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by claytonjy 1138 days 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.
2 comments
JumpCrisscross 1138 days 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

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claytonjy 1138 days 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.
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Retric 1137 days 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.

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ComputerGuru 1137 days ago
You forgot the one exception: or you expect the private company to go public after your investment.
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Retric 1137 days 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.
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ComputerGuru 1136 days 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.
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MuffinFlavored 1137 days ago
how high?
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