SaaS valuation multiples in 2025 have settled into a “new normal,” with average EV/Revenue multiples returning to pre-pandemic levels amid evolving investor expectations and global economic shifts. This article explores what investors are paying for growth, the factors that move SaaS multiples, and how private and public SaaS businesses are valued in 2025.
Overview of SaaS Valuation Multiples in 2025
SaaS companies in 2025 are generally valued using revenue multiples rather than profit ones, given the recurring-revenue business model and the fact that many firms are still scaling and investing heavily. As of mid-2025, the median public SaaS company is trading around 6.0x EV/Revenue, down from the 2021 peak, but still healthy compared to historical norms. Private M&A deals see a median multiple of 4.8x revenue, with the top quartile of transactions achieving over 8.3x.
The SaaS Valuation Cycle: Boom, Bust, and Stabilization
- Pandemic Years: Between 2020 and 2021, SaaS valuations reached unprecedented highs, with many companies trading well above 15x EV/Revenue. Asana notably hit an 89x multiple at market peak in November 2021.
- Correction Phase: The tightening of monetary policy and interest rate hikes after 2022 triggered a sharp correction. By early 2023, the median public SaaS multiple dropped to 6.7x, and by July 2025, it had settled at 6.0x.
- Current “Normal” Range: In 2025, public SaaS multiples are generally between 5.5x and 8.0x ARR for high-quality names, while private valuations hover just below public comparables.
Key Drivers of SaaS Valuation Multiples
1. Revenue Growth
Growth remains the dominant factor. The SaaS market still rewards high top-line expansion:
- In 2025, companies growing 20%+ can command multiples well above the median.
- Post-pandemic, median growth slowed. The average SaaS company’s revenue growth rate is now 13-16% annually, down from 31% in the COVID boom.
2. Profitability Trends
Profitability has become more important as markets mature. Investors are increasingly scrutinizing the path to positive EBITDA:
- As of mid-2025, roughly half of the leading public SaaS firms are EBITDA positive, up from only one-third just two years ago.
- Median EBITDA margins are approaching 7%, with net margins hovering near break-even in established firms.
3. Rule of 40
A quick metric for balancing growth and profitability, calculated as revenue growth (%) plus EBITDA margin (%):
- A Rule of 40 score above 40 is still the benchmark for strong SaaS operations.
- In 2025, companies with a Rule of 40 metric +10 points above peers can see revenue multiples rise by approximately 2.2x.
4. Market Sector and AI Integration
Certain sectors command premiums:
- AI-first SaaS, vertical SaaS (e.g., fintech, healthcare), and platforms with clear ROI-driving features are most sought after.
- Vertical platforms and function-specific AI assets are rewarded with multiples of 8-12x; broader horizontal platforms without clear ROI stagnate at 3-5x.
SaaS Multiples by Company Size and Profile
Company Profile | Multiple Range (2025) | Notes |
|---|---|---|
Public SaaS median | 6.0x – 7.0x EV/Revenue | Large, established, typically NYSE/Nasdaq |
Private M&A median | 4.8x EV/Revenue | Median for disclosed deals since 2015 |
Top quartile private | >8.3x EV/Revenue | Fast growth, low churn, large TAM |
Bootstrapped SaaS | ~4.8x EV/Revenue | Slower growth than VC-backed |
VC-backed SaaS | ~5.3x EV/Revenue | Usually, higher growth and retention |
AI/vertical SaaS | 8–12x revenue | Proven retention and upsell |
Examples from 2025: Highest and Lowest Multiples
Top Valued Companies:
- Crowdstrike (20.8x ARR)
- ServiceNow (19.5x ARR)
- Datadog (17.5x ARR)
- Most top-10 players by ARR multiple are leaders in security, workflow automation, or developer tools, often with strong NRR and above-average margins.
Lower Tier:
- Upland Software (0.4x ARR)
- Domo (0.9x ARR)
- Bigcommerce (1.4x ARR)
- These names suffer from flat or declining revenue and negative margins.
Why Multiples Vary: Growth, NRR, Sector, and Deal Size
- Higher multiples are reserved for SaaS offerings with:
- Rapid growth (20%+ YoY)
- High net revenue retention (NRR 120%+)
- Sticky vertical use cases or deep integration in enterprise workflows
- Lower churn and proven upsell
- Efficient use of capitalsaas+1
- Mid-market and lower-multiple deals typically reflect:
- Niche or commoditized products
- Slowing growth (<10%)
- High churn or weak upsell
- High dependence on one or two major customers, Aventis-advisors
- Deal size impacts value: transactions above $50M can achieve nearly double the revenue multiple as those in the $20M–$50M range.
Special Focus: The Impact of AI and Industry Sector
- AI SaaS businesses that drive measurable client outcomes in specific verticals (fintech, healthcare, logistics) now outpace generic horizontal SaaS for premiums.
- Mid-market buyers require stronger evidence (customer stickiness, NRR, ROI cases) before paying a premium for AI-driven SaaS.
M&A and IPO Market in 2025
- After historic lows in venture investment and IPOs (2022-2024), sentiment is more optimistic with the Fed signaling lower rates and a handful of successful public offerings in 2025. Still, Series A deals remain rare, with growth-stage and buyout activity dominating.
- Industry experts expect more SaaS companies to return to growth-centric strategies if borrowing costs fall further in 2025, though efficient, sustainable expansion remains the investor focus.
Takeaways for SaaS Founders and Investors
- Public SaaS multiples in 2025 are in the 6–7x range, with private deals at a 15–35% discount but rising for high performers.
- Growth and profitability have returned to balance, with the market quick to shift premiums toward companies with strong Rule of 40 metrics.
- AI-first functionality, high NRR, and sector specialization boost multiples, but broad, undifferentiated SaaS platforms struggle to command a premium.
- Investors and acquirers remain cautious amid continued macroeconomic uncertainty and closely scrutinize every aspect of SaaS business fundamentals before paying up for growth.
In summary, 2025’s SaaS valuation multiples illustrate a rationalized market—investors are paying up for real growth, capital efficiency, vertical specialization, and demonstrable AI integration, with broad-based speculative premiums firmly a thing of the past.
