Preparing for a SaaS Valuation
Whether you are raising a round or preparing for an acquisition, investors and buyers will look beyond the headline ARR number. Preparation determines whether your multiple is at the low or high end of the range for your growth tier.
The 12-Month Preparation Timeline
Investors look at trailing 12-month performance as the primary evidence for the growth story they are buying into. Starting preparation 12-18 months before a raise or sale gives you time to improve metrics that move slowly.
12-18 months before
- Launch or improve expansion revenue motion (upsells, cross-sells)
- Implement cohort tracking and NRR measurement if not already in place
- Reduce customer concentration if top customer exceeds 20% of ARR
- Begin SOC 2 compliance process if targeting enterprise buyers
6-12 months before
- Ensure financial statements are reviewed or audited
- Clean up cap table and resolve any ambiguous equity situations
- Document all key processes and remove single points of failure in leadership
- Build 24 months of clean MRR waterfall data
0-6 months before
- Prepare the data room with all due diligence materials
- Engage an investment bank or M&A advisor (for exits) or update your pitch deck
- Get introductions to target investors through warm referrals
- Review existing investor rights to understand process requirements
Due Diligence Checklist
Financial Data
- MRR and ARR waterfall for the last 24 months (new, expansion, churn, contraction)
- Monthly cohort retention analysis showing GRR and NRR by cohort
- Gross margin by product line and channel
- P&L with sales and marketing spend, R&D, and G&A broken out
- CAC by channel (paid, organic, outbound, inbound)
- Cash burn and runway forecast at current and scaled spend levels
- Customer count and ARPU by segment
Commercial Data
- Customer list by ARR (anonymised for early process) with contract lengths
- Top 10 customer logos and their ARR and tenure
- Logo churn rate and MRR churn rate by quarter for last 8 quarters
- NRR and GRR by quarter for last 8 quarters
- Sales cycle length and win rate by segment
- Pipeline data showing qualified opportunities and close rates
Product and Technology
- Product roadmap and engineering capacity
- System architecture documentation
- Security and compliance certifications (SOC 2, ISO 27001, GDPR)
- Data privacy policies and customer data handling practices
- Key integrations and partnership agreements
Legal and Corporate
- Cap table (fully diluted) with all options, warrants, and convertible instruments
- Existing investor rights and anti-dilution provisions
- Standard customer contracts and any side letters
- IP ownership confirmation and any employee or contractor IP assignments
- Employment agreements for key personnel
How to Tell Your Growth Story
A compelling growth narrative answers three questions: Why have you grown to where you are? Why will you continue growing at this rate? And why is now the right time to raise capital?
The why-us story
Product differentiation, unique insight, and why your team is the right team to solve this problem. Ground it in customer evidence - quotes, logos, use cases.
The market timing story
Why is this market large and growing now? What structural shifts (regulation, technology, behaviour change) create the window? Why couldn't this have been built five years ago?
The use-of-funds story
Exactly how will the capital raised turn into more ARR? Show the unit economics: if you invest $X in sales capacity, what ARR does that produce based on current metrics?