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Market Update.

Logan Bartlett

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Software Multiples Normalizing At 6x NTM Revenue.

Source: Pitchbook, NTM Revenue Multiple calculated from a list of 84 High Performing SaaS Public Comps

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Public Companies Are Trading Growth For Profitability With Private Businesses Following Suit.

Source: Pitchbook, NTM Revenue Multiple & LFCF Margin calculated from a list of 84 High Performing SaaS Public Comps

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There Has Been A Flight To Quality In Public and Private Markets.

(45%) drop in price

Source: Pitchbook, NTM revenue multiple by revenue growth analysis, Red: Unprofitable & low growth, Orange: Rules of 40% & <30% growth, Green: Rule of 40% & unprofitable, Blue: Rule of 40% & profitable

(50%) drop in price

(35%) drop in price

(32%) drop in price

NTM Revenue Growth Rate

NTM FCF % of Revenue

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Source: Pitchbook, Company Estimates & Guidance, Altimeter Research. Companies included in analysis: Alteryx, Bill.com, Paylocity, Zscaler, Hashicorp, Atlassian, Fastly, Monday.com, Paycom, Gitlab, MongoDB, ZoomInfo, Guidewire, Sentinel One, Procure, Samsara, Splunk, nCino, Sumo Logic, Cloudflare, Confluent, Amplitude, Datadog, Crowdstrike, Braze, Digital Ocean, Five9, Elastic, Docusign, Snowflake, Jfrog, Asana, PagerDuty, Box, Okta, Qualtrics, Workiva, Q2 Holdings, Coupa, Twilio, Yext, RingCentral, Smartsheet, BlackLine, Freshworks, New Relic, Dynatrace, Zuora, Veeva, BigCommerce, Salesforce, Hubspot, Wix.com, Domo, WalkMe, Zoom, Benefitfocus, Olo, UiPath

Public Companies Guiding Down But May Just Be Setting Stage to Beat.

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Source: AlphaWise, Morgan Stanley Research, N= 100 (US & EU Data)

Despite Slowdown Software Spending Keeps Growing.

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Source: Pitchbook & NVCA, Venture Dollars Invested each quarter

Reminder: Venture Funding Typically Takes 9-10 Quarters To Bottom Out.

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Private Market Valuation Observations.

Series B and Series C company valuations remained elevated in the first half of 2022 before softening over the course of the second half of the year

Quality deal volume is very low ⇒ most high performing businesses elected not to raise

Early stage valuations were quick to correct falling 25-50% ⇒ much more consistent fundraises over the course of 2022

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Growth Market Update.

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Why Didn’t We Invest More In 2022?

Unprecedented disconnect between public

and private markets

Valuations

Supply

Limited opportunities and adverse selection with companies fundraising

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Median	2017	2018	2019	2020	2021	2022
High Growth Software Revenue Multiples	8.2x	13.9x	19.5x	23.0x	32.4x	13.7x
Series B and C ARR Multiples	20.2x	21.9x	31.3x	39.7x	105.4x	76.7x
Premium to Public Market	2.5x	1.6x	1.6x	1.7x	3.3x	5.6x

Median	2017	2018	2019	2020	2021	2022
High Growth Software Revenue Multiples	8.2x	13.9x	19.5x	23.0x	32.4x	13.7x
Series B and C Software ARR Multiples	20.2x	21.9x	31.3x	39.7x	105.4x	76.7x
Premium to Public Market	246%	157%	160%	172%	325%	560%

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.

Unprecedented Disconnect Between Public & Private Market Valuations.

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

Limited Supply & Adverse Selection With Companies Funding.

Note: Series B and C based proprietary collected set of relevant deals done by peer firms.

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Quarterly trend shows sanity remerging (but still a ways to go)

Valuations

Supply

Major backlog of opportunities should be coming to market

But We’re More Optimistic About 2023.

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Median	Q1 2022	Q2 2022	Q3 2022	Q4 2022	Q1 2023
High Growth Software Revenue Multiples	21.1x	12.7x	11.9x	9.7x	10.1x
Series B and C ARR Multiples	91.7x	100.0x	55.0x	46.4x	38.9x
Premium to Public Market	4.3x	7.9x	4.6x	4.8x	3.9x

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.

Median	Q1 2022	Q2 2022	Q3 2022	Q4 2022	Q1 2023
High Growth Software Revenue Multiples	21.1x	12.7x	11.9x	9.7x	10.1x
Series B and C ARR Multiples	91.7x	100.0x	55.0x	46.4x	38.9x
Premium to Public Market	435%	787%	462%	478%	385%

Quarterly Trend Show Some Sanity Reemerging But Still a Long Way To Go.

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

Companies Are Waiting Longer To Fundraise But Can’t Wait Forever.

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Major Backlog Of Opportunities Should Be Coming�To Market.

Note: Number of Series A investments based on proprietary collected set of relevant cloud and software companies that Redpoint Omega IV tracks for potential Series B investments.

Will need to raise Series Bs in coming quarters

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Absolute valuations are falling, while market opportunities remain very large

Flight to quality for founders looking for investors who have experience and are purpose built for the early stages

Fewer funded competitors in any given category as fewer companies are able to raise and stay in business, leading to marginally easier hiring and less expensive growth

Financing constraints lead to better business fundamentals early on

Should Ultimately Prove A Great Time To Invest But

May Take Time.