So there’s a curious thing anyone close to venture capital fundraising and rounds is seeing today:
Valuations for Hot VC Deals remain far higher than pre-March 2020 … even though growth for the overall public SaaS and Cloud companies has slowed to … all time lows.
The latest Bessemer data proves this out in a very helpful chart and summary:
For the best of the best in SaaS and Cloud, yes ARR multiples in VC rounds are down 31% from their 2021 peak. But … they are still double where they were in 2018-2019. And just as high as 2020.
Now the BVP Cloud 100 of course represents some of the best of the best in SaaS, from Wiz to Stripe to Figma and more. Most likely no matter how well you are doing — that’s likely not quite you.
So you can discount some of this as outliers, even the outliers of the outliers. But the Cloud 100 was always outliers. And as you can see above, valuations started to grow into 2019 … exploded in 2020 and 2021 and into 2022 , which sort of made sense, as overall growth rates exploded … but then valuations for the best of the best have stayed persistently high.
Now to be clear, this is for the best of the best of the best. The average Cloud 100 company has nine figures+ of ARR and is growing a stunning 70% (!):
So at those growth rates, sky high valuations at the growth stage are arguably merited, at least in theory. So many of the Best of the Best are growing at crazy rates at scale, from Canva to Databricks and Wiz and more.
And yet … and I think almost everyone in venture also knows this … it doesn’t quite make sense.
Public SaaS and Cloud multiples have fallen to almost 5x ARR, an all-time low for past 8+ years at least. And growth rates have fallen to all-time lows.
And yet optimism, or perhaps even just the pressure to deploy capital, has seen private valuations stay not as far off their 2021 peaks as one would expect.
IMHO, it’s justified for a Wiz or two, for sure. But when even the Best of the Best like the latest SaaS IPO, OneStream, growing 34%+ at $500m ARR … trade for 10x ARR …
Then VC valuations still seem awfully disconnected from reality. Especially in good deals, but not Wiz-grade deals.
We’ll see.
