Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Stocks are set to fall further today, likely forcing shares in SaaS and cloud companies down yet again. After two wild trading weeks, the high-flying tech category is off over 9% from recent highs before the bell this morning, putting it close to correction territory. (A correction is usually defined as a decline in value of 10% or more from recent highs.)
With today’s expected declines, SaaS companies are likely set to close out Friday close to or in a formal correction. Even more notably the Bessemer cloud index, which tracks public SaaS companies, is worth less today — even before fresh declines — than it was last July. That implies that SaaS companies have not only given up recent gains; they’ve shed all their progress since last Summer.
But the news isn’t all bad. Even while all the companies that Bessemer’s handy have grown since their mid-2019 size, Bessemer is reporting a slightly expansion in the value of SaaS revenue since that date. It’s an odd moment that we’d best unpack.
Let’s observe the market data, and examine a few public SaaS companies to see its impacts. For startups, today’s dive is an attempt to understand how public market investors are valuing recurring revenue. It’s something worth grokking if you have a pricing event coming up this year. Let’s go!