Jumping up to public markets, I thought this was an interesting insight yesterday from Jamin Ball at Altimeter:
> There's now only 3 cloud software companies trading >10x NTM rev. Snowflake at 15.2x, Veeva at 10.8x and Cloudflare at 10.5x [0]
:O
[0] https://twitter.com/jaminball/status/1653482586054987776
Growth adjusting à la PEG [1] might help normalise the data. Pre-C businesses should grow faster than public ones. That said, these are all heuristics—details like churn, margins and customer acquisition cost matter.
That self selection means they really should have a higher multiple even if you judge them using the same metrics. IE if you have a public company growing by 20% per year and a private one growing by 20% per year you should only invest in the private one of it’s at a significant discount or it’s growth will likely continue for significantly longer than the public one.
Taking a company public is generally profitable because of people’s liquidity preference. Companies will sell shares to an investment bank directly before an IPO as both a form of payment and a hedge. It’s a very nuanced transaction that might otherwise seem dumb on the surface.