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NASDAQ at an All-Time High.

Current (Feb’24): 16,092

Source: Yahoo Finance as of 2/29/24

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Largely Driven by Magnificent Seven.

Seven largest companies

as share of S&P 500 total market cap

Indexed return

Source: Compostat, Goldman Sachs Global Investment Research, FactSet as of October 2023

Share of largest seven companies' market cap in S&P 500 is at an all-time high

The Magnificent 7 have led the index higher in 2023

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Current (Feb’24): 10.8x

High Growth Cloud Software Multiples.

Note: High Growth NTM Revenue Multiple based on index of cloud and software companies growing >30% (average over period). Data as of February 2024.

Peak (Oct’21): 25.1x

Trough (Dec’22): 7.2x

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The Market Has Stabilized on Rewarding Growth and Profitability.

Source: Meritech Capital from Company Filings as of February 2024. �Notee: Relative importance defined as ratio of the correlation of NTM revenue growth and NTM FCF Margin to EV / Implied ARR multiple based on a two-factor linear regression analysis. Represents two-quarter rolling average.

Peak (Jun’21): 11.6

Trough (Jun’20): 2.2

Current (Feb’24): 2.9

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Leading Companies to Adjust Their Financial Composition.

Source: Meritech Capital from Company Filings as of January 2024.

Note: NTM defined as next-twelve months consensus estimate.

NTM Revenue Growth and NTM Free Cash Flow Margin

Median NTM Revenue Growth

Median NTM FCF Margin

30%

25%

20%

15%

10%

5%

0%

Aug-20

Nov-20

Feb-21

May-21

Aug-21

Nov-21

Feb-22

May-22

Aug-22

Nov-22

Feb-23

May-23

Aug-23

Nov-23

Feb-24

Current: 14%

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There Are Signs That We’ve Bottomed Out.

Source: Altimeter Capital from Company Filings as of September 2023.

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It’s Also Getting Better for Selling Software.

Source: Bravado Network as of February 2024.

53%

Q4 2021

23%

Q4 2022

29%

Q4 2023

41%

YTD 2024

Quota Attainment by Quarter for Software Sales Reps

Indicates Quota Attainment

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Tale of Three Situations.

Growing Through Valuations

Raising Down Rounds

Shutting Down or Selling

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Source: PitchBook as of February 2024. Note: Represents the median number of months since the prior round for Series B & Series C raises during the respective time period.

Situation One: Growing Through Valuations.

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Source: PitchBook as of February 2024. Reflects US data only.

Situation Two: Raising Down Rounds.

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Situation Three: Shutting Down or Selling.

Source: Carta as of December 2023.

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.

If History Repeats, We Might Be Nearing Bottom.

Source: Pitchbook & NVCA, Venture Dollars Invested each quarter as of December 2023.

10 quarters

Internet Bubble

9 quarters

Great Recession

8 quarters

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Tourists Are Leaving the Venture Market.

31% CAGR

-35% CAGR

9% CAGR

-10% CAGR

Source: Pitchbook & NVCA as of December 2023.

Note: Non-traditional investors include Corporate VC funds, hedge funds, PE firms, and sovereign wealth funds

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Source: Internal data as of February 2024. Number of Series A investments based on proprietary collected set of relevant cloud and software companies that Redpoint Omega tracks for potential Series B Investments.�©2024 Redpoint Ventures. Proprietary and confidential. Do not copy or distribute without permission.

Series A Have Stayed Muted.

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Source: Series B and C comps based on proprietary collected set of relevant deals done by peer firms as of February 2024.

While Deal Activity at the Series B and C Is Picking Up.

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Note: High Growth LTM Revenue Multiple based on index of cloud and software companies growing >30% (average over period); Series B and C current ARR multiples based on median of proprietary collected set of relevant deals done by peer firms. Data as of February 2024.

Spread Between Publics and Private Markets Have Tightened.

	2017	2018	2019	2020	2021	2022	2023	2024 (YTD)
Public High Growth Software Revenue Multiples	10.6x	13.9x	15.2x	20.9x	25.8x	14.0x	12.5x	15.6x

Series B and C Software ARR Multiples	20.2x	21.9x	31.3x	39.7x	105.4x	85.0x	63.5x	42.2x

Premium to Public Market	1.91x	1.58x	2.06x	1.90x	4.09x	6.07x	5.08x	2.71x

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Note: Series B and C current ARR multiples based on median of proprietary collected set of relevant deals done by peer firms as of February 2024.

AI Businesses: Demanding a Premium.

3.0x Premium

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Note: Series B and C current ARR multiples based on median of proprietary collected set of relevant deals done by peer firms as of February 2024.

AI Businesses: Raising More Capital.

70% More Capital Raised

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Note: Series B and C current ARR multiples based on median of proprietary collected set of relevant deals done by peer firms as of February 2024.

AI Businesses: Growing Faster.

2.5x Faster Growth

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With Way More AI to Come.

Source: https://jaredheyman.medium.com/on-the-y-combinator-summer-2023-batch-986f38cc3f56

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Market Cycles Tend to Repeat Themselves.

Source: Dr. Jean-Paul Rodrigue, Dept. of Global Studies & Geography, Hofstra University

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Summary.

The market seems to have stabilized with software selling increasingly showing optimistic signs

Private valuations have trended lower and are more in-line with the historical spread between public and private software companies

There are still a number of businesses in the private market that will need to accept lower valuations, move to sell the company or shutdown

Increasing bi-furcation with private businesses: AI companies are being valued higher, raising more capital and growing faster