Software Index
State of the Market
The NASDAQ and S&P 500 continue to climb to new highs. The NASDAQ Composite Index reached an all-time high of 16,274 and the S&P 500 surpassed 5,175. The Scalar Software Index top-10 next twelve month (“NTM”) median multiple increased 9.1% month-over-month to 16.4X and the Scalar Software median NTM multiple increased 7.5% month-over-month to 6.0X.
Nvidia reported a blowout fourth quarter ending January 28, 2024. The company’s Q4 revenue was $22.1B, up 243% year-over-year and the company reported full-year revenue of $60.9B, a 126% increase. Nvidia’s phenomenal financial results increased the company’s market cap north of $2T and led to a market rally.
Reddit announced its plans to go public at a ~$6B valuation. The company plans to raise ~$750M in its IPO. This news comes on the heels of Astera Lab’s announcement of IPO at a valuation of ~$4.5B. Assuming both companies have successful IPO’s, we would expect additional late-stage technologies companies to follow suit and file confidential S-1’s to begin the IPO process.
The US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) increased by 3.2% in February, and total nonfarm payroll employment rose by 275,000 in February, increasing the unemployment rate to 3.9%. Both results were stronger than expected, but the markets rallied nonetheless.
According to AlleyWatch, $8.3B was invested in 473 US venture-backed companies in February. This marked a 16.5% increase from the previous year.
The inflation and employment data juxtaposed to the continued appreciation in the public markets provide economists with the difficult task of predicting the economic outlook for the remainder of this year. If the public markets remain strong and continue to grow, even at a decelerated rate, we may see an increase in M&A activity in the private markets. This outcome would be a warm welcome to founders, VC/PE funds, and limited partners, which have seen technology company valuations cut by more than half from the zero-interest rate policy (“ZIRP”) timeframe (the top quartile last twelve-month enterprise value to revenue multiple during ZIRP was 25.3X).
Alternatively, if inflation continues to be persistent, then the Federal Reverse may not decrease the Federal Funds Rate as quickly as originally predicted. Former Secretary of the Treasury Larry Summers recently stated that there’s a 15% chance the Federal Reverse increases the Federal Fund Rate, versus lowers the Federal Funds Rate multiple times this year (which has been the consensus among economists). In this scenario, we would anticipate the markets to pull back and the implied revenue multiples for technology companies to reverse course and end the year lower than today.
Median
NTM Rev Multiple
6.1x
Top 10*
NTM Rev Multiple
16.4x
Median
NTM Rev Growth
11%
Top 10*
NTM Rev Growth
24%
Median
Gross Margin
75%
Top 10*
Gross Margin
76%
*Median multiple, growth rate, and gross margin for the top 10 companies based on EV/NTM Revenue.
Valuation Trends
Index Leaders
Top 10 companies in the Software Index based on current EV / NTM Revenue Multiple.
|
Company
|
EV/NTM Rev
|
EV ($MM)
|
LTM Rev $MM
|
NTM Rev Growth
|
LTM Rev Growth
|
Gross Margin
|
Operating Margin
|
FCF Margin
|
|---|---|---|---|---|---|---|---|---|
| CrowdStrike Holdings, Inc. | 20.4x | 75,503 | 2,848 | 30.2% | 40% | 75% | -3% | 36% |
| Cloudflare, Inc. | 20.0x | 33,034 | 1,297 | 27.7% | 33% | 76% | -14% | 24% |
| Palantir Technologies Inc. | 19.5x | 52,136 | 2,225 | 20.1% | 17% | 81% | 5% | 30% |
| Snowflake Inc. | 16.6x | 57,536 | 2,806 | 23.3% | 36% | 68% | -39% | 42% |
| MongoDB, Inc. | 16.6x | 31,611 | 1,586 | 20.2% | 33% | 75% | -15% | 14% |
| Datadog, Inc. | 16.2x | 41,948 | 2,128 | 21.5% | 27% | 81% | -2% | 28% |
| Samsara Inc. | 16.2x | 17,918 | 848 | 30.9% | 43% | 73% | -30% | 16% |
| Manhattan Associates, Inc. | 15.0x | 15,350 | 929 | 10.1% | 21% | 54% | 23% | 25% |
| GitLab Inc. | 15.0x | 10,287 | 539 | 27.7% | 42% | 89% | -35% | 65% |
| Zscaler, Inc. | 14.8x | 34,666 | 1,896 | 23.7% | 41% | 78% | -10% | 30% |
| ServiceNow, Inc. | 14.0x | 152,329 | 8,971 | 21.5% | 24% | 79% | 8% | 36% |
| HubSpot, Inc. | 12.0x | 30,757 | 2,170 | 18.0% | 25% | 84% | -5% | 18% |
| Microsoft Corporation | 11.9x | 3,103,902 | 227,583 | 14.3% | 12% | 70% | 45% | 26% |
| Atlassian Corporation | 11.7x | 53,440 | 3,892 | 17.8% | 22% | 82% | -5% | 31% |
| Adobe Inc. | 11.6x | 249,485 | 19,409 | 10.8% | 10% | 88% | 34% | 34% |
| The Descartes Systems Group Inc. | 11.6x | 7,094 | 550 | 11.1% | 16% | 76% | 28% | 38% |
| Shopify Inc. | 11.1x | 94,411 | 7,060 | 20.8% | 26% | 50% | 4% | 8% |
| C3.ai, Inc. | 10.7x | 3,763 | 296 | 18.5% | 11% | 59% | -104% | -13% |
| SPS Commerce, Inc. | 10.6x | 6,585 | 537 | 15.3% | 19% | 66% | 14% | 21% |
| monday.com Ltd. | 10.4x | 9,711 | 730 | 28.2% | 41% | 89% | -5% | 24% |
| Confluent, Inc. | 10.3x | 9,801 | 777 | 22.3% | 33% | 71% | -54% | 14% |
| SentinelOne, Inc. | 10.1x | 7,639 | 573 | 32.5% | 58% | 70% | -69% | 18% |
| JFrog Ltd. | 9.9x | 4,239 | 350 | 22.0% | 25% | 78% | -19% | 30% |
| Braze, Inc. | 9.8x | 5,305 | 440 | 23.3% | 34% | 69% | -34% | 16% |
| Qualys, Inc. | 9.7x | 5,901 | 554 | 9.6% | 13% | 81% | 29% | 37% |
| Elastic N.V. | 9.5x | 12,913 | 1,212 | 11.8% | 18% | 74% | -10% | 22% |
| Workday, Inc. | 8.7x | 72,979 | 7,259 | 15.8% | 17% | 76% | 3% | 29% |
| Dynatrace, Inc. | 8.6x | 13,958 | 1,364 | 18.4% | 24% | 83% | 9% | 24% |
| Clearwater Analytics Holdings, Inc. | 8.3x | 3,457 | 368 | 13.1% | 21% | 71% | -5% | -2% |
| Sprout Social, Inc. | 8.1x | 3,453 | 334 | 27.6% | 31% | 77% | -19% | 21% |
| Salesforce, Inc. | 7.8x | 297,332 | 34,857 | 9.3% | 11% | 76% | 17% | 34% |
| DoubleVerify Holdings, Inc. | 7.3x | 5,066 | 573 | 21.7% | 27% | 81% | 15% | 18% |
| Docebo Inc. | 7.2x | 1,588 | 181 | 22.6% | 27% | 81% | 3% | 11% |
| Oracle Corporation | 7.0x | 387,611 | 51,628 | 7.5% | 12% | 72% | 29% | 24% |
| Freshworks Inc. | 7.0x | 4,932 | 596 | 18.8% | 20% | 83% | -29% | 26% |
| Klaviyo, Inc. | 6.9x | 6,187 | 698 | 27.9% | 48% | 75% | -46% | 34% |
| Okta, Inc. | 6.7x | 16,806 | 2,263 | 11.0% | 22% | 74% | -20% | 4% |
| Dayforce Inc. | 6.6x | 11,441 | 1,514 | 14.0% | 21% | 47% | 9% | 8% |
| Workiva Inc. | 6.5x | 4,693 | 630 | 14.4% | 17% | 76% | -11% | 19% |
| Constellation Software Inc. | 6.5x | 61,560 | 7,932 | 19.2% | 29% | 35% | 14% | 28% |
| Paylocity Holding Corporation | 6.2x | 9,190 | 1,292 | 13.9% | 29% | 69% | 17% | 20% |
| Tenable Holdings, Inc. | 6.2x | 5,587 | 799 | 13.0% | 17% | 77% | -5% | 24% |
| Informatica Inc. | 6.2x | 10,509 | 1,595 | 6.4% | 6% | 80% | 6% | 28% |
| Couchbase, Inc. | 6.1x | 1,199 | 172 | 13.8% | 16% | 87% | -46% | 7% |
| HashiCorp, Inc. | 6.1x | 3,864 | 563 | 11.9% | 29% | 81% | -46% | 4% |
| DigitalOcean Holdings, Inc. | 6.1x | 4,691 | 693 | 10.7% | 20% | 59% | 10% | 16% |
| Splunk Inc. | 6.1x | 27,587 | 4,216 | 8.2% | 15% | 80% | 8% | 30% |
| Asana, Inc. | 5.9x | 4,137 | 632 | 10.8% | 24% | 90% | -45% | 11% |
| BlackLine, Inc. | 5.8x | 3,726 | 590 | 9.3% | 13% | 75% | -1% | 16% |
| ZoomInfo Technologies Inc. | 5.6x | 7,146 | 1,240 | 2.6% | 13% | 89% | 22% | 38% |
| PROS Holdings, Inc. | 5.5x | 1,827 | 304 | 9.7% | 10% | 62% | -17% | 11% |
| VTEX | 5.4x | 1,330 | 202 | 21.5% | 28% | 70% | -7% | 12% |
| Paycom Software, Inc. | 5.4x | 10,097 | 1,694 | 10.5% | 23% | 87% | 27% | 19% |
| AvidXchange Holdings, Inc. | 5.4x | 2,404 | 381 | 17.4% | 20% | 68% | -14% | 2% |
| Paycor HCM, Inc. | 5.3x | 3,713 | 605 | 16.0% | 25% | 66% | -15% | 21% |
| Smartsheet Inc. | 4.8x | 5,236 | 914 | 19.6% | 28% | 80% | -16% | 27% |
| BILL Holdings, Inc. | 4.6x | 6,017 | 1,192 | 9.9% | 39% | 86% | -16% | 11% |
| PagerDuty, Inc. | 4.5x | 2,112 | 421 | 10.6% | 21% | 82% | -21% | 25% |
| Appian Corporation | 4.4x | 2,676 | 545 | 12.9% | 17% | 74% | -20% | -3% |
| Q2 Holdings, Inc. | 4.3x | 2,953 | 625 | 9.8% | 10% | 48% | -14% | 15% |
| Five9, Inc. | 4.3x | 4,537 | 910 | 15.9% | 17% | 52% | -10% | 23% |
| Progress Software Corporation | 4.1x | 2,962 | 694 | 4.9% | 15% | 86% | 19% | 30% |
| Box, Inc. | 4.0x | 4,272 | 1,031 | 3.7% | 7% | 75% | 5% | 33% |
| Jamf Holding Corp. | 3.9x | 2,431 | 561 | 10.1% | 17% | 80% | -19% | 24% |
| SolarWinds Corporation | 3.8x | 2,969 | 759 | 2.8% | 5% | 90% | 22% | 37% |
| Amplitude, Inc. | 3.8x | 1,114 | 276 | 6.1% | 16% | 74% | -34% | 18% |
| Alteryx, Inc. | 3.8x | 4,053 | 970 | 10.8% | 13% | 87% | -15% | 10% |
| Sprinklr, Inc. | 3.8x | 2,942 | 703 | 11.3% | 20% | 76% | 2% | 10% |
| Pegasystems Inc. | 3.8x | 5,615 | 1,433 | 4.6% | 9% | 74% | 7% | 17% |
| Enghouse Systems Limited | 3.6x | 1,278 | 327 | 9.6% | 6% | 67% | 19% | 30% |
| DocuSign, Inc. | 3.5x | 10,108 | 2,709 | 5.6% | 11% | 79% | 2% | 36% |
| Dropbox, Inc. | 3.5x | 8,913 | 2,502 | 1.8% | 8% | 81% | 15% | 30% |
| International Business Machines Corporation | 3.4x | 216,199 | 61,860 | 3.0% | 2% | 55% | 16% | 19% |
| EverCommerce Inc. | 3.2x | 2,293 | 668 | 7.2% | 12% | 66% | 0% | 19% |
| Zoom Video Communications, Inc. | 3.2x | 14,618 | 4,527 | 2.0% | 3% | 76% | 12% | 37% |
| Open Text Corporation | 3.1x | 18,140 | 5,696 | 2.3% | 61% | 77% | 15% | 7% |
| American Software, Inc. | 3.0x | 305 | 119 | -14.3% | 0% | 59% | 5% | 13% |
| Zuora, Inc. | 2.3x | 1,045 | 432 | 5.1% | 9% | 67% | -14% | 6% |
| BigCommerce Holdings, Inc. | 2.0x | 672 | 309 | 7.2% | 11% | 76% | -18% | 2% |
| RingCentral, Inc. | 2.0x | 4,659 | 2,202 | 8.2% | 11% | 70% | -8% | 22% |
| WalkMe Ltd. | 1.8x | 518 | 267 | 5.7% | 9% | 83% | -23% | 8% |
| Twilio Inc. | 1.8x | 8,014 | 4,154 | 4.8% | 9% | 49% | -9% | 15% |
| Asure Software, Inc. | 1.8x | 218 | 119 | 3.9% | 24% | 72% | -3% | 7% |
| Upland Software, Inc. | 1.6x | 446 | 298 | -8.4% | -6% | 68% | -11% | 26% |
| Yext, Inc. | 1.6x | 661 | 405 | -0.1% | 1% | 77% | -4% | 15% |
| Domo, Inc. | 1.6x | 497 | 318 | 0.7% | 6% | 77% | -18% | 9% |
| Rackspace Technology, Inc. | 1.3x | 3,807 | 3,024 | -5.7% | -3% | 23% | -1% | 20% |
| Riskified Ltd. | 1.2x | 397 | 293 | 10.2% | 16% | 50% | -30% | 4% |
| eGain Corporation | 1.2x | 106 | 96 | -4.5% | -2% | 71% | 6% | 12% |
| Veritone, Inc. | 1.2x | 155 | 137 | -2.3% | -15% | 79% | -51% | 21% |
| Expensify, Inc. | 1.1x | 159 | 151 | -6.5% | -11% | 56% | -22% | 8% |
| Kaltura, Inc. | 1.0x | 170 | 175 | 0.0% | 4% | 64% | -22% | 11% |
| ON24, Inc. | 0.7x | 98 | 164 | -11.4% | -14% | 73% | -33% | 15% |
| Top 10 Average | 17.0x | 36,999 | 1,710 | 23.5% | 33% | 75% | -12% | 31% |
| Top 10 Median | 16.4x | 33,850 | 1,741 | 23.5% | 35% | 76% | -12% | 29% |
| Overall Average | 6.9x | 58,696 | 5,585 | 11.9% | 19% | 73% | -7% | 20% |
| Overall Median | 6.1x | 5,236 | 703 | 10.8% | 17% | 75% | -5% | 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%)
12.7x
|
|
Multiple
|
Growth
|
|---|---|---|
| SentinelOne, Inc. | 10.1x | 32.5% |
| Samsara Inc. | 16.2x | 30.9% |
| CrowdStrike Holdings, Inc. | 20.4x | 30.2% |
| monday.com Ltd. | 10.4x | 28.2% |
| Klaviyo, Inc. | 6.9x | 27.9% |
| GitLab Inc. | 15.0x | 27.7% |
| Cloudflare, Inc. | 20.0x | 27.7% |
| Sprout Social, Inc. | 8.1x | 27.6% |
EV/NTM Revenue Multiple
Average Growth (15%-25%)
9.9x
|
|
Multiple
|
Growth
|
|---|---|---|
| Zscaler, Inc. | 14.8x | 23.7% |
| Snowflake Inc. | 16.6x | 23.3% |
| Braze, Inc. | 9.8x | 23.3% |
| Docebo Inc. | 7.2x | 22.6% |
| Confluent, Inc. | 10.3x | 22.3% |
| JFrog Ltd. | 9.9x | 22.0% |
| DoubleVerify Holdings, Inc. | 7.3x | 21.7% |
| VTEX | 5.4x | 21.5% |
| ServiceNow, Inc. | 14.0x | 21.5% |
| Datadog, Inc. | 16.2x | 21.5% |
| Shopify Inc. | 11.1x | 20.8% |
| MongoDB, Inc. | 16.6x | 20.2% |
| Palantir Technologies Inc. | 19.5x | 20.1% |
| Smartsheet Inc. | 4.8x | 19.6% |
| Constellation Software Inc. | 6.5x | 19.2% |
| Freshworks Inc. | 7.0x | 18.8% |
| C3.ai, Inc. | 10.7x | 18.5% |
| Dynatrace, Inc. | 8.6x | 18.4% |
| HubSpot, Inc. | 12.0x | 18.0% |
| Atlassian Corporation | 11.7x | 17.8% |
| AvidXchange Holdings, Inc. | 5.4x | 17.4% |
| Paycor HCM, Inc. | 5.3x | 16.0% |
| Five9, Inc. | 4.3x | 15.9% |
| Workday, Inc. | 8.7x | 15.8% |
| SPS Commerce, Inc. | 10.6x | 15.3% |
EV/NTM Revenue Multiple
Low Growth (< 15%)
4.0x
|
|
Multiple
|
Growth
|
|---|---|---|
| Workiva Inc. | 6.5x | 14.4% |
| Microsoft Corporation | 11.9x | 14.3% |
| Dayforce Inc. | 6.6x | 14.0% |
| Paylocity Holding Corporation | 6.2x | 13.9% |
| Couchbase, Inc. | 6.1x | 13.8% |
| Clearwater Analytics Holdings, Inc. | 8.3x | 13.1% |
| Tenable Holdings, Inc. | 6.2x | 13.0% |
| Appian Corporation | 4.4x | 12.9% |
| HashiCorp, Inc. | 6.1x | 11.9% |
| Elastic N.V. | 9.5x | 11.8% |
| Sprinklr, Inc. | 3.8x | 11.3% |
| The Descartes Systems Group Inc. | 11.6x | 11.1% |
| Okta, Inc. | 6.7x | 11.0% |
| Alteryx, Inc. | 3.8x | 10.8% |
| Asana, Inc. | 5.9x | 10.8% |
| Adobe Inc. | 11.6x | 10.8% |
| DigitalOcean Holdings, Inc. | 6.1x | 10.7% |
| PagerDuty, Inc. | 4.5x | 10.6% |
| Paycom Software, Inc. | 5.4x | 10.5% |
| Riskified Ltd. | 1.2x | 10.2% |
| Jamf Holding Corp. | 3.9x | 10.1% |
| Manhattan Associates, Inc. | 15.0x | 10.1% |
| BILL Holdings, Inc. | 4.6x | 9.9% |
| Q2 Holdings, Inc. | 4.3x | 9.8% |
| PROS Holdings, Inc. | 5.5x | 9.7% |
| Enghouse Systems Limited | 3.6x | 9.6% |
| Qualys, Inc. | 9.7x | 9.6% |
| BlackLine, Inc. | 5.8x | 9.3% |
| Salesforce, Inc. | 7.8x | 9.3% |
| Splunk Inc. | 6.1x | 8.2% |
| RingCentral, Inc. | 2.0x | 8.2% |
| Oracle Corporation | 7.0x | 7.5% |
| BigCommerce Holdings, Inc. | 2.0x | 7.2% |
| EverCommerce Inc. | 3.2x | 7.2% |
| Informatica Inc. | 6.2x | 6.4% |
| Amplitude, Inc. | 3.8x | 6.1% |
| WalkMe Ltd. | 1.8x | 5.7% |
| DocuSign, Inc. | 3.5x | 5.6% |
| Zuora, Inc. | 2.3x | 5.1% |
| Progress Software Corporation | 4.1x | 4.9% |
| Twilio Inc. | 1.8x | 4.8% |
| Pegasystems Inc. | 3.8x | 4.6% |
| Asure Software, Inc. | 1.8x | 3.9% |
| Box, Inc. | 4.0x | 3.7% |
| International Business Machines Corporation | 3.4x | 3.0% |
| SolarWinds Corporation | 3.8x | 2.8% |
| ZoomInfo Technologies Inc. | 5.6x | 2.6% |
| Open Text Corporation | 3.1x | 2.3% |
| Zoom Video Communications, Inc. | 3.2x | 2.0% |
| Dropbox, Inc. | 3.5x | 1.8% |
| Domo, Inc. | 1.6x | 0.7% |
| Kaltura, Inc. | 1.0x | 0.0% |
| Yext, Inc. | 1.6x | -0.1% |
| Veritone, Inc. | 1.2x | -2.3% |
| eGain Corporation | 1.2x | -4.5% |
| Rackspace Technology, Inc. | 1.3x | -5.7% |
| Expensify, Inc. | 1.1x | -6.5% |
| Upland Software, Inc. | 1.6x | -8.4% |
| ON24, Inc. | 0.7x | -11.4% |
| American Software, Inc. | 3.0x | -14.3% |
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$9.3B
- Series B$24.7B
- Series C$36.5B
- Series D$132.8B
Average
Pre Money Valuation
- Series A$50.1B
- Series B$141.1B
- Series C$165.3B
- Series D$1,935.0B
Average
Post Money Valuation
- Series A$61.9B
- Series B$165.4B
- Series C$192.1B
- Series D$2,150.0B
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.
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Data Sources: S&P Global Market Intelligence and PitchBook Data, Inc.
Enterprise Software Operating Metrics provided by Public Comps.