Meritech Benchmarking: Update on our free and comprehensive public SaaS operating metrics, financials, and trading data application.
What does a best-in-class SaaS company look like? How quickly is it growing? How efficient is its go-to-market (GTM)? How is it valued? Private company CEOs, CFOs, other operators, board members, and potential investors look to the public markets to answer these questions on a daily basis, especially in periods of volatility. Meritech has been investing in late-stage venture since 1999 and we’ve been fortunate to partner with many iconic companies through IPO, including Salesforce, Facebook, Tableau, Datadog, Roblox, Snowflake, UiPath, Braze, and over 50 others. Given this experience, we are often asked these same questions. It’s why we launched Meritech Insights in April of 2020 to be the leading comprehensive and free database of non-GAAP financials and imputed metrics for public SaaS companies. Now, we’re happy to share that we’ve launched a new and improved version of this product, Meritech Benchmarking.
Meritech Benchmarking is a totally free, easy-to-use web application that has all available valuation metrics, non-GAAP financials, and trading history for almost every public SaaS company. It’s also filterable by industry, business model, and growth rate enabling users to dig into what it means to be a public SaaS company across every important metric.
Our application is organized into five sections:
Valuation Metrics: Valuation tools and data such as a regression analysis, IPO returns, equity value, multiples of revenue, growth adjusted multiples, implied ARR multiples, and gross profit multiples.
Operating Metrics: Operational KPIs such as magic number and payback periods (sales efficiency), implied customer sizes, revenue and cost per full-time employee, net dollar retention, and company age.
Financial Metrics: Financial metrics such as implied ARR (annualized total revenue run-rate) and growth, non-GAAP gross margins and operating expenses, non-GAAP operating margins, free cash flow margins, and Rule of 40.
Trading Data: Historical trading data for almost 120 companies including share price, multiples, and growth rates. In particular, one of our favorite tools is a three-variable view of stock price, valuation multiple, and LTM (last-twelve-months) revenue growth on a single chart. This data gives users a historical perspective into the public SaaS asset class as a whole as well as looking at each individual company since their IPO.
Summary Comparables Table: A summary table of all companies and metrics in one single view, enabling users to view and sort all metrics across all companies.
All of our charts and table views are filterable across segment and growth rates, enabling users to look at literally thousands of possibilities of different views.
Regression Analysis
For example, users can understand in a few clicks the relationships between valuation multiple, growth rate, and profitability for the fastest-growing businesses. Here is a screenshot of our regression analysis tool. As you can see, the correlation (or r-squared) of a company’s valuation multiple to a forward-looking revenue growth rate is 0.34.
Source: Company filings and CapitalIQ as of 11-July-2022. * Indicates current Meritech Capital Partners portfolio company.
In one click, users can do that same analysis but look at the correlation of a company’s valuation multiple to Rule of 40, which incorporates revenue growth as well as a company’s free cash flow margin, a measure of both growth and profitability. As you can see below, the correlation coefficient of growth and profitability is greater than using growth rate alone – a correlation (or r-squared) of 0.38 – as the market now values revenue growth and free cash flow margins. This, however, is a big change from 2021 when a company’s value was most correlated to growth. Check out our regression tool here, which has over 1,000 combinations of data points to run correlations.
Source: Company filings and CapitalIQ as of 11-July-2022. * Indicates current Meritech Capital Partners portfolio company.
Combined Stock Price, Multiple, and Growth
Another interesting view we’ve produced is the combination of stock price, LTM (last-twelve-months) revenue growth rate, and valuation multiple (enterprise value over forward revenue) all in one chart. We have complete trading data for almost 120 companies and users can toggle between different time periods.
Take a look at ServiceNow (NYSE:NOW) in the chart below. The company has been trading for over 10 years and as you can see their valuation multiple hasn’t changed all that much, but revenue growth has slowed (as they went from ~$150M of implied ARR to almost $7B today), although their share price has seen massive appreciation – from $23/share to almost $500/share over the past 10 years, showing the power of compounding growth and margins.
Source: CapitalIQ as of 11-July-2022. Dollars in millions. NTM defined as next-twelve-months and LTM defined as last-twelve-months. * Indicates current Meritech Capital Partners portfolio company.
The second example is BigCommerce (NasdaqGM:BIGC). BigCommerce went public in 2020 and even though the business has seen accelerated LTM (last-twelve-months) revenue growth, their valuation multiple and share price has fallen due to deteriorating market conditions.
Source: CapitalIQ as of 11-July-2022. Dollars in millions. NTM defined as next-twelve-months and LTM defined as last-twelve-months. * Indicates current Meritech Capital Partners portfolio company.
Comparables Table
Lastly, we offer a sortable and filterable comparables table for every company, enabling users to filter and line up metrics by growth rate, valuation multiples, implied ACVs (annual contract value), equity value, share price performance, and much more.
Source: Company filings and CapitalIQ as of 11-July-2022. Dollars in millions. * Indicates current Meritech Capital Partners portfolio company.
We’re excited to share Meritech Benchmarking and we will be updating this data for earnings and for price updates every week. Lastly, we only expose a fraction of the data we have hosted internally, and for founders and executives, please do reach out to us (insights@meritechcapital.com) if you'd like to see more. If you want to receive more emails like this, please sign up here.
*Indicates that Meritech Capital is a shareholder.