often a rough figure. Very high multiples usually come from young companies quoting small sales. If you ask for many times your revenue, expect the investors to ask what the price is based on.
What was said
Mohamed Ismail Mansour
ObjectionThis valuation has nothing to do with the reality of the situation at all; you're asking for 30 times your sales.
Alma (الما) · S2 E13 · 20:53 · Paraphrased
Mohamed Farouk
ConcernWe don't value companies based on revenue multiples; you're not the type of commercial company that can ask for a multiple.
Tayar (طيار) · S5 E11 · 5:23 · Paraphrased
Mohamed Farouk
ConcernI value tech companies at one-time revenue, whereas I value companies like yours by their P/E ratio. If I valued you by P/E, you wouldn't be happy with the result.
Didoz (ديدوز) · S5 E14 · 17:16 · Paraphrased