Klaviyo IPO Could Be Valued at 13x ARR: The New Profitable Growth SaaS Benchmark?

Well, now SaaS companies have another reason to get to profitability as if they needed one -- looking more like Klaviyo.

Klaviyo's revenue (ex-pricing changes) is in the ~40% range, their ARR is $585M, and they have turned the corner on profitability in the next year.

The big question everyone had was - what would the valuation multiple be?

Well, we just learned. The company is looking to get a $6.8B valuation, which would put it near 13x ARR.

SaaS founders can be excused for taking a huge sigh of relief. In the past, 10x ARR was a solid multiple for someone growing but not experiencing hyper-growth. Slower growth got 2-5x ARR generally, at least in the public markets.

During the pandemic, SaaS multiples skyrocketed as investors poured money in. During this time, it wasn't uncommon to see 20x+ multiples.

The past 6-9 months have been a bloodbath in SaaS 🗡 . I've seen growing profitable companies only get 2-3x ARR. 👀 Hopefully we can close the book on that.

For investors, 13x is a solid benchmark, particularly as there hasn't been a large number of profitable eCommerce SaaS software companies historically. The fact that Klaviyo is setting a public benchmark and (hopefully) continues to be profitable will, I think, have a few benefits and lessons for the industry:

* It will set a trend that resonates with VCs -- VCs now have a public comparable to beat. (Private company valuations usually exceed public company ones)

* It will set a trend that resonates with Founders -- and encourage good behavior. But they should have long-term operating metric targets and an understanding of how to get there (not just a hope and a dream).

* As a note of caution, though.... Founders should not overreach to this message. Klaviyo was founded in 2012 and I bet they might still NOT be profitable unless we got into these more difficult economic times. And no way they reach where they are today if they tried to be profitable from Day 1. SaaS just doesn't tend to work that way because of the sales, marketing, and technology investments required.

In any event, we can celebrate a momentary return to sanity.

At least until the next bubble. Oh wait -- Artificial Intelligence says hello. 👋 👋

Regardless of what you think, Klaviyo is the new SaaS North Star for the eCommerce independent software vendors (ISVs).