Clearly my post on Thursday titled SaaS Public Company Valuations Q1 2016 was bizarrely timed as less than 24 hours later the companies in the category lost $28 billion in market cap value that day. Here are a few notes from the Re/Code article:
- Big drops on Friday:
- LinkedIn fell 43 percent
- Salesforce.com fell 13 percent
- Workday fell 16 percent
- NetSuite fell 14 percent
- ServiceNow fell 11 percent
- Valuations of 47 publicly traded cloud software companies have fallen $66 billion since a mid-December peak
- As a group, these companies are trading at four times forward revenue (meaning, 4x the revenues expected in the next 12 months)
Long term, I believe we’ll see SaaS companies trade at 4-6x revenue unless they have an exceptional growth rate (see also Quantifying the SaaS Growth Rate Multiplier). While the market likely overcorrected on SaaS valuations, I still see the long-term future of SaaS as incredibly promising.
What else? What are some more thoughts on public SaaS valuations being hit hard?
3 thoughts on “Public SaaS Valuations Hit Hard”
Tableau (NYSE:DATA) is another worthwhile mention here with a 50% loss on minor earnings disappointment.
But the macro-market is also needs to be mentioned for context, with a YTD loss of 8% for 2016 through Feb 5th.
Hi David, as a SaaS founder and CEO(first time entrepreneur) I think the question is how will it affect private markets? I am less worried on optimizing valuations but more the fundraising ability. I have been hearing horror stories about 2008 🙂
David, I’m not sure it’s best to judge fundamentals in this market. The stock prices of drug companies, consumer goods and other industries have been on a steady decline for the last 3 months to the bafflement of financial experts. Personally, I think it’s the unwinding of the Chinese financial market, which is run by relatively unskilled managers, and less about the fundamental economy, which I think is just fine.