Episode 827 | The Founder's Guide to Selling Your SaaS for What It's Actually Worth

What It Covers

Einar Vollset, co-founder of TinySeed and founder of Discretion Capital, discusses his new book on M&A for B2B SaaS companies between 2 and 20 million ARR, explaining how private equity now dominates this market and why most founders leave significant money on the table.

Key Questions Answered

• •Buyer landscape reality: 70% of B2B SaaS acquisitions between 2 and 20 million ARR are completed by private equity buyers, either as platform acquisitions or tuck-ins to existing portfolio companies. Only 20% are strategic buyers. Founders who only approach competitors miss the dominant buyer pool entirely and typically receive far lower offers as a result.
• •Tuck-in valuation advantage: Private equity tuck-in buyers frequently outbid strategic acquirers because a target company solves a specific capability gap in their existing portfolio. A 5 million ARR business can sell for 15x ARR to a PE-backed platform that paid 3x ARR for its own acquisition, making tuck-in positioning a concrete pricing lever.
• •Growth rate as the primary valuation driver: Annual growth above 25% correlates with multiples of 4 to 6x ARR. Dropping below 25% growth triggers a buyer-type shift toward value and turnaround buyers, compressing multiples to roughly 2x ARR. A larger but slower-growing business can be worth millions less than a smaller, faster-growing one.
• •The over-running trap: Founders who delay selling to reach a higher ARR number often destroy value by exhausting growth channels. A 2 million ARR business growing 100% annually can fetch 10 to 20 million. The same business at 4 million ARR growing 10% annually may only command 4 to 8 million, a potential eight-figure loss in exit value.
• •Churn as downside protection for buyers: PE buyers model 3 to 5x returns in 3 to 5 years and treat churn as their primary risk factor. Monthly churn of 8% cycles through an entire customer base in under a year, making post-acquisition revenue projections unreliable. Low churn signals that revenue will survive founder departure, directly increasing buyer confidence and offer price.