Main takeaways: - $ 816 Billion of Market Cap of the SaaS Index has evaporated in 5 months, fueled by rising US Treasury Yields - Investors in public SaaS companies no longer reward growth at all costs, but start prioritizing capital efficiency in determining public valuation multiples. - Valuation multiples for public SaaS have rationalized since Q4 2021, indicated by an inclining RSQ of our model from 0.53 to 0.72

1. Knight Capital
Public SaaS Update
Q1 2022

2. 21x 22x 20x
23x 23x 24x 23x
26x
21x 19x
16x 14x 13x
17x 17x 17x 18x 19x 18x 17x 18x
15x 14x
12x 11x 11x
5x
25x
45x
65x
85x
105x
125x
Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22
Revenue Valuation Multiples
Multiple Range (Largest/Smallest) Average Multiple Median Multiple
Median Valuation Multiples for SaaS Companies Continue Sliding to 10.5X in March 2022
The difference between the highest valued SaaS
company and the lowest valued company (‘range’) has
contracted by more than 60% from the peak to its lowest
point in 12 months

3. $-
$50,000
$100,000
$150,000
$200,000
$250,000
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22
Aggregated MarketCap and Revenues
Total Market Cap Knight Index Total Revenues
$816 Billion of Market Cap Evaporated Since November 2021, Whilst Revenues Climb
* X Million
*
+11%
-29%
*

4. 1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
70
80
90
100
110
120
130
140
Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22
Index Performance
Knight Index NASDAQ S&P500 10Y US Treasury Yield
Drop in SaaS Stock Prices Since Q4 2021 Largely Explained by Rising US Treasury Yield
-0.81 Correlation between Knight SaaS Index and
10Y US Treasury Yield

5. 0.55 0.54 0.53
0.62
0.66
0.57
0.65
0.72
0.65
0.72
0.93 0.93
0.23
0.11
0.06
0.00
17.6x
17.3x
17.9x
14.8x
14.1x
11.8x
10.8x
10.5x
5x
7x
9x
11x
13x
15x
17x
19x
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22
RSQ P-Value R40 Median Revenue Multiple
Multiples Suffer as Rule of 40 Becomes Significant for Investors in Determining Valuations
0.72 72% of the value of the revenue multiples is explained by
our regression model as per March 2022
Correlation 0.87

6. 0.41
0.36
0.25
0.41
0.47
0.56
0.51
0.55
0.59
0.61 0.61
0.64
0.61
0.28
0.24
0.35
0.29
0.41
0.37
0.34
0.43
0.50 0.50
0.56
0.63
0.15
0.25
0.35
0.45
0.55
0.65
0.75
Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22
Correlations* with Valuation Multiple
Growth
Rule of 40
Rule of 40 Surpasses Growth as Most Relevant Determinant of Valuation Multiples
Investors no longer reward growth at all costs, as the trade-off between
growth and capital efficiency has become the primary valuation driver in
March 2022
* Correlation of the Rule of 40 with valuation multiples should not be confused with the correlation of the P-value of Rule of 40 with median valuation multiples as displayed in the previous slide. Latter describes the statistical significance of Rule of 40 in determining valuation multiples

7. 67%
102%
46%
75%
38%
57%
30%
37%
20%
28%
0%
20%
40%
60%
80%
100%
120%
LTM Mar-22
Median Growth Rate per Revenue Multiple Class
> 40x 30-40x 20-30x 10-20x < 10x
Investors Have Reduced Valuation Rewards for Growth in March 2022
Companies need a higher growth rate in March 2022 to get
rewarded with a high valuation multiple by investors

8. Conclusion
The contraction of public software multiples that we have observed over Q4 2021 has persisted throughout Q1 2022 to a median revenue multiple of 10.5X in our SaaS sample. One primary driver behind the compressed
valuation multiples of software companies is the rising yield of US Treasury Bonds, which has a strong correlation with valuations.
Responding to these rising interest rates, investors have started prioritizing efficient revenue growth over growth at all cost as Rule of 40 has surpassed revenue growth as the leading determinant of valuation multiples.
Interestingly, since multiples have started declining in Q4 2021, our internalregression model has a stronger explanatory power in estimating valuation multiples. This may imply that valuation multiples have rationalized.
-20%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
0x 10x 20x 30x 40x 50x 60x
Valuation Multiples Scattered Against R40
Bill.com
Snowflake
Cloudflare
Datadog
Sentinelone
Crowdstrike
Zscaler
Zoominfo
Atlassian
MongoDB
Confluent
GitLab
HashiCorp
nCino
Monday.com
Toast
Veeva
Sprout Social
C3.ai
CouchBase
Agora VTEX
Fastly

9. COMMENTS?
marco@knight.capital
Marco Joosten
https://www.linkedin.com/in/joostenmarco/
Address
Herengracht 450
1017 CA Amsterdam
The Netherlands
www.knight.capital
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