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Fascinating. Jumping up to public markets, I thought this was an interesting insight yesterday from Jamin Ball at Altimeter: > There's now only 3 cloud softwa

Fascinating. Jumping up to public markets, I thought this was an interesting insight yesterday from Jamin Ball at Altimeter: > There's now only 3 cloud software companies trading >10x NTM rev. Snowflake at 15.2x, Veeva at 10.8x and Cloudflare at 10.5x [0] :O [0] https://twitter.com/jaminball/status/1653482586054987776 https://twitter.com/jaminball/status/1653482586054987776

claytonjy 3y ago
How does this compare to private companies? I don't see anything in the article about revenue multiples, but I was on the market recently and anecdotally everyone is trying to justify much higher multiples for early stage (pre-C) private SaaS right now.
- JumpCrisscross 3y ago
  > everyone is trying to justify much higher multiples for early stage (pre-C) private SaaS right now Growth adjusting à la PEG [1] might help normalise the data. Pre-C businesses should grow faster than public ones. That said, these are all heuristics—details like churn, margins and customer acquisition cost matter. [1] https://en.m.wikipedia.org/wiki/PEG_ratio https://en.m.wikipedia.org/wiki/PEG_ratio
  - claytonjy 3y ago
    I checked my notes and 20-30x seems was the target next-round multiple for the A's and B's I talked to. I get that earlier companies get a higher multiple based on growth, but I don't know if 2-3x the multiple for top public co's is reasonable or not.
    - Retric 3y ago
      It’s not worth investing in private companies unless their long term growth outlook is significantly outperforming public ones. PEG on the other hand is by necessity a backward looking metric. That self selection means they really should have a higher multiple even if you judge them using the same metrics. IE if you have a public company growing by 20% per year and a private one growing by 20% per year you should only invest in the private one of it’s at a significant discount or it’s growth will likely continue for significantly longer than the public one.
      - ComputerGuru 3y ago
        You forgot the one exception: or you expect the private company to go public after your investment.
        Retric 3y ago
        That reduces but doesn’t eliminate this preference. A private company going public in 1 months is still one month where you have less liquidity than investing in a public company for that month. Everything else being equal liquidity makes public companies more attractive.
        ComputerGuru 3y ago
        Well, most people would be betting that by investing pre-IPO they can cash out upon or shortly after IPO with nice gains. Of course none of that is guaranteed.
        Retric 3y ago
        You still need to find someone to take the other side of that investment. Taking a company public is generally profitable because of people’s liquidity preference. Companies will sell shares to an investment bank directly before an IPO as both a form of payment and a hedge. It’s a very nuanced transaction that might otherwise seem dumb on the surface.
        ComputerGuru 3y ago
        Thanks for the additional info. I feel like I need to read up on this some more to make more sense of all the conflicting bits I have accumulated.
- MuffinFlavored 3y ago
  how high?

claytonjy 3y ago

How does this compare to private companies? I don't see anything in the article about revenue multiples, but I was on the market recently and anecdotally everyone is trying to justify much higher multiples for early stage (pre-C) private SaaS right now.

JumpCrisscross 3y ago
> everyone is trying to justify much higher multiples for early stage (pre-C) private SaaS right now Growth adjusting à la PEG [1] might help normalise the data. Pre-C businesses should grow faster than public ones. That said, these are all heuristics—details like churn, margins and customer acquisition cost matter. [1] https://en.m.wikipedia.org/wiki/PEG_ratio https://en.m.wikipedia.org/wiki/PEG_ratio
- claytonjy 3y ago
  I checked my notes and 20-30x seems was the target next-round multiple for the A's and B's I talked to. I get that earlier companies get a higher multiple based on growth, but I don't know if 2-3x the multiple for top public co's is reasonable or not.
  - Retric 3y ago
    It’s not worth investing in private companies unless their long term growth outlook is significantly outperforming public ones. PEG on the other hand is by necessity a backward looking metric. That self selection means they really should have a higher multiple even if you judge them using the same metrics. IE if you have a public company growing by 20% per year and a private one growing by 20% per year you should only invest in the private one of it’s at a significant discount or it’s growth will likely continue for significantly longer than the public one.
    - ComputerGuru 3y ago
      You forgot the one exception: or you expect the private company to go public after your investment.
      - Retric 3y ago
        That reduces but doesn’t eliminate this preference. A private company going public in 1 months is still one month where you have less liquidity than investing in a public company for that month. Everything else being equal liquidity makes public companies more attractive.
        ComputerGuru 3y ago
        Well, most people would be betting that by investing pre-IPO they can cash out upon or shortly after IPO with nice gains. Of course none of that is guaranteed.
        Retric 3y ago
        You still need to find someone to take the other side of that investment. Taking a company public is generally profitable because of people’s liquidity preference. Companies will sell shares to an investment bank directly before an IPO as both a form of payment and a hedge. It’s a very nuanced transaction that might otherwise seem dumb on the surface.
        ComputerGuru 3y ago
        Thanks for the additional info. I feel like I need to read up on this some more to make more sense of all the conflicting bits I have accumulated.
MuffinFlavored 3y ago
how high?