"Let’s say you’re doing $5M ARR. What are you worth?
If you’re growing at 10%, maybe 3x ARR → $15M valuation.
If you’re growing at 50%, you could be worth 10–12x ARR → $50–60M valuation.
If you’re growing at 100%+, and retention is strong? You’re in the 15–20x club.
This is why growth rate matters so much."
A curious side effect of this norm is that founders are pushed hard to show the growth dynamics. The infamous hockey stick growth.
After all, each percent is like another million or so in valuation (to stick with the original numbers). While pumping the growth from 20% to 50% may be beyond reach, playing the numbers so they show a bit more rosy reality at the right time is a piece of cake.
Just look at any corporation pushing for the numbers before the end of a fiscal year (and thus, bonuses).
With startups, it's even more broken because the payout is explicitly non-linear.
So we are designing a game where short-term gains over long-term gains are rewarded. There's no shortage of stories of how that can backfire.
What stood out for me is how you framed valuation less as a static number and more as the “scorecard of your strategy.” I think too many founders obsess over chasing a multiple instead of engineering the fundamentals that make that multiple inevitable—low churn, efficient CAC payback, and true revenue stickiness. Well written, Chris!
ARR: the valuation anchor, and MRR: The momentum indicator! I love this breakdown, so relevant with the AI bubble talk and the mega funded AI startups we're seeing today.
Chris you've brilliantly stripped away the mystique around SaaS valuation and made it actionable. The progression from "ARR is your anchor" to "growth multiplies value" to "narrative sells the vision" creates a perfect framework that founders can actually use in investor meetings.
In my opinion, the biggest valuation killer is metric inconsistency. Founders who define ARR differently in their deck vs. their data room, or who can't explain why their MRR growth doesn't match their ARR claims. Investors smell this immediately, and it destroys trust faster than high churn ever could.
The other piece many founders miss is timing their valuation story. Early-stage companies often try to justify mature-stage multiples with growth metrics, when they should be selling potential. Late-stage companies sometimes still pitch like startups when they need to demonstrate operational excellence. The stage-appropriate mindset shift you outlined is crucial.
I know you didn't ask for this but one writing tip you can use to amplify this article's impact is opening with a specific scenario instead of the general "founder face" observation. Something like: "Sarah's Series A pitch started strong... $2M ARR, 80% growth, impressive logos. Then I asked about her unit economics. Silence. Her $20M valuation ask suddenly felt like wishful thinking."
Ghostwriting weekly newsletters for C-suite executives has taught me that a concrete example immediately demonstrates the stakes and makes the abstract concept of "valuation narrative" tangible. Readers can picture themselves in Sarah's shoes and feel the urgency to master these concepts. It transforms your advice from theoretical knowledge into "I need to know this before my next meeting" practical wisdom.
Valuation really does sit in that space between art and arithmetic. What I’ve seen time and again is how much confidence grows once founders grasp the key levers investors actually care about rather than trying to spin a story.
Amazing post Chris!
Glad you like it - part of a series and inspired by my new Book out this week ! The Big Book of BrainDumps 🧠💩
"Let’s say you’re doing $5M ARR. What are you worth?
If you’re growing at 10%, maybe 3x ARR → $15M valuation.
If you’re growing at 50%, you could be worth 10–12x ARR → $50–60M valuation.
If you’re growing at 100%+, and retention is strong? You’re in the 15–20x club.
This is why growth rate matters so much."
A curious side effect of this norm is that founders are pushed hard to show the growth dynamics. The infamous hockey stick growth.
After all, each percent is like another million or so in valuation (to stick with the original numbers). While pumping the growth from 20% to 50% may be beyond reach, playing the numbers so they show a bit more rosy reality at the right time is a piece of cake.
Just look at any corporation pushing for the numbers before the end of a fiscal year (and thus, bonuses).
With startups, it's even more broken because the payout is explicitly non-linear.
So we are designing a game where short-term gains over long-term gains are rewarded. There's no shortage of stories of how that can backfire.
What stood out for me is how you framed valuation less as a static number and more as the “scorecard of your strategy.” I think too many founders obsess over chasing a multiple instead of engineering the fundamentals that make that multiple inevitable—low churn, efficient CAC payback, and true revenue stickiness. Well written, Chris!
The basket is metrics that matter to investors get bigger the more mature the business - but you've captured the pre seed to Series A nicely ✨
Great job simplifying this - the sheer volume of metrics is overwhelming at first. Every founder should read this
The 101 of metrics could easily be the 101 metrics 😂 or the 101 pages of metrics 😬
ARR: the valuation anchor, and MRR: The momentum indicator! I love this breakdown, so relevant with the AI bubble talk and the mega funded AI startups we're seeing today.
Yes. Very true. With AI we're looking for usage as a major indicator that growth is real 🌟
Chris you've brilliantly stripped away the mystique around SaaS valuation and made it actionable. The progression from "ARR is your anchor" to "growth multiplies value" to "narrative sells the vision" creates a perfect framework that founders can actually use in investor meetings.
In my opinion, the biggest valuation killer is metric inconsistency. Founders who define ARR differently in their deck vs. their data room, or who can't explain why their MRR growth doesn't match their ARR claims. Investors smell this immediately, and it destroys trust faster than high churn ever could.
The other piece many founders miss is timing their valuation story. Early-stage companies often try to justify mature-stage multiples with growth metrics, when they should be selling potential. Late-stage companies sometimes still pitch like startups when they need to demonstrate operational excellence. The stage-appropriate mindset shift you outlined is crucial.
I know you didn't ask for this but one writing tip you can use to amplify this article's impact is opening with a specific scenario instead of the general "founder face" observation. Something like: "Sarah's Series A pitch started strong... $2M ARR, 80% growth, impressive logos. Then I asked about her unit economics. Silence. Her $20M valuation ask suddenly felt like wishful thinking."
Ghostwriting weekly newsletters for C-suite executives has taught me that a concrete example immediately demonstrates the stakes and makes the abstract concept of "valuation narrative" tangible. Readers can picture themselves in Sarah's shoes and feel the urgency to master these concepts. It transforms your advice from theoretical knowledge into "I need to know this before my next meeting" practical wisdom.
Valuation really does sit in that space between art and arithmetic. What I’ve seen time and again is how much confidence grows once founders grasp the key levers investors actually care about rather than trying to spin a story.