Price Tags on Tech Companies: Analyzing Private and Public Valuations
Markets have been shaking through the first half of the year, leaving many investors hitting the pause button as they wait for valuations to stabilize. When is the right time for investors to jump in with confidence that prices have reset and are reasonable marks?
In this webinar, Aman Verjee, General Partner at Practical Venture Capital, will discuss private and public company valuations, taking a deep dive on pricing in the SaaS sector (“Software as a Service”).
Join us on July 14 for a webinar on private and public company valuations. Register here.
Here’s a quick preview of the webinar…
- The PVC SaaS Index is a proprietary index created by Aman Verjee that tracks a basket of 117 publicly traded US-listed SaaS companies that went public after 2015. The median company in the PVC SaaS Index had a blistering YoY revenue growth rate of +29% YoY for the full fiscal year.
- Public SaaS companies are generating over $366B in ARR and a total enterprise value of over $4T. This kind of annual performance from such a large public market sector – showing top-line growth of nearly 30% with expanding profit margins, now through several straight quarters that include a US recession – is unheard of.
- EV / trailing sales multiples have reverted back to pre-pandemic levels, with the median SaaS multiple compressing by 54% and the top-quartile multiple compressing by about 65%, from 31x at the peak to 11 today. The companies are generally performing extremely well, so we see this as an inevitable and healthy correction in valuations.
- Valuations in the public markets and venture round sizes on the private side are tightly correlated. Historically, there is over a 90% correlation between movements in the NASDAQ Composite Index and venture capital round sizes.
- After nearly two years of a government-fueled expansion, public markets have adjusted quickly and tech multiples for SaaS have corrected back to 2018-2019 multiples.
- For any investor with a longer-term horizon, now is the least expensive time to buy in the extremely overpriced past 2 years.
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About
Practical Venture Capital (PVC) is a Silicon Valley VC firm that buys secondary interests in mature, top-performing early-stage VC funds and companies. The co-founders and managing partners are Dave McClure and Aman Verjee, experienced investors and internet startup veterans who have worked at PayPal, eBay, Sonos, Founders Fund and 500 Startups. They have been early investors in 30+ unicorns and 8 IPOs that have generated 50-100x+ returns including Credit Karma, Twilio, SendGrid, Lyft, TalkDesk, Canva, among others.