6 ms·

For $200M ARR, in a non-fictional world I may have it as low as 600M valuation and as high $1.2b depending on growth. But in this world, it's valued @ 5B. The

For $200M ARR, in a non-fictional world I may have it as low as 600M valuation and as high $1.2b depending on growth. But in this world, it's valued @ 5B. The tech world (bubble) is amazing. Businesses are now being appraised like houses: "Comparable businesses were just bought for X dollars". At the end of the day the valuations don't rely on businesses bottom line. They are based on two factors: - How much Google, Apple, etc. MIGHT buy them for in the future. - How much investors THINK Google, Apple, etc. would buy them today for. Speculative markets have never failed us. /s

ejcx 9y ago
3x revenue for a SaaS business that is probably growing at 100% yoy makes no sense. I have no idea why people continue to cite this. Even public SaaS companies aren't getting valuations so low.
- wyattk 9y ago
  I agree. 8-12x ARR seems to be the standard multiplier for valuation of a SaaS startup. This is also growing ~100% YoY at this scale. That being said, 25x seems very bullish. Even 20x kind of jumps off the page to me. Keep in mind, it's also the SaaS darling in the valley right now, so it's gonna get a bump.
- AstralStorm 9y ago
  The service is very cheap and easy to replace, so such valuation makes sense actually. Do you really expect Slack to bring in 10x more business than it has now?
  - mhluongo 9y ago
    That's not what a 10X multiple implies
ec109685 9y ago
How can you put a limit on their market cap without understanding their growth rate?
alexasmyths 9y ago
The 'existential' issue with Slack, is not their growth rate or multiples ... It's the fact that they don't necessarily have 'vendor lock in' - and substitution is easy. And it's an easy thing to copy. It's designed for small teams, and small teams can switch to the 'next, cool thing' in a heartbeat. At the end of the day it's just chat. That's it. There's nary anything special about it. They did a good job of it. That said, brands to have sticking power, and if there is no reason to change then why? They have some new MS execs, who might teach them the ways of 'sinking their claws in' :) and becoming incumbent. I should add, the larger the company (even with small teams), the bigger the switching costs. After about 500 people, IT kind of becomes 'detached' from the people, and doing anything on one's own becomes harder, so tech becomes entrenched. This company is the next 'IPO pony' the VC's are building up, hoping to push onto markets at high valuation to get a big bang.
- alexasmyths 9y ago
  To add: it's 'Softbank'. They have so much money to invest ... they are looser with their cash I believe.
- beambot 9y ago
  But they do have vendor lockin... in that the switching costs are high. E.g. CRM, Access Control, Database, etc. Once big enterprise customers integrate you into their workflow, it takes a long time to get unseated.
  - alexasmyths 9y ago
    I think most deployments aren't tightly integrated into CRM etc.. But I don't have the figures to back it up.
- Eridrus 9y ago
  I totally agree with you, but I'm pretty impressed they got to 200m ARR at all. I guess marketing is a pretty powerful force when you have so much more money than your competitors. I wonder if they can use this money to build an actual product edge, maybe with search.
vram22 9y ago
Related recent post by Fred Wilson of AVC blog: Some Thoughts On Burn Rates: http://avc.com/2017/09/some-thoughts-on-burn-rate http://avc.com/2017/09/some-thoughts-on-burn-rate

ejcx 9y ago

3x revenue for a SaaS business that is probably growing at 100% yoy makes no sense. I have no idea why people continue to cite this. Even public SaaS companies aren't getting valuations so low.

wyattk 9y ago
I agree. 8-12x ARR seems to be the standard multiplier for valuation of a SaaS startup. This is also growing ~100% YoY at this scale. That being said, 25x seems very bullish. Even 20x kind of jumps off the page to me. Keep in mind, it's also the SaaS darling in the valley right now, so it's gonna get a bump.
AstralStorm 9y ago
The service is very cheap and easy to replace, so such valuation makes sense actually. Do you really expect Slack to bring in 10x more business than it has now?
- mhluongo 9y ago
  That's not what a 10X multiple implies

ec109685 9y ago

How can you put a limit on their market cap without understanding their growth rate?

alexasmyths 9y ago

The 'existential' issue with Slack, is not their growth rate or multiples ... It's the fact that they don't necessarily have 'vendor lock in' - and substitution is easy. And it's an easy thing to copy. It's designed for small teams, and small teams can switch to the 'next, cool thing' in a heartbeat. At the end of the day it's just chat. That's it. There's nary anything special about it. They did a good job of it. That said, brands to have sticking power, and if there is no reason to change then why? They have some new MS execs, who might teach them the ways of 'sinking their claws in' :) and becoming incumbent. I should add, the larger the company (even with small teams), the bigger the switching costs. After about 500 people, IT kind of becomes 'detached' from the people, and doing anything on one's own becomes harder, so tech becomes entrenched. This company is the next 'IPO pony' the VC's are building up, hoping to push onto markets at high valuation to get a big bang.

alexasmyths 9y ago
To add: it's 'Softbank'. They have so much money to invest ... they are looser with their cash I believe.
beambot 9y ago
But they do have vendor lockin... in that the switching costs are high. E.g. CRM, Access Control, Database, etc. Once big enterprise customers integrate you into their workflow, it takes a long time to get unseated.
- alexasmyths 9y ago
  I think most deployments aren't tightly integrated into CRM etc.. But I don't have the figures to back it up.
Eridrus 9y ago
I totally agree with you, but I'm pretty impressed they got to 200m ARR at all. I guess marketing is a pretty powerful force when you have so much more money than your competitors. I wonder if they can use this money to build an actual product edge, maybe with search.

vram22 9y ago

Related recent post by Fred Wilson of AVC blog: Some Thoughts On Burn Rates: http://avc.com/2017/09/some-thoughts-on-burn-rate http://avc.com/2017/09/some-thoughts-on-burn-rate