SaaS Company Benchmarks - Debt/Equity Ratio

The Capchase Team
The Capchase Team
Posted on
August 31, 2022
min read
SaaS Company Benchmarks - Debt/Equity Ratio

Understanding growth benchmarks, both how they are calculated and why they are important indicators of your company’s success, is important for long-term growth. Companies that are successful and grow faster than their peers often have an easier time raising capital, hiring, and getting press. Below, we define Debt/Equity Ratio, explain its importance, and share the rates that you need to be at to be in the top quartile of same-stage SaaS companies.

Debt/Equity Ratio Defined

Before analyzing the ratio of Debt/Equity and how your company’s Debt/Equity ratio compares to that of other similar-stage SaaS companies, it is important to understand how it is calculated:

Debt-to-equity is used to assess a company’s financial leverage. It tells you whether a business is able to cover outstanding debts with shareholder equity in case of a business downturn.

Comparing Debt/Equity Ratio by Company Stage

When analyzing trends in companies’ Debt/Equity ratio based on their stage, you can see that once companies reach the $5-10m in ARR mark, there’s a jump in D/E Ratio. This is best explained by companies in our dataset taking low millions in equity and receiving 2x larger debt facilities secured against receivables or cash flow.

A comparison of Debt/Equity Ratios from a private analysis of over 200 VC-backed SaaS companies with $1 - $15m in Annual Recurring Revenue.

About Our Data & SaaS Company Benchmark Report

Whether you’re planning to raise funding or preparing your worst-case scenario, it’s more important than ever to have a razor-sharp understanding of what good performance looks like and which metrics are the markers of a healthy SaaS business. You can view the entire benchmark report, including which companies we analyzed, here.

For this report, we analyzed 439 private SaaS companies with $1 - 15m Annual Recurring Revenue. The data reflects actual financial performance, sourced directly from companies’ own records. We believe it is the largest dataset of its kind that is based on financial actuals, rather than survey data. When specifically analyzing Debt/Equity ratios, however, our data is based on information from over 200 VC-backed SaaS companies with $1 - $15m in Annual Recurring Revenue.

We then compared the performance of these private companies against 43 SaaS businesses that went public in 2020 and 2021. Data on public SaaS performance was sourced from their S-1 filings.

Or, for more analyses of important SaaS benchmarks, see our findings on: