PVC SaaS Index™ | Q2/25 – SaaS Multiples Rebounding

Practical Summary:

• PVC SaaS Index™ is now at 7.0X sales, up from under 6X following “Liberation Day.”
• Multiples remain below their 5- and 10-year averages of ~8-9X.
• Lower multiples reflect slowing growth rates, currently ~15% YoY. However, IPO sentiment has improved dramatically over the past 30 days.

This post is an update in a quarterly series of posts that tracks the PVC SaaS Index™, a basket of publicly traded US-listed SaaS companies.

Software as a Service (“SaaS”) has been around longer than the cool new cloud. Although the SaaS category shares some aspects of cloud computing, its focus tends to be clearer: SaaS is the delivery of software applications over the Internet from a server hosted by the SaaS provider somewhere far away.

The first big SaaS IPO was Salesforce (NASDAQ: CRM) in 2004. Almost 20 years later, we have 92 pure-play SaaS/cloud companies in our proprietary PVC SaaS Index™. These companies all trade on the NASDAQ or the NYSE. They derive most of their recognized revenues from long-term contractual commitments (12 months or greater) and recognize those revenues periodically over the life of those contracts.

In this index, we removed several SaaS companies that have gone below $500M market cap, essentially becoming broken IPOs or “zombies” in the public markets, with low liquidity, high volatility, and uncertain public company prospects. Those companies include OneSpan, Agora, Bandwidth, CS Disco, and BigCommerce. Aspen Technology, SolarWinds, Smartsheet, Zuora, and WalkMe were acquired and have also been removed.

The figure below shows the historical EV/TTM (Enterprise Value to Trailing Twelve Months of Revenue) going back to 2013.

Between Q3/20 and Q4/21, the revenue multiples of SaaS companies rocketed to all-time highs, fueled by pandemic-era fiscal and monetary stimulus primarily from the US, ECB, China, Canada, UK, and Japan, peaking around 18-19X in late 2021. By mid-2022, multiples had dropped to 6-8X EV/TTM revenues, and as of Q2/24, continue to trade at the low end of this range.

Multiples recovered to around 8X in Q4/24, when post-election optimism created favorable sentiment. However, the index dropped by nearly 30% in the weeks running up to and following “Liberation Day,” which caused a broad market sell-off. While overall broad indices dropped by 18-20%, high-beta tech stocks traded off even more.

In the past quarter, however, markets have rallied to approach new highs again, and the SaaS Index has benefited. Since the April 7 bottom, the PVC SaaS Index is up 24%, making up about half of the drop that happened since hitting a local high on January 28, 2025. The index is still down 46% from its all-time high in November 2021.

The multiple of 7.0X in Q2/25 is now up quite a bit from the 6.2X multiple in the summer of 2024. Multiples are now just a little bit below the 2016-2019 level, when SaaS multiples averaged about 8X, so I think this represents a normalization of multiples into the historical range of about 7-9X.

SaaS multiples, once peaking at 18–19X in 2021, have rebounded to 7.0X in Q2/25 after a volatile period, signaling a return to their historical 7–9X range amid improving market sentiment.

Growth Slowing in Q2/25

Much of this multiple compression can be attributed to the slower growth rates seen in SaaS companies since the end of 2021. The figure below shows that the median growth rate in our index of publicly traded SaaS companies has dropped from the mid-30% range to the high teens since the middle of 2021. As growth has slowed, multiples have fallen by almost two-thirds from the heights that they hit during the 2021 “Everything, Everywhere, All at Once” bubble, which was catalyzed by Western governments and their post-COVID spending binge financed by trillions in printed money from the Fed, ECB, Bank of England, and Bank of Japan.

This improvement in growth has NOT come at the expense of profitability. In Q1/25, the median free cash flow margin in our index was +20%, up smartly from where we were 2 years ago.

IPO Window Opening Up

There’s some good news in the liquidity-starved venture markets. New listings in the US have bounced back sharply in recent weeks, with some eye-popping debuts stoking hopes of a sustained revival after a dry spell since April. IPO activity had remained shackled after President Donald Trump’s “Liberation Day” tariff threats, which rattled global markets and hit sentiment in April.

Last week, fintech firm Chime (CHYM.O), climbed 59% on its debut, extending a winning streak for the latest US stock market entrants. That was followed by Voyager, a defense tech company that doubled at the bell. Prior to that, AI chipmaker Coreweave and fintech stablecoin player Circle had strong bows.

Until recently, every VC-backed deal over the past 2 years had lost money for their backers, but now many of those companies are in the green. The packed IPO calendar for the rest of 2025 includes high-profile names such as Klarna, Gemini, and Cerebras.