A recent analysis from Crunchbase looked at venture-backed tech companies that went public in the last 8 months found the value increased from $1-4MM per employee to $10+MM per employee.
This begs the question, are we getting more efficient or are public investors valuing tech stocks at a near 10x multiple to maintain their returns?
- Could be related to the stock market boom which was due to increased savings as investors were pushed to riskier assets (like tech stocks)
Links to this note
Startups are a microcosm of the economy and we can observe that things are changing quickly towards a recession footing. The effects of inflation on valuations are readily apparent, but we also see that things were too good to be true and investors and late stage companies exploited it.
Prices of tech stocks soared during the COVID-19 global pandemic in part due to growth. Investors were paying 100x ARR multiples for some tech companies. However, that growth was not permanent and we are seeing tech stock prices revert to the mean.