Today is an incredibly amazing day as @Squarespace lists on the @NYSE via a direct listing. Congratulations to our team, our customers, our investors, and everyone who has come together to make this happen. Looking forward to the next decades of innovation and even more success! pic.twitter.com/rASOW4NfbB
— Anthony Casalena (@acasalena) May 19, 2021
These are the best of times in SaaS. It’s just plain fun to watch Klaviyo raise at $9.5B, Pipe blaze to a $2B valuation in record time, and unicorn after unicorn. It really does seem like we can all do it now, and many of us can.
And yet it doesn’t mean the markets aren’t nervous. They are. They are worried about valuations at all-time highs. They are worried about the hottest start-ups being bidded up to 50x-100x ARR. They are worried growth rates might come down. Most importantly, they are worried the sky-high revenue multiples may revert back to historical norms. That’s something that it is fair to worry about.
Squarespace may be one of the latest signs of nervousness. Squarespace is simply a great company, growing 30% at a stunning $700m in ARR. More on that here.
Yet, the public markets didn’t love it. At a $6B valuation post-public listing, it’s not even worth 10x this year’s revenues, let alone 10x next year’s. And that’s for an epic, capital-efficient, proven brand on its way to powering right past $1B in ARR.
Anu Hariharan, co-head of YC Continuity Fund (YC’s later stage investment vehicle) shared some similar concerns, noting that late stage term sheets are getting repriced and renegotiated during the recent market bumps:
3/ As a result the rules of the game are different
1. Term sheets are not final — valuations can drop and/or investors can pull TS's last minute and your entire round can fall apart
— Anu Hariharan (@anuhariharan) May 18, 2021
Times are still great.
Just be aware the markets are a bit … nervous. Maybe close that term sheet faster. Maybe don’t play any games. Maybe shake hands on a great deal with an investor you love, and move on.
And maybe be just a smidge more conservative. Because even the best of times have better and worse times.