What does it mean for the tech sector that Square's IPO is less than its valuation at the last round of financing?

echojason@gmail.com'

JASON LEMKIN

Not that much as long as Square has a decent, well subscribed IPO.

The market sets prices.  And they do go up and down.

If the last Square rounds were priced “too high” for a ’15 IPO  … and it looks like they may have been, with hindsight at least … then comparable late-stage valuations will fall.   Probably, in some cases, they already have.

It’s OK.

Multiples in particular, go up and down.  The market decides.

This isn’t going to cause a freezing of the capital markets.  But having a lot of IPOs price at less than the last round means implicitly, those deals were all overpriced by at least 50-100%.

So … revenue multiples paid in valuations will come down to adjust to that.

In SaaS, in many cases, they already have.  If valuations fall 1/3d, they fall a 1/3d.  It will be OK.  Companies will get funded.  They’ll just have to wait longer to achieve the same valuation, or sell more of the company.

See Questions On Quora

View original question on quora

Published on November 8, 2015
Share This