SlideShare a Scribd company logo
1 of 17
Download to read offline
Valuations: What is happening,
and does it matter?
Talia Goldberg & Jeremy Levine (Feb 2015)
1
For the Amusement Park Goers
2
For the Newtonian Physicists
3
For the Park Goers
ENTREPRENEURS
4
Quantitative Easing Means Easy Money
“So have you sent a note of
thanks yet to Ben Bernanke and
Janet Yellen? For all of your hard
work and delightful intelligence,
they arguably have had as much
to do with your fund's success as
you have.”
– Dan Primack (2/19/2015)
5
Price really, really, really matters
Top tier fund
Barely in business
$500M
$1B
$1.5B
$2B
6
What Did We Do?
• Looked at 4 public market segments relevant to most of our
investing:
1. Software as a Service
2. Marketplaces
3. Consumer Internet
4. E-Commerce
• Collected monthly valuation multiple and growth data for each
company from 1999 (or first year of public listing) through
February 2015
• Sanitized the data
1. Excluded companies with negative EBITDA from all charts
with EBITDA multiples (only in the period of negative
EBITDA)
2. Each sub segment has a minimum sample size of 5
companies
3. LTM EBITDA excludes stock based compensation expense
7
We are nowhere close to bubble madness (phew!)
-
20.0x
40.0x
60.0x
80.0x
100.0x
120.0x
140.0x
-
100.0x
200.0x
300.0x
400.0x
500.0x
600.0x
700.0x
1/25/1999
1/25/2000
1/25/2001
1/25/2002
1/25/2003
1/25/2004
1/25/2005
1/25/2006
1/25/2007
1/25/2008
1/25/2009
1/25/2010
1/25/2011
1/25/2012
1/25/2013
1/25/2014
1/25/2015
MedianRevenuemultiple
MedianEBITDAmultiple
Consumer Internet Multiples
EBITDA multiple Revenue Multiple
Consumer Internet public valuation multiples have held steady for 5 – 10
years.
Let’s zoom in:
Saas
Marketplaces
Consumer
Ecommerce
8
Maybe a slight uptick in last 24 months
-
5.0x
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
Medianmultiple
Consumer Internet Multiples
EBITDA multiples Revenue Multiples
Recent increase in EBITDA multiples is probably driven by newish batch of hyper-revenue
growth IPOs.
Saas
Marketplaces
Consumer
Ecommerce
9
Growth clearly drives multiples
Be wary of massive multiple re-rating when growth dips below ~30%
-
5.0x
10.0x
15.0x
20.0x
25.0x
-40% -20% 0% 20% 40% 60% 80% 100% 120%
LTMrevenuemultiple
2014 revenue growth
Growth Rate vs. Revenue Multiples
Multiple
compression
begins at ~30%
Saas
Marketplaces
Consumer
Ecommerce
10
$10 billion is the new $1 billion
Current public companies
>$10B market cap
Private companies with at
least $10B valuation
Saas
Marketplaces
Consumer
Ecommerce
In ~20 years, we got 10 US public Internet companies with > $10bn market
caps, and we have 5 new private ones in 5 years.
11
E-commerce businesses aren’t worth much
-
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
20.0x
Ecommerce EBITDA Multiple
-
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
Ecommerce Revenue Multiple
*Data set includes traditional ecommerce, does not include ecommerce marketplace businesses
Many VC’s are paying 3-5x revenues for companies that are worth 1x in the
public markets.
Saas
Marketplaces
Consumer
Ecommerce
12
Amazon is a special case
-
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
E-commerce vs. Amazon
Revenue Multiples
Amazon E-commerce
For ~5 years, Amazon has consistently traded at 2-3x higher multiples than other
public ecommerce companies
Saas
Marketplaces
Consumer
Ecommerce
13
Marketplace models are highly valued
Valuation multiples are robust, but public markets have calmed down recently –
much more so than private markets.
-
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
E-commerce vs. Marketplace
Revenue Multiples
Marketplace E-commerce
Saas
Marketplaces
Consumer
Ecommerce
14
Public Cloud Values are up 30-100%
It’s *much* harder to generate a 3x+ fund in this environment
-
10.0x
20.0x
30.0x
40.0x
50.0x
60.0x
70.0x
01-2007(7)
07-2007(7)
12-2007(6)
06-2008(5)
11-2008(7)
05-2009(7)
10-2009(7)
04-2010(9)
09-2010(11)
03-2011(10)
08-2011(11)
02-2012(9)
07-2012(9)
01-2013(11)
06-2013(9)
12-2013(11)
05-2014(10)
11-2014(10)
EBITDA multiples
-
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
01-2007(7)
07-2007(7)
12-2007(6)
06-2008(5)
11-2008(7)
05-2009(7)
10-2009(7)
04-2010(9)
09-2010(11)
03-2011(10)
08-2011(11)
02-2012(9)
07-2012(9)
01-2013(11)
06-2013(9)
12-2013(11)
05-2014(10)
11-2014(10)
Revenue multiples
*Companies with Market Cap’s >$2B
Financial crisis
Saas
Marketplaces
Consumer
Ecommerce
+ 100%
+ 30%
15
It’s not a tech-wide issue, it’s just our sectors
While SaaS valuations have soared, their legacy
counterparts are stable with much less rich valuations
*Data set: SAP, Oracle, Adobe, Microsoft, HP, Cisco
-
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
"Legacy" revenue multiple
-
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
"Legacy" EBITDA multiple
Saas
Marketplaces
Consumer
Ecommerce
16
SaaS investing was more fun in 2007!
It’s easier to make money betting ahead of the curve. It’s much harder when
everyone agrees with you.
-
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
SaaS vs. "Legacy" software revenue
multiples
SaaS Legacy
Saas
Marketplaces
Consumer
Ecommerce
“The interesting thing about
cloud computing is that we’ve
redefined cloud computing to
include everything that we
already do. ... The computer
industry is the only industry that
is more fashion-driven than
women’s fashion. Maybe I’m an
idiot, but I have no idea what
anyone is talking about. What is
it? It’s complete gibberish. It’s
insane. When is this idiocy going
to stop?"
-- Larry Ellison, Sept 2008

More Related Content

What's hot

Y Combinator Pitch Deck Template For Startup Founders
Y Combinator Pitch Deck Template For Startup FoundersY Combinator Pitch Deck Template For Startup Founders
Y Combinator Pitch Deck Template For Startup FoundersAA BB
 
The Mendoza Line for SaaS Growth
The Mendoza Line for SaaS GrowthThe Mendoza Line for SaaS Growth
The Mendoza Line for SaaS Growth bwalker33
 
The deck we used to raise $270k for our startup Castle
The deck we used to raise $270k for our startup CastleThe deck we used to raise $270k for our startup Castle
The deck we used to raise $270k for our startup Castleentercastle
 
Monzo Deep Dive | Fintech Fraternity
Monzo Deep Dive | Fintech FraternityMonzo Deep Dive | Fintech Fraternity
Monzo Deep Dive | Fintech FraternityFintech Fraternity
 
Pitch Deck Teardown: Fibery's $5.2M Series A deck
Pitch Deck Teardown: Fibery's $5.2M Series A deckPitch Deck Teardown: Fibery's $5.2M Series A deck
Pitch Deck Teardown: Fibery's $5.2M Series A deckHajeJanKamps
 
235629204 snapchat-business-deck
235629204 snapchat-business-deck235629204 snapchat-business-deck
235629204 snapchat-business-deckYan Rozovsky
 
Bessemer Venture Partners' 2019 State of the Cloud
Bessemer Venture Partners' 2019 State of the CloudBessemer Venture Partners' 2019 State of the Cloud
Bessemer Venture Partners' 2019 State of the CloudBessemer Venture Partners
 
Yalochat - 500 Miami Demo Day
Yalochat - 500 Miami Demo DayYalochat - 500 Miami Demo Day
Yalochat - 500 Miami Demo Day500 Startups
 
Standard Treasury Series A Pitch Deck
Standard Treasury Series A Pitch DeckStandard Treasury Series A Pitch Deck
Standard Treasury Series A Pitch DeckZachary Townsend
 
Sequoia Capital Pitch Deck Template
Sequoia Capital Pitch Deck TemplateSequoia Capital Pitch Deck Template
Sequoia Capital Pitch Deck TemplateMalcolm Lewis
 
Buyer Centric Funnel Design
Buyer Centric Funnel DesignBuyer Centric Funnel Design
Buyer Centric Funnel DesignDavid Skok
 
eShares Series A Pitch Deck
eShares Series A Pitch DeckeShares Series A Pitch Deck
eShares Series A Pitch DeckRazin Mustafiz
 
Mattermark 2nd (Final) Series A Deck
Mattermark 2nd (Final) Series A DeckMattermark 2nd (Final) Series A Deck
Mattermark 2nd (Final) Series A DeckDanielle Morrill
 
KPI analytics for saas startups
KPI analytics for saas startupsKPI analytics for saas startups
KPI analytics for saas startupsArtyom Efremov
 
The SaaS business model and metrics
The SaaS business model and metricsThe SaaS business model and metrics
The SaaS business model and metricsDavid Skok
 
Revolut pitch deck
Revolut pitch deckRevolut pitch deck
Revolut pitch deckTech in Asia
 
Rocket Internet Company Presentation
Rocket Internet Company PresentationRocket Internet Company Presentation
Rocket Internet Company PresentationNishan Bose
 

What's hot (20)

Y Combinator Pitch Deck Template For Startup Founders
Y Combinator Pitch Deck Template For Startup FoundersY Combinator Pitch Deck Template For Startup Founders
Y Combinator Pitch Deck Template For Startup Founders
 
The Mendoza Line for SaaS Growth
The Mendoza Line for SaaS GrowthThe Mendoza Line for SaaS Growth
The Mendoza Line for SaaS Growth
 
The deck we used to raise $270k for our startup Castle
The deck we used to raise $270k for our startup CastleThe deck we used to raise $270k for our startup Castle
The deck we used to raise $270k for our startup Castle
 
Monzo Deep Dive | Fintech Fraternity
Monzo Deep Dive | Fintech FraternityMonzo Deep Dive | Fintech Fraternity
Monzo Deep Dive | Fintech Fraternity
 
Pitch Deck Teardown: Fibery's $5.2M Series A deck
Pitch Deck Teardown: Fibery's $5.2M Series A deckPitch Deck Teardown: Fibery's $5.2M Series A deck
Pitch Deck Teardown: Fibery's $5.2M Series A deck
 
235629204 snapchat-business-deck
235629204 snapchat-business-deck235629204 snapchat-business-deck
235629204 snapchat-business-deck
 
Square Pitch Deck
Square Pitch DeckSquare Pitch Deck
Square Pitch Deck
 
Bessemer Venture Partners' 2019 State of the Cloud
Bessemer Venture Partners' 2019 State of the CloudBessemer Venture Partners' 2019 State of the Cloud
Bessemer Venture Partners' 2019 State of the Cloud
 
Yalochat - 500 Miami Demo Day
Yalochat - 500 Miami Demo DayYalochat - 500 Miami Demo Day
Yalochat - 500 Miami Demo Day
 
Standard Treasury Series A Pitch Deck
Standard Treasury Series A Pitch DeckStandard Treasury Series A Pitch Deck
Standard Treasury Series A Pitch Deck
 
Sequoia Capital Pitch Deck Template
Sequoia Capital Pitch Deck TemplateSequoia Capital Pitch Deck Template
Sequoia Capital Pitch Deck Template
 
Buyer Centric Funnel Design
Buyer Centric Funnel DesignBuyer Centric Funnel Design
Buyer Centric Funnel Design
 
eShares Series A Pitch Deck
eShares Series A Pitch DeckeShares Series A Pitch Deck
eShares Series A Pitch Deck
 
Mattermark 2nd (Final) Series A Deck
Mattermark 2nd (Final) Series A DeckMattermark 2nd (Final) Series A Deck
Mattermark 2nd (Final) Series A Deck
 
KPI analytics for saas startups
KPI analytics for saas startupsKPI analytics for saas startups
KPI analytics for saas startups
 
The SaaS business model and metrics
The SaaS business model and metricsThe SaaS business model and metrics
The SaaS business model and metrics
 
Revolut pitch deck
Revolut pitch deckRevolut pitch deck
Revolut pitch deck
 
Scaling to $100 Million
Scaling to $100 MillionScaling to $100 Million
Scaling to $100 Million
 
Front Series B Deck
Front Series B DeckFront Series B Deck
Front Series B Deck
 
Rocket Internet Company Presentation
Rocket Internet Company PresentationRocket Internet Company Presentation
Rocket Internet Company Presentation
 

Viewers also liked

"Time to Scale Up" at SaaS North 2016
"Time to Scale Up" at SaaS North 2016"Time to Scale Up" at SaaS North 2016
"Time to Scale Up" at SaaS North 2016L-SPARK
 
Founding vs Professional CEO Performance Analysis in SaaS
Founding vs Professional CEO Performance Analysis in SaaSFounding vs Professional CEO Performance Analysis in SaaS
Founding vs Professional CEO Performance Analysis in SaaSYujin Chung
 
Joint Oracle-cVidya Cloud webinar - SaaS Market Growth & Opportunities
Joint Oracle-cVidya Cloud webinar - SaaS Market Growth & OpportunitiesJoint Oracle-cVidya Cloud webinar - SaaS Market Growth & Opportunities
Joint Oracle-cVidya Cloud webinar - SaaS Market Growth & OpportunitiescVidya Networks
 
Building the Billion Dollar SaaS Unicorn: CEO Guide
Building the Billion Dollar SaaS Unicorn: CEO GuideBuilding the Billion Dollar SaaS Unicorn: CEO Guide
Building the Billion Dollar SaaS Unicorn: CEO GuideKelly Schwedland
 
SaaS Go To Market Best Practices & Pricing Samples
SaaS Go To Market Best Practices & Pricing SamplesSaaS Go To Market Best Practices & Pricing Samples
SaaS Go To Market Best Practices & Pricing SamplesHeinz Marketing Inc
 
Sales Segmentation & Qualification for B2B SaaS Companies
Sales Segmentation & Qualification for B2B SaaS CompaniesSales Segmentation & Qualification for B2B SaaS Companies
Sales Segmentation & Qualification for B2B SaaS CompaniesGuillaume Lerouge
 
The Ultimate Guide To Startup Sales Tools (2015)
The Ultimate Guide To Startup Sales Tools (2015)The Ultimate Guide To Startup Sales Tools (2015)
The Ultimate Guide To Startup Sales Tools (2015)Nic Poulos
 
Show Me the Money: Converible Debt Vs. Preferred Equity for Seed Fundraising
Show Me the Money:  Converible Debt Vs. Preferred Equity for Seed Fundraising Show Me the Money:  Converible Debt Vs. Preferred Equity for Seed Fundraising
Show Me the Money: Converible Debt Vs. Preferred Equity for Seed Fundraising Thomas Wisniewski
 
Velocity Marketing - Breaking Through
Velocity Marketing - Breaking ThroughVelocity Marketing - Breaking Through
Velocity Marketing - Breaking ThroughKen Rutsky
 
The Huge List of 127 Marketing Tools (+11 Bonus Sales Tools!)
The Huge List of 127 Marketing Tools (+11 Bonus Sales Tools!)The Huge List of 127 Marketing Tools (+11 Bonus Sales Tools!)
The Huge List of 127 Marketing Tools (+11 Bonus Sales Tools!)TrackMaven
 
Silverpeak Benchmark Report Q2 2017
Silverpeak Benchmark Report Q2 2017Silverpeak Benchmark Report Q2 2017
Silverpeak Benchmark Report Q2 2017Paddy MccGwire
 
Lean Startup Basics - Evidence Based Entrepreneurship
Lean Startup Basics - Evidence Based EntrepreneurshipLean Startup Basics - Evidence Based Entrepreneurship
Lean Startup Basics - Evidence Based EntrepreneurshipKelly Schwedland
 
The SaaS Founder’s Journey: What Matters at Each Stage
The SaaS Founder’s Journey: What Matters at Each StageThe SaaS Founder’s Journey: What Matters at Each Stage
The SaaS Founder’s Journey: What Matters at Each StageDavid Skok
 
A SaaS Metric designed to Increase Free Trial Conversions
A SaaS Metric designed to Increase Free Trial ConversionsA SaaS Metric designed to Increase Free Trial Conversions
A SaaS Metric designed to Increase Free Trial ConversionsLincoln Murphy
 
How to Drive Growth with Customer Success Metrics
How to Drive Growth with Customer Success MetricsHow to Drive Growth with Customer Success Metrics
How to Drive Growth with Customer Success MetricsGainsight
 
SaaS Marketing Plan: 5 Ways to Get your B2B App to Sell Itself
SaaS Marketing Plan: 5 Ways to Get your B2B App to Sell ItselfSaaS Marketing Plan: 5 Ways to Get your B2B App to Sell Itself
SaaS Marketing Plan: 5 Ways to Get your B2B App to Sell ItselfLincoln Murphy
 
Go to-market strategy for B2B SaaS companies
Go to-market strategy for B2B SaaS companiesGo to-market strategy for B2B SaaS companies
Go to-market strategy for B2B SaaS companiesGuillaume Lerouge
 

Viewers also liked (19)

"Time to Scale Up" at SaaS North 2016
"Time to Scale Up" at SaaS North 2016"Time to Scale Up" at SaaS North 2016
"Time to Scale Up" at SaaS North 2016
 
The Ultimate How-To CRM Guide
The Ultimate How-To CRM GuideThe Ultimate How-To CRM Guide
The Ultimate How-To CRM Guide
 
Founding vs Professional CEO Performance Analysis in SaaS
Founding vs Professional CEO Performance Analysis in SaaSFounding vs Professional CEO Performance Analysis in SaaS
Founding vs Professional CEO Performance Analysis in SaaS
 
Joint Oracle-cVidya Cloud webinar - SaaS Market Growth & Opportunities
Joint Oracle-cVidya Cloud webinar - SaaS Market Growth & OpportunitiesJoint Oracle-cVidya Cloud webinar - SaaS Market Growth & Opportunities
Joint Oracle-cVidya Cloud webinar - SaaS Market Growth & Opportunities
 
Saas Math
Saas MathSaas Math
Saas Math
 
Building the Billion Dollar SaaS Unicorn: CEO Guide
Building the Billion Dollar SaaS Unicorn: CEO GuideBuilding the Billion Dollar SaaS Unicorn: CEO Guide
Building the Billion Dollar SaaS Unicorn: CEO Guide
 
SaaS Go To Market Best Practices & Pricing Samples
SaaS Go To Market Best Practices & Pricing SamplesSaaS Go To Market Best Practices & Pricing Samples
SaaS Go To Market Best Practices & Pricing Samples
 
Sales Segmentation & Qualification for B2B SaaS Companies
Sales Segmentation & Qualification for B2B SaaS CompaniesSales Segmentation & Qualification for B2B SaaS Companies
Sales Segmentation & Qualification for B2B SaaS Companies
 
The Ultimate Guide To Startup Sales Tools (2015)
The Ultimate Guide To Startup Sales Tools (2015)The Ultimate Guide To Startup Sales Tools (2015)
The Ultimate Guide To Startup Sales Tools (2015)
 
Show Me the Money: Converible Debt Vs. Preferred Equity for Seed Fundraising
Show Me the Money:  Converible Debt Vs. Preferred Equity for Seed Fundraising Show Me the Money:  Converible Debt Vs. Preferred Equity for Seed Fundraising
Show Me the Money: Converible Debt Vs. Preferred Equity for Seed Fundraising
 
Velocity Marketing - Breaking Through
Velocity Marketing - Breaking ThroughVelocity Marketing - Breaking Through
Velocity Marketing - Breaking Through
 
The Huge List of 127 Marketing Tools (+11 Bonus Sales Tools!)
The Huge List of 127 Marketing Tools (+11 Bonus Sales Tools!)The Huge List of 127 Marketing Tools (+11 Bonus Sales Tools!)
The Huge List of 127 Marketing Tools (+11 Bonus Sales Tools!)
 
Silverpeak Benchmark Report Q2 2017
Silverpeak Benchmark Report Q2 2017Silverpeak Benchmark Report Q2 2017
Silverpeak Benchmark Report Q2 2017
 
Lean Startup Basics - Evidence Based Entrepreneurship
Lean Startup Basics - Evidence Based EntrepreneurshipLean Startup Basics - Evidence Based Entrepreneurship
Lean Startup Basics - Evidence Based Entrepreneurship
 
The SaaS Founder’s Journey: What Matters at Each Stage
The SaaS Founder’s Journey: What Matters at Each StageThe SaaS Founder’s Journey: What Matters at Each Stage
The SaaS Founder’s Journey: What Matters at Each Stage
 
A SaaS Metric designed to Increase Free Trial Conversions
A SaaS Metric designed to Increase Free Trial ConversionsA SaaS Metric designed to Increase Free Trial Conversions
A SaaS Metric designed to Increase Free Trial Conversions
 
How to Drive Growth with Customer Success Metrics
How to Drive Growth with Customer Success MetricsHow to Drive Growth with Customer Success Metrics
How to Drive Growth with Customer Success Metrics
 
SaaS Marketing Plan: 5 Ways to Get your B2B App to Sell Itself
SaaS Marketing Plan: 5 Ways to Get your B2B App to Sell ItselfSaaS Marketing Plan: 5 Ways to Get your B2B App to Sell Itself
SaaS Marketing Plan: 5 Ways to Get your B2B App to Sell Itself
 
Go to-market strategy for B2B SaaS companies
Go to-market strategy for B2B SaaS companiesGo to-market strategy for B2B SaaS companies
Go to-market strategy for B2B SaaS companies
 

Similar to Valuations: What is happening and does it matter?

I Bytes Retail & Consumer Goods industry
I Bytes Retail & Consumer Goods industryI Bytes Retail & Consumer Goods industry
I Bytes Retail & Consumer Goods industryEGBG Services
 
Optimizing the Value of Your Company
Optimizing the Value of Your CompanyOptimizing the Value of Your Company
Optimizing the Value of Your Companybitnetonline
 
eBay - The Science of Making Better Predictions
eBay - The Science of Making Better PredictionseBay - The Science of Making Better Predictions
eBay - The Science of Making Better PredictionsIncubeta NMPi
 
Best Buy Finance MBA Recruiting Presentation 2010
Best Buy Finance MBA Recruiting Presentation 2010Best Buy Finance MBA Recruiting Presentation 2010
Best Buy Finance MBA Recruiting Presentation 2010Brian Kohlbeck
 
Stifel Internet Research Overview
Stifel Internet Research OverviewStifel Internet Research Overview
Stifel Internet Research OverviewScott Devitt
 
Cross-border e-commerce - Cuneyt Erpolat @ eCommCongress 2018
Cross-border e-commerce - Cuneyt Erpolat @ eCommCongress 2018Cross-border e-commerce - Cuneyt Erpolat @ eCommCongress 2018
Cross-border e-commerce - Cuneyt Erpolat @ eCommCongress 2018ecommcongress
 
The Next Recession is Coming... This is Your Survival Guide
The Next Recession is Coming... This is Your Survival GuideThe Next Recession is Coming... This is Your Survival Guide
The Next Recession is Coming... This is Your Survival GuidePhil Argue
 
Bainbridge eCommerce Capital Markets Report | Q2 2021
Bainbridge eCommerce Capital Markets Report | Q2 2021Bainbridge eCommerce Capital Markets Report | Q2 2021
Bainbridge eCommerce Capital Markets Report | Q2 2021Bainbridge
 
The Power of Local: 3 Reasons to Rethink Your Amazon Account
The Power of Local: 3 Reasons to Rethink Your Amazon AccountThe Power of Local: 3 Reasons to Rethink Your Amazon Account
The Power of Local: 3 Reasons to Rethink Your Amazon AccountMeredith Cherney
 
Guide to collect data from Morningstar.com 1) Go to Mornin.docx
Guide to collect data from Morningstar.com 1) Go to Mornin.docxGuide to collect data from Morningstar.com 1) Go to Mornin.docx
Guide to collect data from Morningstar.com 1) Go to Mornin.docxshericehewat
 
The iBuyer Report (Preview)
The iBuyer Report (Preview)The iBuyer Report (Preview)
The iBuyer Report (Preview)Mike DelPrete
 
2014 Tech M&A Monthly - New World of Buyers
2014 Tech M&A Monthly - New World of Buyers2014 Tech M&A Monthly - New World of Buyers
2014 Tech M&A Monthly - New World of BuyersCorum Group
 
UKUPA Jan 09: User Experience In A Downturn
UKUPA Jan 09: User Experience In A DownturnUKUPA Jan 09: User Experience In A Downturn
UKUPA Jan 09: User Experience In A DownturnUXPA UK
 

Similar to Valuations: What is happening and does it matter? (20)

I Bytes Retail & Consumer Goods industry
I Bytes Retail & Consumer Goods industryI Bytes Retail & Consumer Goods industry
I Bytes Retail & Consumer Goods industry
 
Day2
Day2 Day2
Day2
 
2015 day 2
2015 day 22015 day 2
2015 day 2
 
Optimizing the Value of Your Company
Optimizing the Value of Your CompanyOptimizing the Value of Your Company
Optimizing the Value of Your Company
 
eBay - The Science of Making Better Predictions
eBay - The Science of Making Better PredictionseBay - The Science of Making Better Predictions
eBay - The Science of Making Better Predictions
 
X notes 02
X notes 02X notes 02
X notes 02
 
Market entry strategy - presenter deck
Market entry strategy - presenter deckMarket entry strategy - presenter deck
Market entry strategy - presenter deck
 
Best Buy Finance MBA Recruiting Presentation 2010
Best Buy Finance MBA Recruiting Presentation 2010Best Buy Finance MBA Recruiting Presentation 2010
Best Buy Finance MBA Recruiting Presentation 2010
 
Market research for startups
Market research for startupsMarket research for startups
Market research for startups
 
Stifel Internet Research Overview
Stifel Internet Research OverviewStifel Internet Research Overview
Stifel Internet Research Overview
 
Cross-border e-commerce - Cuneyt Erpolat @ eCommCongress 2018
Cross-border e-commerce - Cuneyt Erpolat @ eCommCongress 2018Cross-border e-commerce - Cuneyt Erpolat @ eCommCongress 2018
Cross-border e-commerce - Cuneyt Erpolat @ eCommCongress 2018
 
The Next Recession is Coming... This is Your Survival Guide
The Next Recession is Coming... This is Your Survival GuideThe Next Recession is Coming... This is Your Survival Guide
The Next Recession is Coming... This is Your Survival Guide
 
Bainbridge eCommerce Capital Markets Report | Q2 2021
Bainbridge eCommerce Capital Markets Report | Q2 2021Bainbridge eCommerce Capital Markets Report | Q2 2021
Bainbridge eCommerce Capital Markets Report | Q2 2021
 
The Power of Local: 3 Reasons to Rethink Your Amazon Account
The Power of Local: 3 Reasons to Rethink Your Amazon AccountThe Power of Local: 3 Reasons to Rethink Your Amazon Account
The Power of Local: 3 Reasons to Rethink Your Amazon Account
 
Guide to collect data from Morningstar.com 1) Go to Mornin.docx
Guide to collect data from Morningstar.com 1) Go to Mornin.docxGuide to collect data from Morningstar.com 1) Go to Mornin.docx
Guide to collect data from Morningstar.com 1) Go to Mornin.docx
 
The iBuyer Report (Preview)
The iBuyer Report (Preview)The iBuyer Report (Preview)
The iBuyer Report (Preview)
 
Mar 1 2017 ir marketing final
Mar 1 2017 ir marketing finalMar 1 2017 ir marketing final
Mar 1 2017 ir marketing final
 
2014 Tech M&A Monthly - New World of Buyers
2014 Tech M&A Monthly - New World of Buyers2014 Tech M&A Monthly - New World of Buyers
2014 Tech M&A Monthly - New World of Buyers
 
PhilaU Immersion Program
PhilaU Immersion ProgramPhilaU Immersion Program
PhilaU Immersion Program
 
UKUPA Jan 09: User Experience In A Downturn
UKUPA Jan 09: User Experience In A DownturnUKUPA Jan 09: User Experience In A Downturn
UKUPA Jan 09: User Experience In A Downturn
 

Recently uploaded

Software Security in the Real World w/Kelsey Hightower
Software Security in the Real World w/Kelsey HightowerSoftware Security in the Real World w/Kelsey Hightower
Software Security in the Real World w/Kelsey HightowerAnchore
 
The Critical Role of Spatial Data in Today's Data Ecosystem
The Critical Role of Spatial Data in Today's Data EcosystemThe Critical Role of Spatial Data in Today's Data Ecosystem
The Critical Role of Spatial Data in Today's Data EcosystemSafe Software
 
Which standard is best for your content?
Which standard is best for your content?Which standard is best for your content?
Which standard is best for your content?Rustici Software
 
Unleashing Real-time Insights with ClickHouse_ Navigating the Landscape in 20...
Unleashing Real-time Insights with ClickHouse_ Navigating the Landscape in 20...Unleashing Real-time Insights with ClickHouse_ Navigating the Landscape in 20...
Unleashing Real-time Insights with ClickHouse_ Navigating the Landscape in 20...Alkin Tezuysal
 
MuleSoft Online Meetup Group - B2B Crash Course: Release SparkNotes
MuleSoft Online Meetup Group - B2B Crash Course: Release SparkNotesMuleSoft Online Meetup Group - B2B Crash Course: Release SparkNotes
MuleSoft Online Meetup Group - B2B Crash Course: Release SparkNotesManik S Magar
 
JET Technology Labs White Paper for Virtualized Security and Encryption Techn...
JET Technology Labs White Paper for Virtualized Security and Encryption Techn...JET Technology Labs White Paper for Virtualized Security and Encryption Techn...
JET Technology Labs White Paper for Virtualized Security and Encryption Techn...amber724300
 
React JS; all concepts. Contains React Features, JSX, functional & Class comp...
React JS; all concepts. Contains React Features, JSX, functional & Class comp...React JS; all concepts. Contains React Features, JSX, functional & Class comp...
React JS; all concepts. Contains React Features, JSX, functional & Class comp...Karmanjay Verma
 
Landscape Catalogue 2024 Australia-1.pdf
Landscape Catalogue 2024 Australia-1.pdfLandscape Catalogue 2024 Australia-1.pdf
Landscape Catalogue 2024 Australia-1.pdfAarwolf Industries LLC
 
Accelerating Enterprise Software Engineering with Platformless
Accelerating Enterprise Software Engineering with PlatformlessAccelerating Enterprise Software Engineering with Platformless
Accelerating Enterprise Software Engineering with PlatformlessWSO2
 
The work to make the piecework work: An ethnographic study of food delivery w...
The work to make the piecework work: An ethnographic study of food delivery w...The work to make the piecework work: An ethnographic study of food delivery w...
The work to make the piecework work: An ethnographic study of food delivery w...stockholm university
 
Generative Artificial Intelligence: How generative AI works.pdf
Generative Artificial Intelligence: How generative AI works.pdfGenerative Artificial Intelligence: How generative AI works.pdf
Generative Artificial Intelligence: How generative AI works.pdfIngrid Airi González
 
Potential of AI (Generative AI) in Business: Learnings and Insights
Potential of AI (Generative AI) in Business: Learnings and InsightsPotential of AI (Generative AI) in Business: Learnings and Insights
Potential of AI (Generative AI) in Business: Learnings and InsightsRavi Sanghani
 
HCI Lesson 1 - Introduction to Human-Computer Interaction.pdf
HCI Lesson 1 - Introduction to Human-Computer Interaction.pdfHCI Lesson 1 - Introduction to Human-Computer Interaction.pdf
HCI Lesson 1 - Introduction to Human-Computer Interaction.pdfROWELL MARQUINA
 
All These Sophisticated Attacks, Can We Really Detect Them - PDF
All These Sophisticated Attacks, Can We Really Detect Them - PDFAll These Sophisticated Attacks, Can We Really Detect Them - PDF
All These Sophisticated Attacks, Can We Really Detect Them - PDFMichael Gough
 
Long journey of Ruby standard library at RubyConf AU 2024
Long journey of Ruby standard library at RubyConf AU 2024Long journey of Ruby standard library at RubyConf AU 2024
Long journey of Ruby standard library at RubyConf AU 2024Hiroshi SHIBATA
 
Infrared simulation and processing on Nvidia platforms
Infrared simulation and processing on Nvidia platformsInfrared simulation and processing on Nvidia platforms
Infrared simulation and processing on Nvidia platformsYoss Cohen
 
Dynamical Context introduction word sensibility orientation
Dynamical Context introduction word sensibility orientationDynamical Context introduction word sensibility orientation
Dynamical Context introduction word sensibility orientationBuild Intuit
 
Automation Ops Series: Session 3 - Solutions management
Automation Ops Series: Session 3 - Solutions managementAutomation Ops Series: Session 3 - Solutions management
Automation Ops Series: Session 3 - Solutions managementDianaGray10
 
Design pattern talk by Kaya Weers - 2024 (v2)
Design pattern talk by Kaya Weers - 2024 (v2)Design pattern talk by Kaya Weers - 2024 (v2)
Design pattern talk by Kaya Weers - 2024 (v2)Kaya Weers
 
full stack practical assignment msc cs.pdf
full stack practical assignment msc cs.pdffull stack practical assignment msc cs.pdf
full stack practical assignment msc cs.pdfHulkTheDevil
 

Recently uploaded (20)

Software Security in the Real World w/Kelsey Hightower
Software Security in the Real World w/Kelsey HightowerSoftware Security in the Real World w/Kelsey Hightower
Software Security in the Real World w/Kelsey Hightower
 
The Critical Role of Spatial Data in Today's Data Ecosystem
The Critical Role of Spatial Data in Today's Data EcosystemThe Critical Role of Spatial Data in Today's Data Ecosystem
The Critical Role of Spatial Data in Today's Data Ecosystem
 
Which standard is best for your content?
Which standard is best for your content?Which standard is best for your content?
Which standard is best for your content?
 
Unleashing Real-time Insights with ClickHouse_ Navigating the Landscape in 20...
Unleashing Real-time Insights with ClickHouse_ Navigating the Landscape in 20...Unleashing Real-time Insights with ClickHouse_ Navigating the Landscape in 20...
Unleashing Real-time Insights with ClickHouse_ Navigating the Landscape in 20...
 
MuleSoft Online Meetup Group - B2B Crash Course: Release SparkNotes
MuleSoft Online Meetup Group - B2B Crash Course: Release SparkNotesMuleSoft Online Meetup Group - B2B Crash Course: Release SparkNotes
MuleSoft Online Meetup Group - B2B Crash Course: Release SparkNotes
 
JET Technology Labs White Paper for Virtualized Security and Encryption Techn...
JET Technology Labs White Paper for Virtualized Security and Encryption Techn...JET Technology Labs White Paper for Virtualized Security and Encryption Techn...
JET Technology Labs White Paper for Virtualized Security and Encryption Techn...
 
React JS; all concepts. Contains React Features, JSX, functional & Class comp...
React JS; all concepts. Contains React Features, JSX, functional & Class comp...React JS; all concepts. Contains React Features, JSX, functional & Class comp...
React JS; all concepts. Contains React Features, JSX, functional & Class comp...
 
Landscape Catalogue 2024 Australia-1.pdf
Landscape Catalogue 2024 Australia-1.pdfLandscape Catalogue 2024 Australia-1.pdf
Landscape Catalogue 2024 Australia-1.pdf
 
Accelerating Enterprise Software Engineering with Platformless
Accelerating Enterprise Software Engineering with PlatformlessAccelerating Enterprise Software Engineering with Platformless
Accelerating Enterprise Software Engineering with Platformless
 
The work to make the piecework work: An ethnographic study of food delivery w...
The work to make the piecework work: An ethnographic study of food delivery w...The work to make the piecework work: An ethnographic study of food delivery w...
The work to make the piecework work: An ethnographic study of food delivery w...
 
Generative Artificial Intelligence: How generative AI works.pdf
Generative Artificial Intelligence: How generative AI works.pdfGenerative Artificial Intelligence: How generative AI works.pdf
Generative Artificial Intelligence: How generative AI works.pdf
 
Potential of AI (Generative AI) in Business: Learnings and Insights
Potential of AI (Generative AI) in Business: Learnings and InsightsPotential of AI (Generative AI) in Business: Learnings and Insights
Potential of AI (Generative AI) in Business: Learnings and Insights
 
HCI Lesson 1 - Introduction to Human-Computer Interaction.pdf
HCI Lesson 1 - Introduction to Human-Computer Interaction.pdfHCI Lesson 1 - Introduction to Human-Computer Interaction.pdf
HCI Lesson 1 - Introduction to Human-Computer Interaction.pdf
 
All These Sophisticated Attacks, Can We Really Detect Them - PDF
All These Sophisticated Attacks, Can We Really Detect Them - PDFAll These Sophisticated Attacks, Can We Really Detect Them - PDF
All These Sophisticated Attacks, Can We Really Detect Them - PDF
 
Long journey of Ruby standard library at RubyConf AU 2024
Long journey of Ruby standard library at RubyConf AU 2024Long journey of Ruby standard library at RubyConf AU 2024
Long journey of Ruby standard library at RubyConf AU 2024
 
Infrared simulation and processing on Nvidia platforms
Infrared simulation and processing on Nvidia platformsInfrared simulation and processing on Nvidia platforms
Infrared simulation and processing on Nvidia platforms
 
Dynamical Context introduction word sensibility orientation
Dynamical Context introduction word sensibility orientationDynamical Context introduction word sensibility orientation
Dynamical Context introduction word sensibility orientation
 
Automation Ops Series: Session 3 - Solutions management
Automation Ops Series: Session 3 - Solutions managementAutomation Ops Series: Session 3 - Solutions management
Automation Ops Series: Session 3 - Solutions management
 
Design pattern talk by Kaya Weers - 2024 (v2)
Design pattern talk by Kaya Weers - 2024 (v2)Design pattern talk by Kaya Weers - 2024 (v2)
Design pattern talk by Kaya Weers - 2024 (v2)
 
full stack practical assignment msc cs.pdf
full stack practical assignment msc cs.pdffull stack practical assignment msc cs.pdf
full stack practical assignment msc cs.pdf
 

Valuations: What is happening and does it matter?

  • 1. Valuations: What is happening, and does it matter? Talia Goldberg & Jeremy Levine (Feb 2015)
  • 2. 1 For the Amusement Park Goers
  • 3. 2 For the Newtonian Physicists
  • 4. 3 For the Park Goers ENTREPRENEURS
  • 5. 4 Quantitative Easing Means Easy Money “So have you sent a note of thanks yet to Ben Bernanke and Janet Yellen? For all of your hard work and delightful intelligence, they arguably have had as much to do with your fund's success as you have.” – Dan Primack (2/19/2015)
  • 6. 5 Price really, really, really matters Top tier fund Barely in business $500M $1B $1.5B $2B
  • 7. 6 What Did We Do? • Looked at 4 public market segments relevant to most of our investing: 1. Software as a Service 2. Marketplaces 3. Consumer Internet 4. E-Commerce • Collected monthly valuation multiple and growth data for each company from 1999 (or first year of public listing) through February 2015 • Sanitized the data 1. Excluded companies with negative EBITDA from all charts with EBITDA multiples (only in the period of negative EBITDA) 2. Each sub segment has a minimum sample size of 5 companies 3. LTM EBITDA excludes stock based compensation expense
  • 8. 7 We are nowhere close to bubble madness (phew!) - 20.0x 40.0x 60.0x 80.0x 100.0x 120.0x 140.0x - 100.0x 200.0x 300.0x 400.0x 500.0x 600.0x 700.0x 1/25/1999 1/25/2000 1/25/2001 1/25/2002 1/25/2003 1/25/2004 1/25/2005 1/25/2006 1/25/2007 1/25/2008 1/25/2009 1/25/2010 1/25/2011 1/25/2012 1/25/2013 1/25/2014 1/25/2015 MedianRevenuemultiple MedianEBITDAmultiple Consumer Internet Multiples EBITDA multiple Revenue Multiple Consumer Internet public valuation multiples have held steady for 5 – 10 years. Let’s zoom in: Saas Marketplaces Consumer Ecommerce
  • 9. 8 Maybe a slight uptick in last 24 months - 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x 35.0x Medianmultiple Consumer Internet Multiples EBITDA multiples Revenue Multiples Recent increase in EBITDA multiples is probably driven by newish batch of hyper-revenue growth IPOs. Saas Marketplaces Consumer Ecommerce
  • 10. 9 Growth clearly drives multiples Be wary of massive multiple re-rating when growth dips below ~30% - 5.0x 10.0x 15.0x 20.0x 25.0x -40% -20% 0% 20% 40% 60% 80% 100% 120% LTMrevenuemultiple 2014 revenue growth Growth Rate vs. Revenue Multiples Multiple compression begins at ~30% Saas Marketplaces Consumer Ecommerce
  • 11. 10 $10 billion is the new $1 billion Current public companies >$10B market cap Private companies with at least $10B valuation Saas Marketplaces Consumer Ecommerce In ~20 years, we got 10 US public Internet companies with > $10bn market caps, and we have 5 new private ones in 5 years.
  • 12. 11 E-commerce businesses aren’t worth much - 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 20.0x Ecommerce EBITDA Multiple - 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x Ecommerce Revenue Multiple *Data set includes traditional ecommerce, does not include ecommerce marketplace businesses Many VC’s are paying 3-5x revenues for companies that are worth 1x in the public markets. Saas Marketplaces Consumer Ecommerce
  • 13. 12 Amazon is a special case - 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x E-commerce vs. Amazon Revenue Multiples Amazon E-commerce For ~5 years, Amazon has consistently traded at 2-3x higher multiples than other public ecommerce companies Saas Marketplaces Consumer Ecommerce
  • 14. 13 Marketplace models are highly valued Valuation multiples are robust, but public markets have calmed down recently – much more so than private markets. - 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x 8.0x 9.0x 10.0x E-commerce vs. Marketplace Revenue Multiples Marketplace E-commerce Saas Marketplaces Consumer Ecommerce
  • 15. 14 Public Cloud Values are up 30-100% It’s *much* harder to generate a 3x+ fund in this environment - 10.0x 20.0x 30.0x 40.0x 50.0x 60.0x 70.0x 01-2007(7) 07-2007(7) 12-2007(6) 06-2008(5) 11-2008(7) 05-2009(7) 10-2009(7) 04-2010(9) 09-2010(11) 03-2011(10) 08-2011(11) 02-2012(9) 07-2012(9) 01-2013(11) 06-2013(9) 12-2013(11) 05-2014(10) 11-2014(10) EBITDA multiples - 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 01-2007(7) 07-2007(7) 12-2007(6) 06-2008(5) 11-2008(7) 05-2009(7) 10-2009(7) 04-2010(9) 09-2010(11) 03-2011(10) 08-2011(11) 02-2012(9) 07-2012(9) 01-2013(11) 06-2013(9) 12-2013(11) 05-2014(10) 11-2014(10) Revenue multiples *Companies with Market Cap’s >$2B Financial crisis Saas Marketplaces Consumer Ecommerce + 100% + 30%
  • 16. 15 It’s not a tech-wide issue, it’s just our sectors While SaaS valuations have soared, their legacy counterparts are stable with much less rich valuations *Data set: SAP, Oracle, Adobe, Microsoft, HP, Cisco - 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x "Legacy" revenue multiple - 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x "Legacy" EBITDA multiple Saas Marketplaces Consumer Ecommerce
  • 17. 16 SaaS investing was more fun in 2007! It’s easier to make money betting ahead of the curve. It’s much harder when everyone agrees with you. - 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x SaaS vs. "Legacy" software revenue multiples SaaS Legacy Saas Marketplaces Consumer Ecommerce “The interesting thing about cloud computing is that we’ve redefined cloud computing to include everything that we already do. ... The computer industry is the only industry that is more fashion-driven than women’s fashion. Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish. It’s insane. When is this idiocy going to stop?" -- Larry Ellison, Sept 2008