Capped price. The median acquisition price of these companies was $6.2bln. There are only so many acquirers that can spend billions in cash and/or company stock to make acquisitions. Once you get to $5bln+ in valuation, the universe of corporate acquirers (Salesforce, Microsoft, Adobe) and private equity firms (Thoma Bravo, KKR, Vista, Clearlake, Fracnsico, Symphony) that can afford you shrinks, such that IPO becomes the primary viable option. And of course, SaaS IPO’s don’t grow on trees; there were 40 in 2021. There have been no SaaS IPO’s in 2022 and 2023 as the market is frozen; sellers can’t agree on valuation with institutional buyers that are needed to buoy an IPO. Internal down rounds and flat have been happening for all those bullshit “unicorns”.
No burn. These companies don’t burn, but they also weren’t wildly profitable. On median, EBITDA margin was -4%. Profitability isn’t a requirement to get acquired, and these acquisitions fly in the face of “Rule of 40”, which we don’t believe is required.
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