4 ms·

So bear in mind: 1) those are 2017 numbers, so if we assume they grew by the same amount, they’re over 400m this year, which makes it only 20x 2) the article

So bear in mind: 1) those are 2017 numbers, so if we assume they grew by the same amount, they’re over 400m this year, which makes it only 20x 2) the article mentions that SAP is paying a 75% premium over the IPO valuation, because the road show was going well, they felt like they had to do it. 3) a 10-12x revenue valuation is not unreasonable for publicly traded companies So, they’re growing like crazy, IPO plans going great, Sap comes calling and qualtrics basically says “why should we sell? We did all the annoying IPO work, what are you going to offer us to make this worth our while?” It’s basically the perfect negotiating position.

throwaway5752 8y ago
a 10-12x revenue valuation is not unreasonable for publicly traded companies I know a lot of publicly traded "cloud" companies are in fact valued like this. I suspect very strong that this is because analysts thing that they have cracked a business model that is very easy to predict and expand rapidly: very low capex, very low-churn (earnings calls talking about "retention rates", NPSs), and easy to predict even high growth (ARR retention/expansion). I think several early players like SFDC and Splunk have created this impression. P/S > 3-4 had been pretty unusual up until recently. All companies are worth the discounted sum of their future cashflow, whatever that may be. To see P/Ss 10+ you are projecting both serious growth and very high margins. I wonder if one looked at the whole space if the 5 year projected earnings of all the companies together would make sense, or if we're collectively under-discounting risk (ie, sum total of all cloud SaaS companes far exceeding the reasonable TAM) All that being said I think you entirely nailed the chain of events leading up to the acquisition.

4 ms·

So bear in mind: 1) those are 2017 numbers, so if we assume they grew by the same amount, they’re over 400m this year, which makes it only 20x 2) the article

by mattzito 8y ago

throwaway5752 8y ago
a 10-12x revenue valuation is not unreasonable for publicly traded companies I know a lot of publicly traded "cloud" companies are in fact valued like this. I suspect very strong that this is because analysts thing that they have cracked a business model that is very easy to predict and expand rapidly: very low capex, very low-churn (earnings calls talking about "retention rates", NPSs), and easy to predict even high growth (ARR retention/expansion). I think several early players like SFDC and Splunk have created this impression. P/S > 3-4 had been pretty unusual up until recently. All companies are worth the discounted sum of their future cashflow, whatever that may be. To see P/Ss 10+ you are projecting both serious growth and very high margins. I wonder if one looked at the whole space if the 5 year projected earnings of all the companies together would make sense, or if we're collectively under-discounting risk (ie, sum total of all cloud SaaS companes far exceeding the reasonable TAM) All that being said I think you entirely nailed the chain of events leading up to the acquisition.