According to recent statistics, late-stage SaaS firms may be the most vulnerable to changing valuation markers among technology companies. According to a survey by Silicon Valley Bank (SVB) on first-quarter software startup trends, late-stage SaaS valuations in the United States grew the fastest in 2021, ending the year with the highest revenue multiples of their peer group.
The quick rise in the value of software equities in the aftermath of the pandemic’s inception in 2020 and into most of 2021 contributed rocket fuel to late-stage startup valuations, as is widely documented. However, it is just now becoming evident how much harm late-stage SaaS businesses may face. Remember that layoffs are already on the rise in the market, and several unicorns are attempting to re-price their stock to retain employees.
Isn’t it strange that the startups with the highest valuations look to be on the verge of a major correction? No. It’s purely coincidental. Let’s speak about why. What goes up in price? We’re approaching the start of the first quarter of venture capital data, which means it’s almost time to retire the 2021 findings as temporally relevant. However, note how SVB illustrates how revenue multiples grew for two subgroups of the US SaaS industry — enterprise apps (lighter colors) and business infrastructure (darker colors) — under the deadline.
Nstacart isn’t done generating headlines yet. The well-known grocery delivery startup launched a software package as part of its self-described third act earlier this week. According to Bloomberg, Instacart’s valuation has dropped from about $39 billion to $24 billion, marking a 38.5 percent drop in the company’s value. According to the commentary, the company’s new “valuation” was determined by a 409a price shift rather than a fall in the value of preferred shares sold in the previous round. The difference here is that 409a values are established by third parties, not startups or their venture backers – Carta, for example, undertakes this work for clients – leading in more objective pricing in certain ways. However, what we assume to be a freshly established 409a value for Instacart is significant.
The decrease in valuation is part of a bigger pattern in which the value of high-growth technology businesses has been declining in recent months. The public markets have cut the value of major and small software enterprises, SaaS and otherwise, from their late-2021 highs. Instacart, which has a number of public comparables owing to IPOs from DoorDash and Uber, operates in an environment where its value can be directly compared to that of publicly traded companies. The Exchange has done some research on the Instacart value shift and has some observations on the company’s present trajectory. Instacart’s reduced valuation is influenced by a number of factors, including the shifting public market. Human skill is the other. Let’s have a look.