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Second Thoughts on Valuations

Second Thoughts on Valuations
March 28, 2022

The Daily Stack is a daily private market insights newsletter by PrivCo, a private company intelligence platform. Read our previous insights.
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Good morning and hope you had a terrific weekend. I soaked up what might be the last wintry day we can expect in Northern California, doing the things that don’t feel as good when it’s 75 and sunny. Rested and thoroughly Netflixed out, I'm now ready to get into some numbers.

A market correction is still underway for public companies. The hot IPOs of 2021 are underperforming, and investors on the private side are rethinking some of their enthusiastic fundings from last year. Peloton losing steam on customer acquisition and Zoom not replicating the same growth trajectory are just two examples of pandemic darling companies that have investors wary of making new bets.

The Real Valuation
To see if a valuation might be off, an easy calculation is to compare revenue to the valuation ratio of a comparable company on the public exchange. For instance, Patreon last raised in April, 2021 at a $4BN valuation, tripling its value in just six months. Comparing it to a similar business model like Shopify, we can calculate the valuation to revenue ratio for a reasonable idea of its true valuation.

Shopify has a valuation of 19 times its annual revenue ($88BN valuation divided by $4.6BN in revenues = 19). Using PrivCo's financial data available for 2021, Patreon’s $171MM of annual revenue should equate to a $3.2BN valuation ($171MM x 19 = $3.2BN), a far cry or 25% shy of $4BN.

 

Who else might be off a few decimals? 

Company  

Latest Revenue 

Private
Valuation 

 Public Comp 

“Real” Valuation
Based on Public Comp 

Instacart 

$1.8BN

$39BN

 DoorDash

  $17.5 - 34.2BN

Chime

$1BN

$25BN

 NuBank

  $43BN

FTX

$1BN

$32BN

 Coinbase

  $4.7BN

 

Curious to learn more about the private valuation corrections based on public comparables? Check out this article.

Since last week, PrivCo has added:
1,042 Companies | 282 Funding Activities | 131 M&A Deals

Funding & Deal Highlights:
 

Salad raises $17MM from Left Lane Capital

Blockchain • Round A • Salt Lake City, UT
 

Radish Health raises $4MM from Tusk Venture Partners

Concierge Services • Seed • New York, NY
 

Triple Whale raises $27.7MM 

Analytics • Round A • Columbus, OH
 

Captain raises $104MM from NFX Guild

Disaster Recovery • Debt & Equity • Walnut, CA
 

Firstbase raises $50MM from Kleiner Perkins 

Business-to-Consumer • Round B • New York, NY
 

Apiwiz raises $2MM from Raj Khaware

API • Seed • Bellevue, WA
 

Hera Biotech raises $100K from San Diego Angel Conference

Equity • Life Sciences • San Antonio, TX
 

WELOVENOCODE raises $3MM from MANTIS Venture Capital

Apps • Equity • San Francisco, CA
 

BriteCo raises $9MM from Brand Foundry Ventures

Appraisal • Round A • Evanston, IL
 

Reach Digital raises $7MM from Grayhawk Capital

SaaS • Round A • Tel Aviv-Yafo, Israel
 

RIDE1UP raises $6.5MM from Ecosystem Integrity Fund

Electric Bicycle • Round A • San Diego, CA
 

ArcSpan raises $6MM from angel investors

Advertising • Seed • New York, NY
 

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