#187: Practical Rule of 40 Growth+Profits Still Works for SaaS Acquirers - Juan Ignacio Garcia Braschi

Summary of #187: Practical Rule of 40 Growth+Profits Still Works for SaaS Acquirers - Juan Ignacio Garcia Braschi

by Greg Head

56m•March 13, 2026
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Overview of #187: Practical Rule of 40 Growth+Profits Still Works for SaaS Acquirers (Practical Founders Podcast — Juan Ignacio García Braschi)

This episode features Juan Ignacio García Braschi, CEO and managing partner of L40, a sell‑side M&A boutique for practical B2B SaaS founders (primarily Europe, also North & Latin America). Juan explains who’s buying SaaS today, how deals are being valued and structured, what founders should do to prepare, and practical timing/strategies for founders thinking about an exit. Main themes: Rule of 40 remains central, private equity and buy‑and‑hold groups are increasingly active, growth is the dominant multiple driver, and founders should plan 12–24 months ahead of a sale.

Guest & firm snapshot

  • Guest: Juan Ignacio García Braschi — former founder/operator (Cabify), banker, investor; now running L40 (3 partners, ~10 people; offices in Madrid, Miami, Lisbon).
  • Focus: sell‑side M&A advisory for B2B SaaS founders; typical deal sizes $20M–$200M enterprise value (common ARR range $5M–$50M; sweet spot $5M–$100M).
  • Geography: primarily European founders; buyers are global and increasingly geography‑agnostic if product addresses a global pain.

Key takeaways

  • Rule of 40 (growth % + EBITDA % ≥ 40) is effectively required for attractive exits today.
  • Growth rate is the single biggest driver of valuation multiples; retention and profitability are also critical.
  • Typical process time: expect ~6–9 months (4 months is an outlier).
  • L40 often reaches out to ~100 potential buyers in a process for a mid‑market SaaS target.
  • Plan to sell 12–24 months before your desired exit date; build decent profitability and sustainable growth.
  • Don’t over‑raise; raise only the capital needed to get to desired scale.

Market & buyer landscape

  • Buyer types
    • Permanent capital / buy‑and‑hold (e.g., Constellation-like): smoother execution, reliable closes, but often lower multiples.
    • Strategic buyers: opportunistic; legacy software buyers are less acquisitive than pre‑COVID; big strategics still buy but are selective.
    • Financial sponsors / private equity: very active, especially for roll‑ups or platform builds. Can pay higher multiples when there’s a clear strategic fit.
  • Trend: traditional PE firms increasingly enter tech, adding competition and driving multiples up.
  • Geography note: many buyers prefer familiar jurisdictions (North America), but quality European targets in credible jurisdictions still attract global buyers.

Valuation mechanics & typical multiples

  • Rule of thumb multiples (by ARR band):
    • $5M–$10M ARR: ~4–6x ARR (occasional 7x for exceptional cases).
    • $10M–$20M ARR: ~5–8x ARR (depends on growth, retention, profitability).
  • Primary valuation drivers:
    1. Growth rate (largest factor) — higher growth → big premium.
    2. Retention metrics (NDR/GDR) and customer stickiness.
    3. Profitability (EBITDA margin); 20%+ is attractive, double digits usually expected.
    4. Market defensibility, product durability (AI vulnerability/disruption risk considered).
  • AI: currently more of a fundraising narrative than a strong M&A valuation driver. It helps if AI improves product economics or retention, but traction matters.

Deal structures & founder outcomes

  • Common structures: full sale, majority sale with rollover equity, earnouts.
  • Earnouts vs rollover equity:
    • Earnouts are capped payments contingent on future performance — limited upside, dependent on achieving forecasts.
    • Rolling equity preserves post‑sale upside (uncapped exposure) but ties founder to the company/value path.
  • Founder involvement: typical minimum transition period ~1 year; 2 years is common. Founders can negotiate shorter/longer terms; many prefer to exit operationally sooner.
  • Important non‑price terms: team fate, change‑of‑control terms, reps & warranties, MAC clauses, shareholder protections for retained equity, and earnout mechanics.

Preparing to sell — practical checklist

  • Timeline: start preparing 12–24 months before target sale date.
  • Financials:
    • Ensure accurate, traceable accounting and metrics; fractional CFO or internal finance resource is acceptable.
    • Standardize KPIs: ARR, NDR, churn, LTV:CAC, gross margin, EBITDA.
  • Legal & IP:
    • IP assignment signed by employees/contractors.
    • Registered trademarks (where relevant).
    • Clean customer contracts and clear terms for key accounts.
    • Contractor agreements/engagements documented properly.
  • Operational:
    • Reduce single‑person/key‑dependency on founder; document processes; ensure team can operate without founder day‑to‑day.
    • Organize data/backup for diligence (customer lists, contracts, cap table, tax, payroll).
  • Narrative:
    • Prepare realistic, supportable financial projections (not overly aggressive) for buyer review.
    • Be transparent about concentrations, platform dependencies and risks — disclose early.

Common red flags & deal killers

  • Lack of transparency or mistrust from the founder (e.g., undisclosed customer concentration).
  • Heavy reliance on a single customer or platform (undisclosed) — becomes a risk if surprise appears during diligence.
  • Founders refusing reasonable legal protections or non‑competes.
  • Weak or messy financials / untraceable metrics.
  • Overly aggressive/unsupported projections tied to earnouts.

How an M&A advisor helps

  • Maximizes price and deal terms by running a competitive process.
  • Screens and qualifies buyers (financial funding verification and reputational vetting).
  • Manages founder bandwidth and stress during a distracting process.
  • Structures offers comparatively and negotiates legal/contractual details to protect sellers.
  • Acts as intermediary to preserve relationships and prevent inadvertent deal‑killing disclosures.

Practical advice for founders (direct quotes / distilled)

  • “If you think that you're going to sell your company, you should think of that two years ahead of when you want to sell.”
  • Aim for the sweet spot: steady growth of ~20–40% YoY with profitability — Rule of 40 compliant.
  • Don’t over‑raise capital; raise what you need to scale sensibly.
  • If you’re growing very quickly (2–3x YoY), consider delaying a sale — the company may be worth substantially more in 12–24 months.
  • Disclose customer concentration and other risks early — buyers will factor them into price/structure but won’t like surprises.

Actionable next steps (founder to‑do list)

  • Run a readiness audit: accounting, KPIs, contracts, IP, team dependencies.
  • Build a 12–24 month plan to reach Rule of 40 (growth + EBITDA ≥ 40).
  • Decide desired founder outcome (full exit vs roll + earnout) to guide buyer targeting.
  • If considering sale in 1–2 years, begin engaging an experienced sell‑side advisor to prep and market the company.
  • Document and centralize diligence materials (data room starters).

Closing note

The M&A market for practical B2B SaaS is active and competitive; growth remains the dominant value lever but profitability and predictable metrics (Rule of 40) are increasingly important. With 6–9 months typical process time and many buyer types available, founders who prepare financially, legally, and organizationally — and who plan their exit trajectory 12–24 months in advance — materially increase their chances of a smooth process and a superior transaction outcome.

Links / contact (from episode)

  • Guest firm: L40 (Juan Ignacio García Braschi) — sell‑side M&A for practical SaaS founders (offices Madrid, Miami, Lisbon).