Software Index
State of the Market
The NASDAQ increased by 8.9% in November, and the Scalar Software Index's median next-twelve-month (“NTM”) revenue multiple improved to 5.4X, marking a notable 6.2% month-over-month increase. The top 10 companies in the Scalar Software Index experienced a substantial surge, with their NTM median multiple soaring by 26.7% to 14.9X.
According to the Bureau of Labor Statistics, the total nonfarm payroll increased by 190,000, resulting in a slight dip in the national unemployment rate to 3.7%. Additionally, the Consumer Price Index (“CPI”) inched up by 0.1%, with a year-over-year increase of 3.1%.
Following the recent Federal Open Market Committee (FOMC) meeting, the board members have adopted a dovish stance in their public statements. Despite the Federal Reserve's decision to maintain the Federal Funds Rate, the rhetoric from its members has triggered a decrease in the 10-year treasury rate from 4.67% to 4.22%. Moreover, this move in the 10-year treasury has resulted in the 30-year fixed mortgage rate dropping to 7.22% as of November 30, 2023.
In a surprising turn of events, Openview Venture Partners announced a cessation of new investments and laid off a significant portion of its workforce. This move has raised speculation about the fate of other venture capital funds, given that many invested heavily at peak valuations in 2020 and 2021. With public equity market multiples returning closer to their historical averages over the past decade (excluding 2020 and 2021), the equity valuation of numerous private companies now fails to surpass their liquidation value. Consequently, these companies face the challenging prospects of raising funds at reduced valuations, selling below their liquidation preferences, or even considering the possibility of winding down operations. The reverberations of these outcomes will directly impact some venture funds, potentially hampering their ability to generate returns for their limited partners and raise subsequent funds.
Amidst the dovish sentiment from the Federal Reserve and market anticipation of multiple rate cuts in 2024, we believe that the Scalar Software Index median NTM revenue multiple could experience an accelerated upward trajectory through December. However, this optimism remains tempered by ongoing global conflicts and persistent macroeconomic headwinds. Our outlook remains cautious, with the belief that accessing private funding will prove challenging, prompting investors in both public and private equities to adhere to a 'flight to quality' investment strategy.
Median
NTM Rev Multiple
5.4x
Top 10*
NTM Rev Multiple
15.0x
Median
NTM Rev Growth
12%
Top 10*
NTM Rev Growth
21%
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. | 17.0x | 57,679 | 2,621 | 29.2% | 41% | 67% | -40% | 37% |
| Cloudflare, Inc. | 16.7x | 25,750 | 1,209 | 27.9% | 35% | 76% | -16% | 18% |
| MongoDB, Inc. | 16.6x | 28,994 | 1,487 | 17.2% | 37% | 74% | -18% | 12% |
| Palantir Technologies Inc. | 16.1x | 40,663 | 2,125 | 19.0% | 16% | 80% | 2% | 21% |
| Datadog, Inc. | 15.1x | 36,846 | 2,008 | 21.4% | 31% | 80% | -5% | 26% |
| CrowdStrike Holdings, Inc. | 14.8x | 54,572 | 2,848 | 29.6% | 40% | 75% | -3% | 36% |
| Manhattan Associates, Inc. | 13.9x | 13,566 | 889 | 9.7% | 20% | 53% | 22% | 23% |
| ServiceNow, Inc. | 13.2x | 135,526 | 8,474 | 21.5% | 22% | 79% | 8% | 36% |
| Samsara Inc. | 13.1x | 14,177 | 848 | 28.0% | 43% | 73% | -30% | 11% |
| Adobe Inc. | 13.1x | 274,773 | 18,886 | 11.4% | 10% | 88% | 34% | 39% |
| Zscaler, Inc. | 12.7x | 28,190 | 1,758 | 26.0% | 45% | 77% | -12% | 33% |
| Shopify Inc. | 11.4x | 89,781 | 6,651 | 18.7% | 27% | 49% | -2% | 6% |
| The Descartes Systems Group Inc. | 11.2x | 6,691 | 527 | 13.0% | 14% | 76% | 28% | 38% |
| Atlassian Corporation | 11.2x | 48,283 | 3,705 | 16.2% | 24% | 82% | -6% | 30% |
| Microsoft Corporation | 11.1x | 2,777,895 | 218,310 | 15.1% | 8% | 69% | 43% | 24% |
| Qualys, Inc. | 10.6x | 6,370 | 541 | 11.0% | 15% | 80% | 28% | 39% |
| GitLab Inc. | 10.5x | 6,540 | 502 | 23.9% | 51% | 89% | -41% | 23% |
| SPS Commerce, Inc. | 10.2x | 6,098 | 514 | 16.3% | 19% | 66% | 14% | 22% |
| Braze, Inc. | 10.0x | 5,012 | 409 | 22.1% | 37% | 68% | -37% | 12% |
| HubSpot, Inc. | 10.0x | 24,050 | 2,058 | 17.3% | 26% | 84% | -5% | 18% |
| Clearwater Analytics Holdings, Inc. | 9.9x | 4,182 | 352 | 19.8% | 21% | 71% | -3% | 26% |
| Dynatrace, Inc. | 9.8x | 15,139 | 1,297 | 18.6% | 25% | 83% | 9% | 24% |
| monday.com Ltd. | 8.9x | 7,692 | 677 | 28.0% | 46% | 89% | -7% | 24% |
| Workday, Inc. | 8.3x | 67,595 | 6,983 | 16.3% | 17% | 75% | 0% | 25% |
| C3.ai, Inc. | 8.2x | 2,636 | 274 | 17.1% | 3% | 64% | -106% | -35% |
| DoubleVerify Holdings, Inc. | 8.2x | 5,473 | 534 | 24.9% | 26% | 81% | 14% | 15% |
| Sprout Social, Inc. | 7.9x | 3,159 | 310 | 29.0% | 30% | 77% | -21% | 21% |
| Workiva Inc. | 7.4x | 5,205 | 607 | 15.7% | 18% | 75% | -15% | 13% |
| Oracle Corporation | 7.2x | 395,672 | 50,962 | 7.4% | 15% | 72% | 28% | 24% |
| Freshworks Inc. | 7.1x | 4,778 | 569 | 18.3% | 21% | 82% | -33% | 25% |
| SentinelOne, Inc. | 7.1x | 4,938 | 524 | 33.2% | 73% | 68% | -79% | 12% |
| Ceridian HCM Holding Inc. | 6.7x | 11,357 | 1,450 | 16.3% | 22% | 48% | 10% | 12% |
| Salesforce, Inc. | 6.6x | 245,948 | 33,954 | 10.6% | 12% | 75% | 16% | 35% |
| Confluent, Inc. | 6.5x | 5,775 | 732 | 21.4% | 36% | 69% | -65% | 10% |
| Asana, Inc. | 6.5x | 4,413 | 607 | 12.5% | 30% | 90% | -54% | 7% |
| Splunk Inc. | 6.3x | 27,107 | 3,981 | 8.2% | 20% | 79% | 4% | 26% |
| Docebo Inc. | 6.0x | 1,251 | 171 | 22.8% | 27% | 81% | 2% | 18% |
| BlackLine, Inc. | 5.9x | 3,820 | 574 | 12.0% | 15% | 75% | -3% | 19% |
| Paylocity Holding Corporation | 5.9x | 8,565 | 1,239 | 17.9% | 34% | 69% | 15% | 21% |
| JFrog Ltd. | 5.9x | 2,352 | 329 | 21.9% | 25% | 78% | -23% | 26% |
| PROS Holdings, Inc. | 5.7x | 1,856 | 297 | 9.8% | 10% | 62% | -18% | 6% |
| Five9, Inc. | 5.6x | 5,636 | 880 | 14.4% | 18% | 53% | -9% | 25% |
| Elastic N.V. | 5.6x | 7,562 | 1,113 | 21.6% | 21% | 73% | -14% | 25% |
| Paycor HCM, Inc. | 5.5x | 3,728 | 578 | 16.6% | 27% | 66% | -16% | 20% |
| Paycom Software, Inc. | 5.5x | 10,027 | 1,630 | 11.5% | 26% | 87% | 28% | 21% |
| Constellation Software Inc. | 5.5x | 52,328 | 7,932 | 19.4% | 29% | 35% | 14% | 28% |
| Tenable Holdings, Inc. | 5.2x | 4,565 | 770 | 13.3% | 19% | 77% | -6% | 21% |
| DigitalOcean Holdings, Inc. | 5.2x | 3,823 | 675 | 9.9% | 27% | 60% | 4% | 20% |
| ZoomInfo Technologies Inc. | 5.1x | 6,338 | 1,225 | 2.4% | 20% | 89% | 21% | 38% |
| Informatica Inc. | 5.0x | 8,327 | 1,549 | 6.6% | 2% | 79% | 3% | 30% |
| Smartsheet Inc. | 5.0x | 5,236 | 867 | 20.3% | 32% | 79% | -19% | 26% |
| BILL Holdings, Inc. | 4.9x | 6,254 | 1,134 | 11.7% | 50% | 86% | -23% | 6% |
| HashiCorp, Inc. | 4.8x | 2,923 | 542 | 13.4% | 38% | 81% | -52% | 2% |
| Sprinklr, Inc. | 4.7x | 3,644 | 674 | 14.6% | 21% | 76% | -1% | 10% |
| Appian Corporation | 4.7x | 2,763 | 526 | 12.2% | 18% | 73% | -25% | -4% |
| VTEX | 4.6x | 1,065 | 186 | 23.4% | 25% | 68% | -13% | 7% |
| AvidXchange Holdings, Inc. | 4.4x | 1,876 | 363 | 16.9% | 21% | 66% | -19% | -1% |
| Okta, Inc. | 4.3x | 10,291 | 2,168 | 11.7% | 25% | 74% | -25% | 33% |
| Dropbox, Inc. | 4.2x | 10,696 | 2,465 | 3.4% | 8% | 81% | 14% | 31% |
| Progress Software Corporation | 4.2x | 2,989 | 675 | 6.7% | 15% | 87% | 20% | 33% |
| Couchbase, Inc. | 4.1x | 765 | 164 | 13.2% | 17% | 86% | -47% | 6% |
| PagerDuty, Inc. | 4.1x | 1,926 | 421 | 11.8% | 21% | 82% | -21% | 23% |
| Box, Inc. | 4.1x | 4,355 | 1,020 | 5.2% | 8% | 75% | 5% | 31% |
| SolarWinds Corporation | 3.8x | 2,958 | 748 | 3.6% | 4% | 90% | 27% | 39% |
| Jamf Holding Corp. | 3.6x | 2,234 | 540 | 14.4% | 19% | 80% | -21% | 25% |
| Q2 Holdings, Inc. | 3.5x | 2,338 | 609 | 9.9% | 11% | 47% | -16% | 16% |
| Alteryx, Inc. | 3.5x | 3,526 | 920 | 11.2% | 26% | 86% | -24% | 9% |
| Enghouse Systems Limited | 3.3x | 1,213 | 334 | 8.8% | 1% | 68% | 19% | 25% |
| Amplitude, Inc. | 3.3x | 953 | 270 | 7.6% | 22% | 73% | -36% | 15% |
| Open Text Corporation | 3.2x | 18,828 | 5,058 | 16.3% | 44% | 76% | 15% | 37% |
| Pegasystems Inc. | 3.2x | 4,590 | 1,355 | 6.6% | 9% | 72% | 0% | 14% |
| Zoom Video Communications, Inc. | 3.1x | 14,234 | 4,499 | 2.1% | 3% | 76% | 8% | 36% |
| EverCommerce Inc. | 3.1x | 2,204 | 668 | 7.3% | 12% | 66% | 0% | 19% |
| International Business Machines Corporation | 3.1x | 192,406 | 61,171 | 2.7% | 1% | 55% | 15% | 19% |
| DocuSign, Inc. | 2.9x | 8,192 | 2,654 | 6.1% | 14% | 79% | 7% | 36% |
| Zuora, Inc. | 2.6x | 1,190 | 424 | 9.1% | 11% | 65% | -14% | 19% |
| American Software, Inc. | 2.5x | 255 | 121 | -17.2% | -7% | 59% | 7% | 13% |
| BigCommerce Holdings, Inc. | 2.3x | 748 | 298 | 10.7% | 10% | 75% | -25% | 0% |
| Twilio Inc. | 2.1x | 9,047 | 4,103 | 4.8% | 13% | 49% | -13% | 10% |
| WalkMe Ltd. | 2.1x | 573 | 264 | 6.1% | 13% | 82% | -28% | 3% |
| RingCentral, Inc. | 1.8x | 4,275 | 2,156 | 9.1% | 13% | 70% | -10% | 17% |
| Yext, Inc. | 1.8x | 737 | 403 | 2.4% | 1% | 76% | -6% | 13% |
| Upland Software, Inc. | 1.8x | 508 | 304 | -4.9% | -3% | 67% | -7% | 13% |
| eGain Corporation | 1.6x | 162 | 97 | 1.5% | 2% | 71% | 4% | 13% |
| Asure Software, Inc. | 1.5x | 175 | 122 | -4.4% | 39% | 73% | 1% | 14% |
| Kaltura, Inc. | 1.3x | 222 | 175 | -1.3% | 4% | 64% | -23% | 8% |
| Domo, Inc. | 1.3x | 414 | 318 | 0.4% | 6% | 77% | -18% | 15% |
| Rackspace Technology, Inc. | 1.3x | 3,623 | 3,024 | -5.5% | -3% | 23% | -1% | 20% |
| Expensify, Inc. | 1.2x | 172 | 159 | -10.6% | -4% | 58% | -18% | 12% |
| Veritone, Inc. | 1.1x | 146 | 137 | -2.3% | -15% | 79% | -51% | 21% |
| Riskified Ltd. | 0.9x | 296 | 293 | 10.4% | 16% | 50% | -30% | 4% |
| ON24, Inc. | 0.7x | 108 | 171 | -14.0% | -13% | 73% | -32% | 10% |
| Top 10 Average | 15.0x | 68,255 | 4,139 | 21.5% | 30% | 74% | -5% | 26% |
| Top 10 Median | 15.0x | 38,754 | 2,067 | 21.5% | 33% | 75% | -4% | 25% |
| Overall Average | 6.3x | 53,737 | 5,454 | 12.5% | 20% | 72% | -9% | 19% |
| Overall Median | 5.4x | 4,975 | 676 | 12.3% | 20% | 75% | -6% | 20% |
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%)
12.9x
|
|
Multiple
|
Growth
|
|---|---|---|
| SentinelOne, Inc. | 7.1x | 33.2% |
| CrowdStrike Holdings, Inc. | 14.8x | 29.6% |
| Snowflake Inc. | 17.0x | 29.2% |
| Sprout Social, Inc. | 7.9x | 29.0% |
| monday.com Ltd. | 8.9x | 28.0% |
| Samsara Inc. | 13.1x | 28.0% |
| Cloudflare, Inc. | 16.7x | 27.9% |
| Zscaler, Inc. | 12.7x | 26.0% |
EV/NTM Revenue Multiple
Average Growth (15%-25%)
8.2x
|
|
Multiple
|
Growth
|
|---|---|---|
| DoubleVerify Holdings, Inc. | 8.2x | 24.9% |
| GitLab Inc. | 10.5x | 23.9% |
| VTEX | 4.6x | 23.4% |
| Docebo Inc. | 6.0x | 22.8% |
| Braze, Inc. | 10.0x | 22.1% |
| JFrog Ltd. | 5.9x | 21.9% |
| Elastic N.V. | 5.6x | 21.6% |
| ServiceNow, Inc. | 13.2x | 21.5% |
| Datadog, Inc. | 15.1x | 21.4% |
| Confluent, Inc. | 6.5x | 21.4% |
| Smartsheet Inc. | 5.0x | 20.3% |
| Clearwater Analytics Holdings, Inc. | 9.9x | 19.8% |
| Constellation Software Inc. | 5.5x | 19.4% |
| Palantir Technologies Inc. | 16.1x | 19.0% |
| Shopify Inc. | 11.4x | 18.7% |
| Dynatrace, Inc. | 9.8x | 18.6% |
| Freshworks Inc. | 7.1x | 18.3% |
| Paylocity Holding Corporation | 5.9x | 17.9% |
| HubSpot, Inc. | 10.0x | 17.3% |
| MongoDB, Inc. | 16.6x | 17.2% |
| C3.ai, Inc. | 8.2x | 17.1% |
| AvidXchange Holdings, Inc. | 4.4x | 16.9% |
| Paycor HCM, Inc. | 5.5x | 16.6% |
| Workday, Inc. | 8.3x | 16.3% |
| Ceridian HCM Holding Inc. | 6.7x | 16.3% |
| Open Text Corporation | 3.2x | 16.3% |
| SPS Commerce, Inc. | 10.2x | 16.3% |
| Atlassian Corporation | 11.2x | 16.2% |
| Workiva Inc. | 7.4x | 15.7% |
| Microsoft Corporation | 11.1x | 15.1% |
EV/NTM Revenue Multiple
Low Growth (< 15%)
3.7x
|
|
Multiple
|
Growth
|
|---|---|---|
| Sprinklr, Inc. | 4.7x | 14.6% |
| Five9, Inc. | 5.6x | 14.4% |
| Jamf Holding Corp. | 3.6x | 14.4% |
| HashiCorp, Inc. | 4.8x | 13.4% |
| Tenable Holdings, Inc. | 5.2x | 13.3% |
| Couchbase, Inc. | 4.1x | 13.2% |
| The Descartes Systems Group Inc. | 11.2x | 13.0% |
| Asana, Inc. | 6.5x | 12.5% |
| Appian Corporation | 4.7x | 12.2% |
| BlackLine, Inc. | 5.9x | 12.0% |
| PagerDuty, Inc. | 4.1x | 11.8% |
| BILL Holdings, Inc. | 4.9x | 11.7% |
| Okta, Inc. | 4.3x | 11.7% |
| Paycom Software, Inc. | 5.5x | 11.5% |
| Adobe Inc. | 13.1x | 11.4% |
| Alteryx, Inc. | 3.5x | 11.2% |
| Qualys, Inc. | 10.6x | 11.0% |
| BigCommerce Holdings, Inc. | 2.3x | 10.7% |
| Salesforce, Inc. | 6.6x | 10.6% |
| Riskified Ltd. | 0.9x | 10.4% |
| DigitalOcean Holdings, Inc. | 5.2x | 9.9% |
| Q2 Holdings, Inc. | 3.5x | 9.9% |
| PROS Holdings, Inc. | 5.7x | 9.8% |
| Manhattan Associates, Inc. | 13.9x | 9.7% |
| RingCentral, Inc. | 1.8x | 9.1% |
| Zuora, Inc. | 2.6x | 9.1% |
| Enghouse Systems Limited | 3.3x | 8.8% |
| Splunk Inc. | 6.3x | 8.2% |
| Amplitude, Inc. | 3.3x | 7.6% |
| Oracle Corporation | 7.2x | 7.4% |
| EverCommerce Inc. | 3.1x | 7.3% |
| Progress Software Corporation | 4.2x | 6.7% |
| Informatica Inc. | 5.0x | 6.6% |
| Pegasystems Inc. | 3.2x | 6.6% |
| DocuSign, Inc. | 2.9x | 6.1% |
| WalkMe Ltd. | 2.1x | 6.1% |
| Box, Inc. | 4.1x | 5.2% |
| Twilio Inc. | 2.1x | 4.8% |
| SolarWinds Corporation | 3.8x | 3.6% |
| Dropbox, Inc. | 4.2x | 3.4% |
| International Business Machines Corporation | 3.1x | 2.7% |
| ZoomInfo Technologies Inc. | 5.1x | 2.4% |
| Yext, Inc. | 1.8x | 2.4% |
| Zoom Video Communications, Inc. | 3.1x | 2.1% |
| eGain Corporation | 1.6x | 1.5% |
| Domo, Inc. | 1.3x | 0.4% |
| Kaltura, Inc. | 1.3x | -1.3% |
| Veritone, Inc. | 1.1x | -2.3% |
| Asure Software, Inc. | 1.5x | -4.4% |
| Upland Software, Inc. | 1.8x | -4.9% |
| Rackspace Technology, Inc. | 1.3x | -5.5% |
| Expensify, Inc. | 1.2x | -10.6% |
| ON24, Inc. | 0.7x | -14.0% |
| American Software, Inc. | 2.5x | -17.2% |
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$10.6B
- Series B$18.8B
- Series C$79.8B
- Series D$114.2B
Average
Pre Money Valuation
- Series A$58.1B
- Series B$73.0B
- Series C$387.5B
- Series D$2,297.5B
Average
Post Money Valuation
- Series A$68.9B
- Series B$89.5B
- Series C$520.5B
- Series D$2,500.0B
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.
The information contained in this newsletter is for general information purposes only. The information is provided by Scalar and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the newsletter or the information, products, services, or related graphics contained in the newsletter for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this newsletter.
Every effort is made to keep the newsletter up and running smoothly. However, Scalar takes no responsibility for, and will not be liable for, the newsletter being temporarily unavailable due to technical issues beyond our control.
Data Sources: S&P Global Market Intelligence and PitchBook Data, Inc.
Enterprise Software Operating Metrics provided by Public Comps.