Need for ARR-based valuation, says BVP report

According to a report by

venture capital firm Bessemer Venture Partners,

the Software as a Service (SaaS) landscape

has seen a surge in the number of unicorns, but some of the valuations have seen a 'hype' that will eventually force a return to business fundamentals such as great products, bolstering customer service, and efficient go-to-market methods.

The proper measure for business success is the SaaS statistic,

Annual Recurring Revenue (ARR),

according to the paper, which highlights $100 million ARR as an inflection point in a SaaS company's journey.

According to the report, "at $100 million in annual revenue, Centaur businesses have product-market fit, a scalable go-to-market strategy, and a rising client base." With a $220 million fund established in November of last year, Bessemer is increasing its footprint in India.

Atlassian,

an Australian project management software vendor with a market capitalization of $47.8 billion on Nasdaq, is one of Bessemer's successful SaaS exits.

Bessemer partner Anant Vidur Puri, said, “If you look at where the public cloud multiples were 10 years ago, it was 10-11 times ARR [valuing a SaaS company based on revenue], but last year it was much higher. This had companies with $20-30 m ARR valued as unicorns.”