Software Index
State of the Market
In October, the NASDAQ decreased by 3.4%, and the Scalar Software Index median NTM revenue multiple fell to 5.1X, a 7.8% decrease from September’s level. Each of the three technology companies that had IPOs in September traded below their offering prices as of the end of October. This mirrors the result of more than 80% of companies that went public via a traditional IPO since 2020 that are now trading below their IPO price.
Total nonfarm payroll increased by 150,000 according to the Bureau of Labor Statistics, leaving the national unemployment rate nominally higher at 3.9%. The Bureau of Economic Analysis reported that the real gross domestic product (GDP) increased at an annual rate of 4.9% in Q3 2023.
The Federal Reserve did not increase the Federal Funds Rate during its most recent FOMC meeting, leaving the Federal Funds Rate unchanged at a target between 5.25% and 5.50%. The 10-year treasury rate increased from 4.69% to 4.88% during the month of October, and the 3-month treasury rate held flat near 5.50%. The average 30-year mortgage continues to hover over 8%, and the Mortgage Bankers Association reported a continued decrease in mortgage applications throughout the month of October.
Pitchbook issued its Q3 Venture Monitor, where it reported that the median 2023 YTD funding for pre-seed deal size and pre-money valuations are holding steady at $500K and $5.7M, respectively. Early-stage deal volume is on track to hit a six-year low at an estimated 4,015 deals, and late-stage venture has seen deal sizes falling to 2019 levels and median valuations falling below 2022 levels. Venture growth rounds continue to decline, with an estimated 175 deals completed in Q3 2023.
We believe the Scalar Software Index median NTM revenue multiple will continue to fluctuate based on the market multiples exhibited between August and October. We believe private funding will continue to be difficult, and venture capital firms and private equity firms will stay consistent with their “flight to quality” investment approach that has persisted throughout 2023.
Median
NTM Rev Multiple
5.1x
Top 10*
NTM Rev Multiple
11.8x
Median
NTM Rev Growth
13%
Top 10*
NTM Rev Growth
20%
Median
Gross Margin
75%
Top 10*
Gross Margin
75%
*Median multiple, growth rate, and gross margin for the top 10 companies based on EV/NTM Revenue.
Valuation Trends
Index Leaders
Top 10 companies in the Software Index based on current EV / NTM Revenue Multiple.
|
Company
|
EV/NTM Rev
|
EV ($MM)
|
LTM Rev $MM
|
NTM Rev Growth
|
LTM Rev Growth
|
Gross Margin
|
Operating Margin
|
FCF Margin
|
|---|---|---|---|---|---|---|---|---|
| Snowflake Inc. | 13.9x | 43,305 | 2,444 | 27.7% | 49% | 66% | -41% | 37% |
| MongoDB, Inc. | 13.7x | 23,918 | 1,487 | 17.1% | 37% | 74% | -18% | 12% |
| Cloudflare, Inc. | 12.9x | 18,821 | 1,127 | 29.8% | 39% | 76% | -17% | 15% |
| Manhattan Associates, Inc. | 12.1x | 11,838 | 889 | 9.7% | 20% | 53% | 22% | 23% |
| Palantir Technologies Inc. | 12.1x | 29,069 | 2,045 | 17.9% | 17% | 79% | -3% | 21% |
| CrowdStrike Holdings, Inc. | 11.6x | 39,866 | 2,642 | 30.7% | 44% | 74% | -6% | 34% |
| Samsara Inc. | 11.4x | 11,613 | 780 | 30.7% | 46% | 72% | -34% | 17% |
| ServiceNow, Inc. | 11.4x | 117,213 | 8,474 | 21.5% | 22% | 79% | 8% | 36% |
| Adobe Inc. | 11.4x | 238,827 | 18,886 | 11.4% | 10% | 88% | 34% | 39% |
| Datadog, Inc. | 11.2x | 25,177 | 1,897 | 18.5% | 39% | 79% | -6% | 25% |
| Atlassian Corporation | 11.0x | 45,766 | 3,535 | 17.5% | 26% | 82% | -7% | 30% |
| Zscaler, Inc. | 10.9x | 22,473 | 1,617 | 27.5% | 48% | 78% | -14% | 29% |
| The Descartes Systems Group Inc. | 10.0x | 5,931 | 527 | 13.0% | 14% | 76% | 28% | 38% |
| Microsoft Corporation | 9.9x | 2,474,658 | 218,310 | 15.1% | 8% | 69% | 43% | 24% |
| SPS Commerce, Inc. | 9.5x | 5,660 | 514 | 16.4% | 19% | 66% | 14% | 22% |
| GitLab Inc. | 9.3x | 5,757 | 502 | 23.8% | 51% | 89% | -41% | 23% |
| Confluent, Inc. | 9.2x | 8,011 | 684 | 27.1% | 40% | 68% | -71% | 6% |
| Qualys, Inc. | 9.0x | 5,262 | 524 | 11.9% | 17% | 80% | 27% | 34% |
| HubSpot, Inc. | 8.9x | 20,466 | 1,944 | 19.0% | 27% | 83% | -6% | 18% |
| Clearwater Analytics Holdings, Inc. | 8.8x | 3,522 | 334 | 19.8% | 20% | 71% | -2% | 22% |
| Dynatrace, Inc. | 8.5x | 12,491 | 1,224 | 20.1% | 24% | 82% | 9% | 26% |
| Braze, Inc. | 7.6x | 3,790 | 409 | 22.3% | 37% | 68% | -37% | 12% |
| Shopify Inc. | 7.6x | 56,961 | 6,303 | 19.4% | 26% | 48% | -8% | 6% |
| DoubleVerify Holdings, Inc. | 7.1x | 4,453 | 502 | 25.3% | 27% | 82% | 14% | 15% |
| Paylocity Holding Corporation | 7.0x | 9,859 | 1,175 | 20.0% | 38% | 69% | 13% | 19% |
| Paycom Software, Inc. | 7.0x | 13,741 | 1,630 | 20.6% | 26% | 87% | 28% | 19% |
| BILL Holdings, Inc. | 7.0x | 9,045 | 1,058 | 22.8% | 65% | 86% | -28% | 2% |
| Workiva Inc. | 6.7x | 4,715 | 607 | 15.8% | 18% | 75% | -15% | 13% |
| Workday, Inc. | 6.7x | 52,080 | 6,716 | 16.2% | 18% | 74% | -1% | 27% |
| monday.com Ltd. | 6.6x | 5,356 | 625 | 29.5% | 52% | 89% | -12% | 21% |
| Oracle Corporation | 6.6x | 360,580 | 50,962 | 7.4% | 15% | 72% | 28% | 24% |
| Ceridian HCM Holding Inc. | 6.6x | 10,608 | 1,388 | 16.2% | 22% | 47% | 8% | 14% |
| C3.ai, Inc. | 6.5x | 2,079 | 274 | 17.1% | 3% | 64% | -106% | -35% |
| Splunk Inc. | 6.3x | 26,425 | 3,843 | 8.6% | 26% | 79% | 0% | 25% |
| Freshworks Inc. | 6.1x | 4,129 | 569 | 18.0% | 21% | 82% | -33% | -2% |
| Sprout Social, Inc. | 6.0x | 2,240 | 289 | 28.9% | 31% | 77% | -19% | 22% |
| Paycor HCM, Inc. | 5.8x | 3,748 | 553 | 17.5% | 29% | 66% | -19% | 22% |
| SentinelOne, Inc. | 5.6x | 3,915 | 524 | 33.2% | 73% | 68% | -79% | 12% |
| Asana, Inc. | 5.6x | 3,805 | 607 | 12.5% | 30% | 90% | -54% | 7% |
| Tenable Holdings, Inc. | 5.5x | 4,644 | 743 | 13.5% | 22% | 77% | -8% | 20% |
| New Relic, Inc. | 5.5x | 5,796 | 968 | 9.1% | 13% | 77% | -6% | 14% |
| Elastic N.V. | 5.4x | 7,037 | 1,113 | 16.6% | 21% | 73% | -14% | 25% |
| Salesforce, Inc. | 5.4x | 196,912 | 33,071 | 10.6% | 13% | 75% | 13% | 32% |
| Docebo Inc. | 5.4x | 1,065 | 161 | 23.2% | 30% | 81% | -3% | 31% |
| BlackLine, Inc. | 5.3x | 3,305 | 558 | 12.3% | 18% | 75% | -5% | 16% |
| Appian Corporation | 5.1x | 2,926 | 507 | 14.1% | 20% | 72% | -30% | -6% |
| JFrog Ltd. | 5.0x | 1,891 | 313 | 21.7% | 28% | 78% | -25% | 21% |
| PROS Holdings, Inc. | 4.9x | 1,604 | 297 | 9.3% | 10% | 62% | -18% | 6% |
| Constellation Software Inc. | 4.8x | 44,424 | 7,532 | 21.8% | 31% | 34% | 13% | 27% |
| Smartsheet Inc. | 4.7x | 4,852 | 867 | 20.3% | 32% | 79% | -19% | 26% |
| ZoomInfo Technologies Inc. | 4.6x | 5,789 | 1,225 | 2.8% | 20% | 89% | 21% | 37% |
| Okta, Inc. | 4.5x | 10,526 | 2,065 | 14.6% | 29% | 73% | -30% | 30% |
| Five9, Inc. | 4.3x | 4,228 | 848 | 15.6% | 21% | 53% | -9% | 23% |
| HashiCorp, Inc. | 4.2x | 2,587 | 542 | 13.4% | 38% | 81% | -52% | 2% |
| DigitalOcean Holdings, Inc. | 4.1x | 2,926 | 650 | 9.7% | 32% | 61% | 0% | 17% |
| Informatica Inc. | 4.1x | 6,599 | 1,512 | 7.9% | 1% | 79% | 2% | 37% |
| Dropbox, Inc. | 4.0x | 10,187 | 2,423 | 4.8% | 8% | 81% | 15% | 33% |
| Progress Software Corporation | 4.0x | 2,881 | 675 | 6.7% | 15% | 87% | 20% | 33% |
| Sprinklr, Inc. | 4.0x | 3,079 | 674 | 14.6% | 21% | 76% | -1% | 10% |
| Box, Inc. | 3.9x | 4,166 | 1,020 | 5.2% | 8% | 75% | 5% | 31% |
| PagerDuty, Inc. | 3.7x | 1,681 | 406 | 11.9% | 25% | 82% | -25% | 22% |
| VTEX | 3.7x | 793 | 174 | 23.0% | 23% | 67% | -18% | 4% |
| Jamf Holding Corp. | 3.7x | 2,193 | 522 | 14.5% | 23% | 80% | -21% | 24% |
| AvidXchange Holdings, Inc. | 3.6x | 1,458 | 347 | 15.9% | 23% | 65% | -24% | 1% |
| SolarWinds Corporation | 3.4x | 2,610 | 737 | 3.3% | 2% | 90% | 22% | 30% |
| Enghouse Systems Limited | 3.2x | 1,125 | 334 | 6.3% | 1% | 68% | 19% | 25% |
| Q2 Holdings, Inc. | 3.1x | 2,023 | 599 | 9.4% | 12% | 47% | -17% | 14% |
| Couchbase, Inc. | 3.1x | 573 | 164 | 13.2% | 17% | 86% | -47% | 6% |
| Amplitude, Inc. | 3.0x | 865 | 261 | 9.6% | 27% | 72% | -39% | 13% |
| Alteryx, Inc. | 2.9x | 2,871 | 903 | 8.5% | 42% | 86% | -30% | 12% |
| International Business Machines Corporation | 2.9x | 179,390 | 61,168 | 2.6% | 1% | 55% | 15% | 19% |
| Open Text Corporation | 2.9x | 16,954 | 4,485 | 32.2% | 28% | 76% | 15% | 45% |
| Zoom Video Communications, Inc. | 2.7x | 12,109 | 4,464 | 2.0% | 4% | 76% | 6% | 34% |
| Pegasystems Inc. | 2.6x | 3,818 | 1,355 | 6.9% | 9% | 72% | 0% | 14% |
| DocuSign, Inc. | 2.6x | 7,335 | 2,654 | 6.1% | 14% | 79% | 7% | 36% |
| BigCommerce Holdings, Inc. | 2.2x | 721 | 292 | 12.0% | 13% | 75% | -29% | 0% |
| American Software, Inc. | 2.2x | 260 | 122 | -2.2% | -6% | 60% | 8% | 7% |
| Zuora, Inc. | 2.0x | 896 | 415 | 8.7% | 12% | 63% | -20% | 36% |
| Asure Software, Inc. | 1.9x | 228 | 115 | 4.6% | 37% | 71% | -2% | 15% |
| RingCentral, Inc. | 1.8x | 4,103 | 2,107 | 9.2% | 16% | 69% | -11% | 16% |
| Twilio Inc. | 1.6x | 6,812 | 4,052 | 2.6% | 19% | 48% | -18% | 6% |
| Upland Software, Inc. | 1.6x | 480 | 310 | -4.9% | 0% | 67% | -4% | 12% |
| Yext, Inc. | 1.6x | 662 | 403 | 2.4% | 1% | 76% | -6% | 13% |
| Rackspace Technology, Inc. | 1.4x | 3,915 | 3,080 | -6.2% | 0% | 24% | -1% | 14% |
| Kaltura, Inc. | 1.3x | 222 | 172 | 0.2% | 2% | 64% | -26% | 9% |
| Veritone, Inc. | 1.3x | 172 | 139 | -0.7% | -5% | 80% | -49% | -17% |
| eGain Corporation | 1.2x | 118 | 98 | -0.6% | 7% | 72% | 1% | 7% |
| Expensify, Inc. | 1.2x | 189 | 165 | -5.1% | 2% | 60% | -11% | 18% |
| Domo, Inc. | 1.1x | 364 | 318 | 0.0% | 11% | 76% | -20% | 9% |
| Riskified Ltd. | 0.7x | 218 | 284 | 12.7% | 18% | 52% | -31% | 2% |
| ON24, Inc. | 0.3x | 37 | 179 | -18.3% | -10% | 72% | -31% | 10% |
| EverCommerce Inc. | N/A | 2,261 | 651 | -100.0% | 15% | 65% | -2% | 18% |
| WalkMe Ltd. | N/A | 544 | 260 | -100.0% | 18% | 81% | -34% | 1% |
| Top 10 Average | 12.2x | 55,965 | 4,067 | 21.5% | 32% | 74% | -6% | 26% |
| Top 10 Median | 11.8x | 27,123 | 1,971 | 20.0% | 38% | 75% | -6% | 24% |
| Overall Average | 5.6x | 46,587 | 5,354 | 11.0% | 22% | 72% | -10% | 18% |
| Overall Median | 5.1x | 4,228 | 675 | 13.4% | 20% | 75% | -7% | 19% |
Multiples by Growth Tranche
Valuation multiples are strongly correlated to expected growth. Scalar has selected the tranches based on current market conditions.
EV/NTM Revenue Multiple
High Growth (> 25%)
9.2x
|
|
Multiple
|
Growth
|
|---|---|---|
| SentinelOne, Inc. | 5.6x | 33.2% |
| Open Text Corporation | 2.9x | 32.2% |
| Samsara Inc. | 11.4x | 30.7% |
| CrowdStrike Holdings, Inc. | 11.6x | 30.7% |
| Cloudflare, Inc. | 12.9x | 29.8% |
| monday.com Ltd. | 6.6x | 29.5% |
| Sprout Social, Inc. | 6.0x | 28.9% |
| Snowflake Inc. | 13.9x | 27.7% |
| Zscaler, Inc. | 10.9x | 27.5% |
| Confluent, Inc. | 9.2x | 27.1% |
| DoubleVerify Holdings, Inc. | 7.1x | 25.3% |
EV/NTM Revenue Multiple
Average Growth (15%-25%)
7.0x
|
|
Multiple
|
Growth
|
|---|---|---|
| GitLab Inc. | 9.3x | 23.8% |
| Docebo Inc. | 5.4x | 23.2% |
| VTEX | 3.7x | 23.0% |
| BILL Holdings, Inc. | 7.0x | 22.8% |
| Braze, Inc. | 7.6x | 22.3% |
| Constellation Software Inc. | 4.8x | 21.8% |
| JFrog Ltd. | 5.0x | 21.7% |
| ServiceNow, Inc. | 11.4x | 21.5% |
| Paycom Software, Inc. | 7.0x | 20.6% |
| Smartsheet Inc. | 4.7x | 20.3% |
| Dynatrace, Inc. | 8.5x | 20.1% |
| Paylocity Holding Corporation | 7.0x | 20.0% |
| Clearwater Analytics Holdings, Inc. | 8.8x | 19.8% |
| Shopify Inc. | 7.6x | 19.4% |
| HubSpot, Inc. | 8.9x | 19.0% |
| Datadog, Inc. | 11.2x | 18.5% |
| Freshworks Inc. | 6.1x | 18.0% |
| Palantir Technologies Inc. | 12.1x | 17.9% |
| Paycor HCM, Inc. | 5.8x | 17.5% |
| Atlassian Corporation | 11.0x | 17.5% |
| C3.ai, Inc. | 6.5x | 17.1% |
| MongoDB, Inc. | 13.7x | 17.1% |
| Elastic N.V. | 5.4x | 16.6% |
| SPS Commerce, Inc. | 9.5x | 16.4% |
| Workday, Inc. | 6.7x | 16.2% |
| Ceridian HCM Holding Inc. | 6.6x | 16.2% |
| AvidXchange Holdings, Inc. | 3.6x | 15.9% |
| Workiva Inc. | 6.7x | 15.8% |
| Five9, Inc. | 4.3x | 15.6% |
| Microsoft Corporation | 9.9x | 15.1% |
EV/NTM Revenue Multiple
Low Growth (< 15%)
3.3x
|
|
Multiple
|
Growth
|
|---|---|---|
| Sprinklr, Inc. | 4.0x | 14.6% |
| Okta, Inc. | 4.5x | 14.6% |
| Jamf Holding Corp. | 3.7x | 14.5% |
| Appian Corporation | 5.1x | 14.1% |
| Tenable Holdings, Inc. | 5.5x | 13.5% |
| HashiCorp, Inc. | 4.2x | 13.4% |
| Couchbase, Inc. | 3.1x | 13.2% |
| The Descartes Systems Group Inc. | 10.0x | 13.0% |
| Riskified Ltd. | 0.7x | 12.7% |
| Asana, Inc. | 5.6x | 12.5% |
| BlackLine, Inc. | 5.3x | 12.3% |
| BigCommerce Holdings, Inc. | 2.2x | 12.0% |
| Qualys, Inc. | 9.0x | 11.9% |
| PagerDuty, Inc. | 3.7x | 11.9% |
| Adobe Inc. | 11.4x | 11.4% |
| Salesforce, Inc. | 5.4x | 10.6% |
| DigitalOcean Holdings, Inc. | 4.1x | 9.7% |
| Manhattan Associates, Inc. | 12.1x | 9.7% |
| Amplitude, Inc. | 3.0x | 9.6% |
| Q2 Holdings, Inc. | 3.1x | 9.4% |
| PROS Holdings, Inc. | 4.9x | 9.3% |
| RingCentral, Inc. | 1.8x | 9.2% |
| New Relic, Inc. | 5.5x | 9.1% |
| Zuora, Inc. | 2.0x | 8.7% |
| Splunk Inc. | 6.3x | 8.6% |
| Alteryx, Inc. | 2.9x | 8.5% |
| Informatica Inc. | 4.1x | 7.9% |
| Oracle Corporation | 6.6x | 7.4% |
| Pegasystems Inc. | 2.6x | 6.9% |
| Progress Software Corporation | 4.0x | 6.7% |
| Enghouse Systems Limited | 3.2x | 6.3% |
| DocuSign, Inc. | 2.6x | 6.1% |
| Box, Inc. | 3.9x | 5.2% |
| Dropbox, Inc. | 4.0x | 4.8% |
| Asure Software, Inc. | 1.9x | 4.6% |
| SolarWinds Corporation | 3.4x | 3.3% |
| ZoomInfo Technologies Inc. | 4.6x | 2.8% |
| International Business Machines Corporation | 2.9x | 2.6% |
| Twilio Inc. | 1.6x | 2.6% |
| Yext, Inc. | 1.6x | 2.4% |
| Zoom Video Communications, Inc. | 2.7x | 2.0% |
| Kaltura, Inc. | 1.3x | 0.2% |
| Domo, Inc. | 1.1x | 0.0% |
| eGain Corporation | 1.2x | -0.6% |
| Veritone, Inc. | 1.3x | -0.7% |
| American Software, Inc. | 2.2x | -2.2% |
| Upland Software, Inc. | 1.6x | -4.9% |
| Expensify, Inc. | 1.2x | -5.1% |
| Rackspace Technology, Inc. | 1.4x | -6.2% |
| ON24, Inc. | 0.3x | -18.3% |
| EverCommerce Inc. | N/A | -100.0% |
| WalkMe Ltd. | N/A | -100.0% |
EV/NTM Revenue Multiple - Top Quartile
NTM Revenue Multiple and NTM Growth Rate for the top quartile of companies in the Scalar Software Index, ordered by NTM Growth Rate.
Pre- & Post- Money Deals
Averages for the trailing 6 months of successful software and SAAS fundraising, including rounds Series A through Series D.
Average
Deal Size
- Series A$10.1B
- Series B$20.0B
- Series C$81.0B
- Series D$100.5B
Average
Pre Money Valuation
- Series A$51.8B
- Series B$78.5B
- Series C$450.0B
- Series D$1,353.8B
Average
Post Money Valuation
- Series A$62.3B
- Series B$97.1B
- Series C$641.0B
- Series D$1,495.8B
The data for the Scalar Software Index is collected based on market data on the last trading day of the previous month.
Metric definitions:
- EV/NTM Rev: Enterprise value to next twelve months revenue.
- EV $MM: Enterprise value, calculated as the market value of equity plus net debt and minority interest, in millions of USD.
- LTM Rev $MM: The last twelve months revenue in millions of USD.
- NTM Rev Growth: The expected growth rate of revenue for the next twelve months.
- LTM Rev Growth: The growth rate of revenue over the last twelve months.
- Gross Margin: The percentage calculated from gross profit over revenue.
- Operating Margin: The percentage calculated from operating income (EBIT) over revenue.
- FCF Margin: The percentage calculated from unlevered free cash flow over revenue.
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Data Sources: S&P Global Market Intelligence and PitchBook Data, Inc.
Enterprise Software Operating Metrics provided by Public Comps.