      cloudedjudgement.substack.com · 2024-06-28
      · 706d
    

Clouded Judgement: Can Subscale Software Companies Go Public?

The article challenges the notion that software companies need $500M+ in ARR to go public, arguing instead that the barrier is inflated private market valuations relative to public market multiples. It analyzes why subscale software companies struggle with IPO timing, examining growth deceleration patterns, valuation compression, and the abundance of late-stage private capital that disconnects private valuations from public market realities.

17 metrics· Cited 0× in the knowledge base ·Open source ↗

Metrics in this report

CAC Payback Period

53months

median

Public SaaS companies at scale

Free Cash Flow Margin

14percent

median

Public SaaS companies at scale

G&A Expense

15percent of revenue

median

Public SaaS companies at scale

Gross Margin

75percent

median

Public SaaS companies at scale

LTM Growth Rate

17percent

median

Public SaaS companies

NTM Growth Rate

12percent

median

Public SaaS companies

Net Revenue Retention

110percent

median

Public SaaS companies at scale

Operating Margin

-10percent

median

Public SaaS companies at scale

R&D Expense

25percent of revenue

median

Public SaaS companies at scale

SaaS Valuation Multiple (High Growth)

10.3x NTM Revenue

median

Public SaaS companies with >27% projected NTM growth

SaaS Valuation Multiple (Low Growth)

3.8x NTM Revenue

median

Public SaaS companies with <15% projected NTM growth

SaaS Valuation Multiple (Mid Growth)

7.6x NTM Revenue

median

Public SaaS companies with 15-27% projected NTM growth

SaaS Valuation Multiple (Overall)

5.2x NTM Revenue

median

All public SaaS companies

SaaS Valuation Multiple (Top 5)

15.7x NTM Revenue

median

Top 5 highest-valued public SaaS companies

Sales & Marketing Expense

40percent of revenue

median

Public SaaS companies at scale

Subscale Company Private Valuation

30x revenue

Hypothetical subscale software companies at $100M ARR in private markets

Subscale Company Public Valuation

5-6x revenue

Subscale software companies at $150M revenue if taken public