Disclaimer: Views expressed here are the author's own and based on public sources. The article is intended for informational purposes only. This is not financial advice. Please consult a professional for investment decisions.
***
We’ve all heard of SaaS companies marked to market at 10-15x ARR.
Well, meet Keap (formerly Infusionsoft): small business and CRM automation software. Keap had raised $200M+ in VC funding, built up to $85M in revenue... and then sold for just $80M.
That's right – a measly 1x multiple.
10 years ago, Keap was reportedly valued at $500M.
At least their offices feature a cool (American) football field! Source: Keap website
Not a typo. Not a fire sale. Just the harsh reality of what we call "stranded software" – a VC’s worst hangover. And Keap isn't alone. For every celebratory LinkedIn post about a SaaS exit at 15x ARR, there are dozens of quiet deals happening at 1-2x.
Why? Because some software companies are like quicksand – the more money you pour in, the deeper you sink.
Below, we share our thoughts on spotting stranded software from looking at hundreds of deals and we break down:
Why these companies end up "stranded"
The telltale signs of a future 1x multiple
Why even sophisticated VCs keep falling into this trap
Quick checklist for spotting (and avoiding) these companies before it's too late
How do software companies end up "stranded"?
Subscribe to Premium to read the rest.
Become a paying subscriber of Premium to get access to this post and other subscriber-only content.
UpgradeA subscription gets you:
- Access to premium content
- Cancel anytime
- Help keep the lights on 😜