revenue multiple

Definition

A valuation metric calculated by dividing company valuation by annual revenue, popular in tech because it works even when profits are mythical. Allows investors to justify astronomical valuations by citing "industry standards."

Example Usage

At a $100M valuation with $10M in revenue, they were trading at a 10x revenue multiple, which seemed high until we saw competitors at 15x.

Origin

Traditional valuation methodology adapted from public market analysis, became common in startup valuation in 1990s-2000s

Fun Fact

SaaS companies can command 10-20x revenue multiples while hardware companies struggle to get 2-3x, proving that investors care a lot more about gross margins than they admit.

Source: Financial valuation terminology

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