I think we’re all trying to figure out what our private stock options are worth, especially after the volatility that was 2022. That magical floating target somewhere between $0, the 409a valuation, and our wildest retirement dreams. There have been a few great recent signals in the public & late stage private markets that are beginning to give us an indication of where the trend is headed as we turn the page to 2023. And by trend, hopefully, we mean bottoming..

First, a very tangible public signal. Coupa Software (COUP) was bought out by Thoma Bravo for $8B this week. Tomaz Tunguz gives a great summary of the deal here (some numbers have since changed) but I’ll paraphrase a few key bullet points:

• Coupa was driving $700M in NTM (next twelve months) revenue and was acquired for a ~70% market premium that values them at 11.4x revenue
• Their cash flow was above average from a peer perspective which makes them particularly attractive to a private equity acquirer (they can afford the debt payments for a leveraged buyout)
• This is the biggest deal of 2022 since Figma – a very quiet year for software acquisitions

Next, a helpful private signal. Snyk, a Boston area security focused developer platform, raised another $196M @ $7.4B. They took a 12% valuation haircut from their previous $8.5B valuation to get the deal done. Some internet reports have their revenue at ~$400M for 2022 so let’s assume an 18-20x 2022 revenue multiple. Pretty good in this economy!

Then we can add in a few more public comparisons for good measure:

• Salesforce (SaaS King): 24% y/y revenue growth / $26.5B 2022 revenue / $133B market cap – 5x 2022 revenue multiple
• Palo Alto Networks (Cybersecurity leader): 29% y/y revenue growth / $5.8B 2022 revenue / $47.5B market cap – 8x 2022 revenue multiple
• DataDog (SaaS High Flyer): 74% y/y revenue growth / $1.6B 2022 revenue / $25.5B market cap – 16x 2022 revenue multiple

Let’s leave aside the fact that you can use different line items to determine valuation – EBITDA, FCF, etc. And let’s ignore that competitive positioning, strategic value, and a whole host of other dark arts drive valuation math.

The bottom line is that when you turn your eyes to your own startup the top tier of growth is unlikely to reflect a materially higher valuation multiple than 20x revenue in this climate. That would certainly represent 100%+ y/y growth. If your company raised money at >$1B valuation, is growing <100% y/y, and has significantly less than $100M in revenue..it’s going to take 2+ years to grow into that valuation.

As you evaluate your options (financial and career) for 2023, it’s always helpful to check in on the valuation math. Especially when it’s moving monthly. Hopefully the climate improves. And it will..in due time. We’re almost on to 2023!