One statistic we like tracking to gauge the health of SaaS investing is the rate of IPOs. Below is the data and a few observations.
It’s not looking good. The last SaaS IPO was Sansara in on December 15, 2021 whereas prior to that, there were as many as 7 SaaS IPO’s a month (June 2021).
The peak has passed. The summer of 2021 was an incredible time for SaaS. In June there were 7 IPO’s followed by 5 in July. It’s a stark contrast to the current situation whereby the count has been zero for 3 straight months.
What’s happening? The SaaS market is correcting. For instance, 74% of 2021 Software IPOs are trading below issue price. Big institutional buyers of IPOs that are critical for SaaS companies to go public can’t agree on the right valuation with the SaaS companies that want to IPO. In some cases, the valuation isn’t at enough of a premium to the last valuation. In other cases, the IPO valuation would represent a nasty down-round to the last valuation. So, large SaaS companies that would go public in a friendlier environment are choosing to remain private.
Why this matters. With the IPO market for SaaS companies currently frozen, if that trend sustains the valuation resets will eventually trickle down into the earlier stages. Get your round done now if you can.
Visit us at blossomstreetventures.com and email me directly at email@example.com. All founders and funds welcome! We invest in companies with ARR of $1mm to $30mm, with year over year growth of 20% to 100%+ depending on revenue. We lead or follow in growth rounds and special situations like inside rounds, small rounds, rushed rounds, corralling investors with our term sheet, inbetweeners, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $3mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.