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Comment by justboxing | Hacker News Reader

> Shows how big the market is...

I think the huge valuation has more to do with how absurd startup valuations really are[1], and less to do with showing how big the market for a niche product is.

[1] Behind the gloss of absurdly high startup valuations https://42floors.com/blog/startups/absurdly-high-valuations

Discussed here => https://news.ycombinator.com/item?id=6874838

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Investors paid to be a part of what Pagerduty can eventually become. Not to have a piece of what Pagerduty is today.

What Pagerduty can become, is much more than just alerting for IT. That's what the $90mm is for.

They hint a little in the article at what some of that future can include: "PagerDuty has shifted some of its focus to doing more with the data it tracks for customers in the future, an area in which it plans to invest."

10-13x ARR isn't absurdly high at all

It depends entirely on your growth rate. In my experience, a lifestyle business growing 20% YoY with 5% churn and 10% operating margin will sell for around 2.5-3x ARR.

20% YoY is very low relative to most of these large SaaS startups that you see on here. The S-1 for Elastic had it at 75% YoY or so. Most of these companies also have absurdly high negative revenue churn. Gross margins approach 75% which become net margins when they stop growing so fast. See the 40% SaaS rule.

https://saasholic.com/the-rule-of-40-for-saas-and-subscripti...

Exactly! Every time you double your growth rate it also approximately doubles the Price / Revenue ratio.

20% growth will yield a 2-3x ratio. 40% growth 4-6x, and by 80% growth you’re looking at a valuation of 8-12x ARR.

Capital market has strong influx which they don't know what to do with. On the other hand they have liability to create money from money. We usually don't realise but investors needs as much opportunity as startups does.

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