Bessemer Venture Partners had added a nice newsletter, Parting the Clouds, that’s very metrics-dense.

A few stuck out this week as helpful ways to summarize just what’s happening with SaaS public companies.  Two big take-aways from this week:

  • 53% of the BVP Cloud Index is trading under 6x ARR, representing 40 companies
  • The top tier of public Cloud companies is trading at 12x ARR, but they are growing 50%+ at $500m+ in ARR, with importantly, 15%+ Free Cash Flow margins.  So the high multiples come with a lot of, if not profits, then a lot of free cash flow.

The public markets want it all right now — strong growth AND strong cash flow.  They want SaaS companies to act like traditional software companies, that mint cash along with revenue.

It’s a high bar.  It’s been Growth, Growth, Growth for years.  Not today.

You need the full package to be worth 10x or more ARR.  Even high growth without a shot at high profits doesn’t cut it.

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