Coupa, Marketo, And the Great Coming Rebound in SaaS

So, things are brutal in the public markets, with multiples approaching all-time lows.

But … we’re seeing those very low prices bring out the Private Equity firms.  They are looking for bargains.  The latest is Coupa.  In fact, this one was such a bargain that a bidding war broke out between two of the mighty giants here, Vista and Thoma Bravo.  Thoma Bravo won, agreeing to take Coupa private for $8 Billion.  When 2 of the giants in PE, in the midst of a huge downturn, enter into a bidding war … that’s a sign.  A sign many of those with the biggest checkbooks in SaaS think things will get substantially better.

No way, you say?

Let’s go back in time … to early 2016.  The public markets were brutal then for SaaS, with LinkedIn, Marketo, and other leaders of that generation way down.  Everyone was down in the dumps.  At SaaStr Annual 2016, in February, all the VCs were discouraged.  “Unicorns are over,” they said.

And the big Private Equity firms saw opportunity.  The first big jaw-dropper was Marketo.  Vista acquired Marketo for what seemed like a head-scratching price of $1.79 Billion, a huge premium at a time when multiples had plummeted.  Silly PE firms overpaying, everyone said.  They’ll never make any money, they said.  Even though Marketo was coming up on $300m in ARR.

And then what happened … things came back.  And multiples came back.  And Marketo just kept growing.

And just over 2 years later … Adobe bought it for a stunning $4,75 Billion:

And a few years after that, it’s at the time smaller, scrappier, SMB competitor called HubSpot … grew into the $15B+ giant we all know and use today.

Big Private Equity firms are betting we’ll see a lot more of these 3x+ outcomes by buying public SaaS companies on the cheap now.  After the market downturn.

A bit of a rebound in multiples, a few years of solid growth fueled by strong NRR … and in 2-3 years, these will be great deals.  Just like Marketo was in the 2016 downturn.

Go long on the good ones.  The top Private Equity firms are.

(happened before image from here)

Published on December 14, 2022