cloudedjudgement.substack.com · 2023-07-14 · 1056d

Clouded Judgement: IPO Readiness Metrics & Software Market Drought

The software IPO market is experiencing an 18-month drought, the longest since the 2008 financial crisis, with ~25 companies queued to go public. The article establishes quantitative benchmarks for IPO readiness based on 50 companies from 2018-2023, showing a median LTM revenue of $198M, 49% YoY growth, and -11% FCF margin. Valuation multiples remain compressed relative to growth rates, with median public SaaS companies trading at 6.6x NTM revenue and exhibiting 115% net retention and 75% gross margins.

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Metrics in this report

Customer Acquisition Cost Payback

57months

median

Public SaaS companies

EV / NTM Revenue Multiple

6.6x

median

Overall public SaaS companies

EV / NTM Revenue Multiple - High Growth

10.3x

median

Public SaaS with >30% projected NTM growth

EV / NTM Revenue Multiple - Low Growth

3.5x

median

Public SaaS with <15% projected NTM growth

EV / NTM Revenue Multiple - Mid Growth

9.6x

median

Public SaaS with 15-30% projected NTM growth

Free Cash Flow Margin

5percent

median

Public SaaS companies

Free Cash Flow Margin at IPO

-11percent

median

LTM FCF margin prior to software IPO

G&A Expense

18percent of revenue

median

Public SaaS companies

Gross Margin

75percent

median

Public SaaS companies

LTM Revenue at IPO

198millions USD

median

Software IPOs from 2018-2023 (50 companies)

Net New ARR in IPO Quarter

22millions USD

median

Software IPOs 2018-2023

Net Revenue Retention

115percent

median

Public SaaS companies

Operating Margin

-20percent

median

Public SaaS companies

Quarterly YoY Revenue Growth at IPO

49percent

median

Most recent quarter vs. prior year quarter for software IPOs

R&D Expense

27percent of revenue

median

Public SaaS companies

Sales & Marketing Expense

46percent of revenue

median

Public SaaS companies