How Cybersecurity Companies Are Valued
Cybersecurity is one of the few software categories that's defied the multiple compression of 2022-2024. The combination of mission-critical spend, switching costs measured in months, regulatory tailwinds (NIST, SOC 2, federal mandates), and breach-driven board-level urgency keeps buyer demand elastic even when general SaaS multiples soften.
That premium isn't uniform. The same 3x revenue range applies to commodity MSSP work and a high-NRR EDR platform — and they trade radically differently. Below, the bands buyers actually use, organized by how you should think about your own company.
SMB Cyber: 2-5x ARR (Sub-$25M Revenue)
Companies under $25M ARR price on revenue, not EBITDA, and the range is wide. The bottom of the range (~2x) reflects services-heavy security shops — pen testing, compliance assessment, MSSP work that's really staff augmentation in security clothing. The top of the range (~5x) reflects product-led companies with documented ARR growth and clear evidence the customer base will renew.
What buyers diligence at this size: logo retention (do customers stay 3+ years?), NRR above 100% (are existing accounts expanding?), and customer count diversification(no top-3 above 30%). A $10M ARR cyber business with 110% NRR and 200+ customers gets bid up to 5-7x; the same revenue concentrated in 20 enterprise accounts with flat NRR trades at 2-3x.
Mid-Market Cyber: 5-8x ARR ($25M-$500M)
At this size, the conversation shifts to category leadership. Buyers — strategic and PE — are looking for companies that own a defensible niche: SASE, identity, EDR, vulnerability management, secrets management, security data lakes. Generic offerings don't clear this range; specialized platforms with technical moats do.
Mid-market cyber companies with 30%+ EBITDA margins also start to trade on EBITDA in parallel — typically 14-32x — and the higher of the two methods wins. NRR >110%, federal/regulated customer base, and partner ecosystem (CrowdStrike, Palo Alto, Microsoft Sentinel integrations) are the multiplier ingredients.
Premium Platforms: 10-25x ARR ($500M+)
At public-comp scale (CrowdStrike, Palo Alto Networks, Zscaler, SentinelOne, Wiz), the multiples reflect growth more than current ARR. CrowdStrike traded above 20x ARR through 2024-2025 because the underlying ARR was compounding 30%+. Wiz reportedly took offers around $20B (~25x ARR) on ~$700M ARR before declining Google's $23B bid in 2024.
For privately-held companies in this range, strategic acquirers like Cisco (which paid 7x ARR for Splunk at $28B), Palo Alto (acquired Talon, Dig, IBM's QRadar SaaS), CrowdStrike (Bionic, Flow), and Zscaler set the comp set. Thoma Bravo's portfolio (Sophos, Proofpoint, SailPoint, ForgeRock) provides PE-side comps in the same range.
Key Drivers Buyers Will Diligence
Net Revenue Retention (NRR) is the single most-watched metric. Above 110%: premium. Below 100%: red flag — suggests churn or downgrade exceeds expansion. The cyber-specific nuance: NRR including customer additions vs. expansion-only NRR are different numbers; buyers will ask for both.
Federal and regulated revenue commands a multiple premium because the procurement cycle that lands those customers is its own moat. FedRAMP-authorized cyber companies frequently trade 1-2 turns higher than commercial-only equivalents at the same ARR.
Platform breadth vs. point solution: buyers increasingly pay platform multiples (8-12x) and point-solution multiples (3-5x). If you do one thing for one buyer persona, you're a feature; if you span EDR + identity + cloud workload + GRC, you're a platform.
What Reduces Cyber Valuations
Customer breach exposure: if your product was named in a customer's breach disclosure, buyers will discount aggressively, even when the root cause wasn't your fault. Forensic narrative ready for diligence.
Channel partner concentration: many cyber companies do 70%+ of revenue through 1-2 distribution partners (Optiv, GuidePoint, CDW). Buyers diligence whether those relationships are contracted or handshake — and discount accordingly.
Talent costs: cyber engineers are the most expensive software engineers in the market. Companies running 30%+ R&D spend without growth to match get marked down.