Technology and SaaS
Technology companies in BC range from IT service firms valued on earnings to software products valued on recurring revenue and growth. The right method depends on which you are. We help founders understand how buyers and investors will value the company, prepare for scrutiny and choose between a sale, a raise and a partnership.
How the money works
- Recurring revenue with low churn commands a different valuation from project revenue
- Code, data and intellectual property must be owned cleanly by the company to transfer
- Founder dependence in product and customer relationships is discounted heavily
- Growth funded by losses is valued differently by buyers, investors and lenders
The moves we make
- Separate recurring, project and services revenue and value each on its own basis
- Audit ownership of code, licences and customer contracts before going to market
- Prepare a data room that answers technical as well as financial diligence
- Compare a sale, a capital raise and a growth partnership before choosing a route
Earnings or recurring revenue
An IT services company, a development shop or an agency is valued like most businesses, on normalised earnings and the quality of its client base. A software product with subscription revenue is often valued on recurring revenue, growth, retention and margin, because buyers are paying for the predictability of the next year. Many BC technology companies are a mix, and sellers who present the whole company on the more flattering basis lose credibility in diligence. We separate the streams and value each honestly.
Technical diligence
Buyers and investors will look under the hood. They want to know who owns the code, whether contractors assigned their rights, what open-source licences are in the product, how the system is hosted and secured, how much technical debt exists and whether the product survives the founder leaving. We prepare founders for this with the same rigour as financial diligence, with Ali's technology team reviewing the stack. Problems found early are fixed or disclosed. Problems found late reprice the deal.
Sale, raise or partner
A founder with a working product and real demand has more than one route. A sale to a strategic buyer converts the company into cash now. A capital raise, run alongside a securities lawyer, funds growth at the cost of dilution and control. A growth partnership brings senior marketing, sales and technology capability into the business in exchange for a share of growth. We compare the three with the numbers on the table, because the right answer depends on what the founder wants next.
Questions from technology and SaaS owners
How is a SaaS company valued?
Usually on recurring revenue, growth rate, retention and margin, with earnings as a check. Smaller or slower-growing products are valued more like ordinary businesses, on normalised earnings.
What kills technology deals in diligence?
Unclear ownership of code, contractors who never assigned rights, undocumented open-source licences, security gaps and a product that only the founder can maintain. All are fixable if found early.
Should I raise money or sell?
It depends on what you want next and what the business can support. We model both, and a growth partnership, before you commit. The legal side of any raise belongs with your securities lawyer.
Start with a confidential conversation.
Tell Ali where the business is and what you want to happen next. You leave with a straight read on value, timing and the two or three moves that matter, whether or not we work together.