A founder I know—let's call him David—came to me a couple of years ago. He'd already signed with another advisor, a firm that was just starting to dabble in SaaS M&A above $1M ARR, and they'd run a process for him. Now they were pressuring him to accept an offer: $18 million. That's where the market is at they were telling him.
"What do you think?" he asked.
I looked at the business. Good metrics. Strong retention. Growing nicely. I told him the truth: this is worth a lot more than that. Go back and tell them to run a proper process—put this in front of the buyers who actually value what you've built; I even gave him a couple of buyers they should definitely have talked to already (they hadn't).
He did. He eventually sold for $32 million.
That's not a rounding error. That's not "plus or minus 10%." That's nearly double. Same company, same founder, same year—just a different approach and actually putting the business in front of the buyers who pay the most.
This happens constantly. And it's why this guide exists.
The Information Problem
There's an enormous amount of misinformation floating around about how B2B SaaS companies get sold. What they're worth. Who buys them. What those buyers actually want. How to position your business. When to sell. How to negotiate.
Some of this misinformation is innocent—people repeating things they've heard without firsthand experience. Some of it is not. The M&A market is full of motivated actors whose incentives don't align with yours.
Buyers want to pay less. That's their job. Value-oriented acquirers build entire businesses around finding founders who don't know what market pricing looks like. They send hundreds of cold emails a month, hoping someone bites at 2x ARR when the business is worth 5x.
Even well-meaning advisors can steer you wrong. Your angel investor who wrote you a check at a $3M valuation might be thrilled at any exit—they've already mentally written off the investment, so $15 million sounds like a windfall. Your lawyer might be great at contracts but has no idea what SaaS multiples look like in 2024. Your VC might tell you to "talk to a few buyers and see what the market says"—but if you only talk to value buyers, you'll get a value-buyer answer.
The result: founders routinely leave 100%, 200%, sometimes 300% on the table. Not because their business isn't valuable, but because they didn't understand the market they were selling into.
A Market That Didn't Exist
Here's some context that helps explain why this problem persists.
Fifteen years ago, the market for B2B SaaS companies under $10M ARR essentially didn't exist. Private equity firms—the buyers who now dominate this space—simply weren't interested. They didn't get out of bed for anything below $10M or $20M ARR. The economics didn't work for their fund sizes, and the category wasn't yet proven enough to justify the attention.
That changed. Over the past decade, PE firms moved aggressively downmarket. Today, there are institutional buyers actively looking at companies doing $1M or $2M ARR. The capital is abundant. The playbooks are proven. Valuations have risen dramatically, and the market is far more liquid than it used to be.
But here's what didn't change: the advisory infrastructure around founders.
The VCs, lawyers, and informal advisors that founders turn to for guidance are largely the same people who were around before this market existed. They learned their instincts in a world where sub-$20M SaaS exits were rare, idiosyncratic, and often disappointing. Many of them still carry those instincts—even though the market has fundamentally shifted.
Meanwhile, the investment banks that do understand institutional SaaS M&A historically focused on larger deals. Below $10M or $15M ARR, you were stuck with generalist brokers who also sold e-commerce stores, info products, and lifestyle businesses. Different buyers, different multiples, different everything.
That gap—between a market that had matured and an advisory ecosystem that hadn't—is exactly why Discretion Capital exists. When we started, I used to joke that we were "the world's best investment bank for $1–10M ARR SaaS companies." It was funny because it was true by default: there was no-one else doing it well.
What Founders Get Wrong
When founders enter the M&A market without understanding it, a few things tend to happen.
- They mistake any interest for real interest. Someone from a firm you've never heard of emails you about "exploring synergies." It feels exciting—someone wants to buy your company! But that buyer might be fishing for a bargain. They might send a hundred of those emails a month.
- They anchor on the first number they hear. If the first offer you get is $15 million, you start to believe that's roughly what you're worth. Maybe a little more, maybe a little less. But if you'd run a proper process, you might have learned the market would pay $30 million.
- They ask the wrong people for advice. Your investors, your lawyer, your founder friends—they all have opinions. But unless they've actually sold a SaaS company in this size range recently (and even then they might have sold at a discount and not known it), or advised on dozens of these transactions, their opinions are guesses dressed up as expertise.
- They underestimate variance. Selling a house, you might get plus or minus 10% depending on timing and negotiation. Selling a SaaS company, the spread between a bad outcome and a good outcome can be 3x or more. The market is not efficient. It rewards founders who understand it and punishes those who don't.
“As a single founder seeking to exit a rapidly growing business, the thought of going through the process of selling a company seemed like an impossible task. Discretion Capital stepped in and made it not only possible but relatively easy. The result was 11 LOIs, including numerous offers that exceeded my highest expectations.”
Cassio Mosqueira
Founder, IntakeQ
What This Guide Is For
This guide exists because there was no single place where a founder doing $2M, $5M, $10M, or $20M ARR could learn what the M&A market actually looks like.
Not what people think it looks like. Not what buyers tell you it looks like. What it actually looks like—based on dozens of transactions, years of pattern recognition, and direct experience on both sides of the table.
By the time you finish this guide, you'll understand:
- Who actually buys companies like yours—and what motivates each type of buyer
- What your company is worth—and the specific factors that move the needle on valuation
- How deal structures work—and why the headline number often isn't the real number
- How to run a process—and why competitive tension is the single biggest driver of outcomes
- When to sell—and how to think about timing, burnout, and optionality
- What good advisors do—and how to tell them apart from the rest
If you internalize what's in here, you'll be better prepared than 95% of founders when it comes time to think about M&A. You'll know which buyers to prioritize, which to avoid, and how to tell the difference. You'll understand what "market" actually means for a business like yours.
And if you decide to hire an advisor—whether that's us or someone else—you'll be able to evaluate them properly. You'll know what questions to ask. You'll know when you're getting good advice and when you're getting sold.
A Note on Incentives
I'll be direct: I run an investment bank. If you hire us and we help you sell your company, we make money. My incentives aren't perfectly aligned with yours—no advisor's are.
But here's what I believe: the best way to build a business like ours is to help founders get outcomes they couldn't have gotten on their own. That means being honest about what things are worth, running processes that maximize competitive tension, and telling founders the truth even when it's not what they want to hear.
This guide is part of that. Yes, it's marketing. But it's also genuinely useful—because if you understand the market better, you'll make better decisions. And if you make better decisions, some of you will hire us to help execute on them.
That's the deal. Now let's get into it.