7 ms·

$5B is a pretty ridiculous valuation for a $140M revenues company.

deleted 6y ago
[deleted]
bpodgursky 6y ago
Zapier has mindshare, enormous depth of functionality, and an enormous potential market. Doesn't feel insane to me. I'd buy in.
- valuearb 6y ago
  And that’s worth $140m in revenues. Not enormous at all.
hangonhn 6y ago
When Slack IPOed, their revenue was around $500 mil and their market cap was $16 billion, IIRC. So Zapier seems pretty inline.
- valuearb 6y ago
  Slacks price was even more ridiculous. It’s lucky it was able to get acquired before this bubble bursts.
isoskeles 6y ago
I am using Zapier because their service was very easy to implement a webhook for what I needed at the time. However, the price is high enough that they're on my short list of vendors to move on from when I have the time to spend building my own integration (not replacing everything Zapier does, just for my use-case). I suspect I am not their intended customer as I don't get a lot of value out of the dozens (hundreds?) of API implementations they offer. But I wonder how much of that revenue represents customers with similar plans.
- mooreds 6y ago
  I'll tell you about the first time I started using Zapier. I wanted to move some data from google spreadsheets to some other system (I don't actually recall what it was, it was 2012). I was on a team of three devs supporting a business critical application. The options for me were: * bump something else to have a dev build out the integration * pay the monthly fee to enable a non technical person to build the integration (it was on the order of $50/month). * don't get the work done Above and beyond the value of the UI and uptime managed by someone else, the fact that it could get done by a non programmer made the monthly fee very worth paying. I think I've used it at 3 companies since, mostly on the free plan. But when I exceed the plan, I don't have any trouble pulling out the company's wallet to pay for it.
  - monoideism 6y ago
    > pay the monthly fee to enable a non technical person to build the integration I'm just curious how that went. Was a non-technical person able to learn Zapier enough to carry out the task? Were they totally non-technical, or just not a professional dev?
    - mooreds 6y ago
      They were able to do what needed to be done. I'm not sure what you mean by totally non technical? They weren't developers, but knew how to use gmail and google sheets at a pretty sophisticated level.
      - monoideism 6y ago
        > but knew how to use gmail and google sheets at a pretty sophisticated level. Thanks, that's what I meant. I think someone who's is tech savvy but not a professional developer would do fine with Zapier, but my guess is that completely non-technical people (who only understand browsers, email, word processors, etc) would struggle.
ineedasername 6y ago
30x revenue multiples are actually not too uncommon, especially for a SaaS firm that appeals to both small & enterprise customers, is already profitable, and has a large addressable market. Here's an article that has a frequency chart based on valuation multiples. Keep in mind that, while it's front-loaded with lower multiples, not all business models have the same potential for revenue growth: https://onstartupexits.com/how-to-value-the-exit-price-for-an-early-stage-startup/ https://onstartupexits.com/how-to-value-the-exit-price-for-a...
- valuearb 6y ago
  30x revenues is a marker for an excellent short position. Revenue growth always slows and almost never justifies such ridiculous valuations.
  - ineedasername 6y ago
    Sure, though I was just saying these valuations aren't too uncommon. Still, in Zapier's case, they're in hockey-stick revenue growth, and accelerating. It's still a gamble, but not an unreasonable one to believe they'll ultimately justify the $5B valuation. Of course by that point they've be valued at some other ridiculously high number.
    - valuearb 6y ago
      Are they in hockey stick revenue growth, or is growth slowing like it does for 90% of startups? How large is their total addressable market anyways? Seems like a super niche product. One thing I could have been clearer on is that private valuations should be at a large discount to public valuations. You buy shares at a $5B valuation only because you believe it can IPO close to a $10B valuation, or what is the point of investing? And a $10B valuation would crazy town.
staysaasy 6y ago
I agree that it feels pretty cray but it's inline with the market. Sector is hot, it has a trendy + efficient product-driven growth model, they're profitable, and growth looks good. There's a lot to like which gives them a revenue multiple at the high end of the market – which currently puts them right around $5B.
- valuearb 6y ago
  It’s a bubble not a sector. This ends like 2000 ended.
reducesuffering 6y ago
No, it's not, because that isn't enough information to determine your conclusion. That's a 36x P/S ratio. Many established public companies are at or exceeding that, like Cloudflare and Crowdstrike. (those companies COULD be overvalued too, but it depends on something else) The most important factor or metric you're missing from the equation is growth (assuming eventual profit margins are normal). It doesn't matter what today's revenue numbers are, if there is an eventual much better revenue number in the future. This can be sustained by something like: 100% YoY growth over 5 years: 4.5b revenue at a $5b valuation? 50% YoY growth over 10 years: 8b revenue at a $5b valuation? Looking much more like a lot of value there.
- jtsiskin 6y ago
  For some context, some other current P/Es: Google: 35.06 Apple: 32.54 Microsoft: 34.64 PayPal: 68.38 Amazon: 73.10 Shopify: 420.04 Square: 515.13 Tesla: 1,043.84
  - valuearb 6y ago
    Those are P/Es, not P/S. If Zapier nets 25% after taxes, it’s valuation is 150x earnings. And Shopify, Square and Tesla’s valuations are even more absurd.
    - reducesuffering 6y ago
      Mentioning these 200-1000 P/E companies, as others do, is such an oddity, because there are 500 other companies with 0 earnings or negative P/E that are worse in that aspect.
      - valuearb 6y ago
        To invest successfully you don’t pay a high price saying “well there are worse companies at worse prices out there”. Valuations are always determined by the NPV of future earnings, discounted for time and cost of money. Given rising interest rates all of these valuations will get slashed substantially. It’s a bubble, after the internet bubble it took Amazon 7 years to trade back to its bubble price. Cisco never has.

deleted 6y ago

[deleted]

Zapier has mindshare, enormous depth of functionality, and an enormous potential market. Doesn't feel insane to me. I'd buy in.

valuearb 6y ago
And that’s worth $140m in revenues. Not enormous at all.

hangonhn 6y ago

When Slack IPOed, their revenue was around $500 mil and their market cap was $16 billion, IIRC. So Zapier seems pretty inline.

valuearb 6y ago
Slacks price was even more ridiculous. It’s lucky it was able to get acquired before this bubble bursts.

isoskeles 6y ago

I am using Zapier because their service was very easy to implement a webhook for what I needed at the time. However, the price is high enough that they're on my short list of vendors to move on from when I have the time to spend building my own integration (not replacing everything Zapier does, just for my use-case). I suspect I am not their intended customer as I don't get a lot of value out of the dozens (hundreds?) of API implementations they offer. But I wonder how much of that revenue represents customers with similar plans.

mooreds 6y ago
I'll tell you about the first time I started using Zapier. I wanted to move some data from google spreadsheets to some other system (I don't actually recall what it was, it was 2012). I was on a team of three devs supporting a business critical application. The options for me were: * bump something else to have a dev build out the integration * pay the monthly fee to enable a non technical person to build the integration (it was on the order of $50/month). * don't get the work done Above and beyond the value of the UI and uptime managed by someone else, the fact that it could get done by a non programmer made the monthly fee very worth paying. I think I've used it at 3 companies since, mostly on the free plan. But when I exceed the plan, I don't have any trouble pulling out the company's wallet to pay for it.
- monoideism 6y ago
  > pay the monthly fee to enable a non technical person to build the integration I'm just curious how that went. Was a non-technical person able to learn Zapier enough to carry out the task? Were they totally non-technical, or just not a professional dev?
  - mooreds 6y ago
    They were able to do what needed to be done. I'm not sure what you mean by totally non technical? They weren't developers, but knew how to use gmail and google sheets at a pretty sophisticated level.
    - monoideism 6y ago
      > but knew how to use gmail and google sheets at a pretty sophisticated level. Thanks, that's what I meant. I think someone who's is tech savvy but not a professional developer would do fine with Zapier, but my guess is that completely non-technical people (who only understand browsers, email, word processors, etc) would struggle.

ineedasername 6y ago

30x revenue multiples are actually not too uncommon, especially for a SaaS firm that appeals to both small & enterprise customers, is already profitable, and has a large addressable market. Here's an article that has a frequency chart based on valuation multiples. Keep in mind that, while it's front-loaded with lower multiples, not all business models have the same potential for revenue growth: https://onstartupexits.com/how-to-value-the-exit-price-for-an-early-stage-startup/ https://onstartupexits.com/how-to-value-the-exit-price-for-a...

valuearb 6y ago
30x revenues is a marker for an excellent short position. Revenue growth always slows and almost never justifies such ridiculous valuations.
- ineedasername 6y ago
  Sure, though I was just saying these valuations aren't too uncommon. Still, in Zapier's case, they're in hockey-stick revenue growth, and accelerating. It's still a gamble, but not an unreasonable one to believe they'll ultimately justify the $5B valuation. Of course by that point they've be valued at some other ridiculously high number.
  - valuearb 6y ago
    Are they in hockey stick revenue growth, or is growth slowing like it does for 90% of startups? How large is their total addressable market anyways? Seems like a super niche product. One thing I could have been clearer on is that private valuations should be at a large discount to public valuations. You buy shares at a $5B valuation only because you believe it can IPO close to a $10B valuation, or what is the point of investing? And a $10B valuation would crazy town.

staysaasy 6y ago

I agree that it feels pretty cray but it's inline with the market. Sector is hot, it has a trendy + efficient product-driven growth model, they're profitable, and growth looks good. There's a lot to like which gives them a revenue multiple at the high end of the market – which currently puts them right around $5B.

valuearb 6y ago
It’s a bubble not a sector. This ends like 2000 ended.

reducesuffering 6y ago

No, it's not, because that isn't enough information to determine your conclusion. That's a 36x P/S ratio. Many established public companies are at or exceeding that, like Cloudflare and Crowdstrike. (those companies COULD be overvalued too, but it depends on something else) The most important factor or metric you're missing from the equation is growth (assuming eventual profit margins are normal). It doesn't matter what today's revenue numbers are, if there is an eventual much better revenue number in the future. This can be sustained by something like: 100% YoY growth over 5 years: 4.5b revenue at a $5b valuation? 50% YoY growth over 10 years: 8b revenue at a $5b valuation? Looking much more like a lot of value there.

jtsiskin 6y ago
For some context, some other current P/Es: Google: 35.06 Apple: 32.54 Microsoft: 34.64 PayPal: 68.38 Amazon: 73.10 Shopify: 420.04 Square: 515.13 Tesla: 1,043.84
- valuearb 6y ago
  Those are P/Es, not P/S. If Zapier nets 25% after taxes, it’s valuation is 150x earnings. And Shopify, Square and Tesla’s valuations are even more absurd.
  - reducesuffering 6y ago
    Mentioning these 200-1000 P/E companies, as others do, is such an oddity, because there are 500 other companies with 0 earnings or negative P/E that are worse in that aspect.
    - valuearb 6y ago
      To invest successfully you don’t pay a high price saying “well there are worse companies at worse prices out there”. Valuations are always determined by the NPV of future earnings, discounted for time and cost of money. Given rising interest rates all of these valuations will get slashed substantially. It’s a bubble, after the internet bubble it took Amazon 7 years to trade back to its bubble price. Cisco never has.