Within the last few weeks, we’ve seen two significant exits in Startupland, the first new pricing information we received in many quarters.
Klaviyo was the first half for IPO in at least a year. Atlassian’s acquisition of Loom is also the first unicorn sale in about the same time frame.
| Company | Last Round Post, $b | Current Value, $b | Change |
|---|---|---|---|
| Loom | 1.53 | 0.95 | -38% |
| Klaviyo | 9.5 | 7.6 | -20% |
Naturally, many of the first analyses compared the last round valuation in the private markets to the exit value. In both cases, the exit values amounted to less than the last private round – discounts of 38% & 20%.
But the market has changed enormously since the market set those prices. But, what if we normalized the delta for the valuation environment?
| Company | 75th Percentile Public Multiple at Last Round | Multiple Today | Change |
|---|---|---|---|
| Loom | 21.2 | 8.9 | -58% |
| Klaviyo | 9.3 | 8.9 | -5% |
When Loom raised its final round in mid-2021, the 75th percentile forward enterprise value to revenue multiple (EV/NTM Rev) for publicly traded software companies mounted to 21.2x. Since then, it has declined by 58% to 8.9x, as of Friday.
Klaviyo’s final round in mid-2022 sees less of a delta in multiples of -5%.
| Company | Normalized Change in Multiple |
|---|---|
| Loom | +20% |
| Klaviyo | -15% |
In this analysis, we assume that both companies command the 75th percentile multiple. Normalizing for the change in the evaluation environment Loom’s relative multiple has increased by 20% while Klaviyo’s has fallen by 15%.
Averaged together, they imply startups are 2.5% more valuable today than a 2 years ago, but that figure is statistical noise.
Klaviyo’s revenue growth rate is the 2nd fastest across publics at 62% last year, & its unit economics are impressive. So I struggle to explain the 15% decrease in multiples, aside from a higher rates environment & geopolitical tensions weighing on valuations.
Loom’s increase tells us Atlassian paid a premium for the company
relative to the normalized market value. Perhaps, the company was growing at an incredible rate, significantly above the 75th percentile. Or an auction blossomed for Loom that increased the valuation & the Atlassian champion insisted the premium was worth it. Without knowing the backstory of the acquisition, I can’t say.
But, these two sparse data points do suggest that the acquisition market is moving in synchrony with the public valuation environment. Benjamin Graham said over the long term, the market is a weighing machine, even if in the short term it’s a voting machine.