Hot in Enterprise IT/VC - What's 🔥 in Enterprise IT/VC #370
What's 🔥 in Enterprise IT/VC #370The End of an era - the extinction of "Hypergrowth" public enterprise software cos, >40% NTM Revenue 📈 - Guggenheim PartnersAs I was thinking about the newsletter this weekend, I got this mind-blowing 🤯 email from Rob Bartlett who is a Sr. MD, phenomenal banker, and leads the Security & Software Infra group for Guggenheim.
Here’s Slide 6. You can see 20% of companies were in the >30% growth bucket mid-2022, and it’s quickly adjusted downwards to just 2 companies representing 1% (Snowflake and SentinelOne). This is absolutely mind blowing and a combination of the COVID acceleration unwinding, a tough economy, rising interest rates, and the public market demanding efficient businesses. There is one silver lining though; while multiples have been wrecked from a peak of 43.4X three years ago, there has been a slight uptick in the last month to 13.3X for High Growth, >30% companies which is back to Pre-Pandemic levels. Let’s see if this continues moving forward in the next few months. Here’s a chart showing the all important trade-off between growth and profitability. In the end, growth is rewarded more than FCF but at same time you need both. If you’re just a profitable company with amazing FCF >30% you’re multiple is just 9.7x forward versus 13.3X forward for >30% growth cos. With the 1000+ 🦄 still private, the big question will be if this new batch of public cos will come out of gate to help recreate the >40% growth bucket or if we have just hit a wall? I expect the former as this new class of IPO candidates has had time to readjust growth and profitability expectations in private and will create a new class of >40% efficient growth companies with positive FCF. As always, 🙏🏼 for reading and please share with your friends and colleagues. Scaling Startups
Enterprise Tech
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