Last week Postman, a software startup that makes it easier for other software systems to speak with each other, raised $225 million in venture funding. That took its valuation to $5.6 billion, up from $2 billion just a year ago. But it wasn’t Postman nearly tripling its valuation in a year that made people sit up and gawk. Instead, it was Postman’s newest investors valuing it a triple-digit multiple on its revenue.
Last week Postman, a software startup that makes it easier for other software systems to speak with each other, raied $225 million in venture funding. That took its valuation to $5.6 billion, up from $2 billion just a year ago. But it wasn’t Postman nearly tripling its valuation in a year that made people sit up and gawk. Instead, it was Postman’s newest investors valuing it a triple-digit multiple on its revenue.
100X.
Valuations of most companies—small or large, private or public, Indian or Southeast Asian—are a function of their projected revenues. In the software-as-a-service (SaaS) space that Postman inhabits, companies have for long been valued at 10X of their top-line. Meaning, a company—let’s call it Acme Software—that was likely to earn $10 million in a year might be valued at $100 million.
But thanks to a global acceleration of SaaS adoption due to the pandemic, investors started valuing SaaS companies much more dearly. 20X dearly. Meaning, Acme Software could now be worth $200M million with the same revenue of $10 million.
Some of Acme Software’s best-in-class peers might command valuations as high as 35X. Meaning, $10 million in revenue and $350 million in valuation. But they’d need to be really good.
Postman's investors gave it a multiple that broke the axes—100X. For an estimated annual revenue of $50-75 million, it commanded a valuation of $5.6 billion.
That is unheard of. How. On. Earth. Did Indian Postman manage it?
