[slap_shot]

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

[claytonjy]

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]

> 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

[claytonjy]

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]

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]

You forgot the one exception: or you expect the private company to go public after your investment.

[Retric]

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.

[MuffinFlavored]

how high?