Today's issue is brought to you by Abacum.
I've been talking about FP&A tools for years in this newsletter, and the complaint is always the same: massive implementation, expensive consultants, and six months later, you're still living in Excel.
Abacum was built by former CFOs specifically to kill that cycle. Integrations you can manage inside your own team, AI that actually impacts daily FP&A work - variance summaries, scenario modeling, formula building - and a platform robust enough for Strava's data volume but intuitive enough that your department heads can use it without a training manual. Finance teams at Strava, Replit, and JG Wentworth run on it. See for yourself in under 5 minutes.
New Jobs: Managers + Directors
Yo, it's CJ! My recruiting arm, Mostly Talent, has been retained to fill the following roles directly from our readership:
Senior Manager, FP&A (Boston based, Public B2B SaaS): R&D Business Partner. Must have cloud forecasting and ideally LLM forecasting experience.
Senior Manager, FP&A (Remote, Public Consumer Fintech): Consumer focused. Build and own long term forecast. Must have public company experience.
Director, FP&A (SF, Series C hypergrowth B2B AI SaaS Applications): Partner directly with VP of finance to own operating plan and drive future fundraises.
These are the types of jobs I wish I could have worked on my path to CFO.
NGL, I’m kinda jealous!
If you need to hire and want to work with Mostly Talent, go here.
Checking in on Revenue Growth Endurance
With all public tech companies done reporting last fiscal year’s results (including the whackadoos who stretch into a single month of 2026 and say they’re reporting the entire FY 2026) it’s a clean place to check in on revenue growth endurance.
As a primer:
Revenue growth endurance is the rate at which growth is retained from one year to the next
It’s basically a measure of how good you are at keeping your annual growth rate up, despite an increasing base (it’s harder to grow a larger number, which makes me think of Sisyphus pushing the boulder up a hill)
F’you, last year’s 57% growth
As a metric it’s measured as this year’s % growth / last year’s % growth
Anything over 100% means you’re accelerating growth
Anything under 100% means your growth is slowing
So 40% growth this year vs 50% growth last year would be a score of 80% revenue growth endurance
What does “good” look like?
In public markets, the median is 95%
Keep in mind that the median growth rate is just 12%, so you better keep it close to that, or you’re going to be in low single digits soon
70% growth endurance on 12% goes to 8%, then 6%, then 4% in just three years
In private markets, where companies are typically smaller (let’s say under $100M in revenue)…
70% is good, 75% is better, 80% is best
The best companies have both strong endurance scores and high growth rates
It’s way cooler to have a score of 80% when you’re growing 25% vs a score of 80% when you are growing 3%
All Companies:
Median of 92%
Top 20:
Vertical Software players who are crushing it
Guidewire (accelerating from 8% to 23%), Clearwater Analytics (23% to 64%), Palantir (29% to 59%), Doximity (13% to 20%)
Fintech players accelerating
Circle (16% to 64%), Upstart (23% to 59%), Adyen (16% to 34%)
Marcom with some surprises:
Amplitude (8% to 15%), Autodesk (12% to 18%)
And then if we strip out anyone who was growing below the median growth rate of 12% last year (for example, Lending Club was growing 2% and then accelerated to 12%) we get the true top performers:
Bottom 20:
In absolute decline:
Dropbox (2% to -1%), Blackbaud (5% to -2%), Stubhub (29% to -1%… the most shocking decline… No Taylor Swift world tour this year hurts)
Crypto booms and busts:
Coinbase (115% to 6%), Gemini (45% to 26%)
Growing, but falling:
Lyft (31% to 9%), Sprout Social (22% to 13%), Bill (22% to 13%)
But then if we strip out anyone who was growing +40% last year and is therefore being penalized for great past performance, you’re left with the real bottom performers:
Companies falling out since they’re unfairly punished for past successes:
Coreweave (737% to 167%… still crazy awesome), Figure (81% to 48%), Bullish (80% to 50%)
A few fun single company examples
Datadog has demonstrated a remarkable ability to keep growth +25% at scale
Dropbox is now in revenue decline after three years of single digit growth
Zoom went bonkers during COVID, then came back down to earth, with a tough comp to keep growth up after pulling forward literally a world of demand
Their great revenue endurance numbers in recent years are somewhat misleading as they are hovering around 3% and 4%, rather than breaking out
The Valuation Angle
How does growth endurance impact valuations?
As we’ve talked about before, it’s not turtles, but DCF models all the way down
The longer you can keep your growth rate up, the more your revenue compounds, which makes a MASSIVE difference in valuation models
The majority of a company’s value sits in the out years and the terminal value bucket, and you want to apply as large of a revenue growth assumption at the end as possible
So high revenue growth today is kind of meaningless if it falls into oblivion in like two years. You won’t get much credit.
And due to software’s business model, it’s the compounding of ARR over time that makes it so valuable (or at least used to, in theory)
What It Means for Operators
I remember having a conversation with an investor once. We were a sub $50M company at the time. We had gone from growing 100% to 75% at year end. And our annual plan for the next year called for something in the high 50%’s, low 60%’s.
I came at it with an attitude of, this is great! A much higher growth rate than public comps. And the investor was like, no way dude. This isn’t the revenue growth endurance we want to see. We are underwriting a billion dollar outcome, and if your growth rate keeps declining like this, I’m not going to be in good shape in three years.
He was playing out the trend, and since the base of revenue we had (albeit it retained extremely well) was not huge yet, it was going to take us longer than he thought to get us to $200M or more in revenue (which is what he assumed the next buyer would want to believe).
So if you’re a private market company who’s presenting a plan to your investors, I’d encourage you to put a line at the bottom of the long term forecast and do a sanity check. Look at the revenue growth endurance in each of the five to ten years you’re forecasting. And ask yourself:
Does the revenue growth endurance get better or worse over time?
It should theoretically get better as growth slows from meteoric rates to something under 100%
Are there any weird lumpy trends?
You don’t want to see it whipsaw from 85% to 72% to 83% to 75%. It should be somewhat smooth
What do you think your investors are willing to accept?
You should understand what valuation they are underwriting. And then test if this revenue growth endurance gets them in the ballpark.
As a finance leader it’s your job to know the “rhythm” of the business better than anyone else. And that starts with sensing the inevitable gravity of revenue growth decline over time, and pulling every lever in the business to stave it off for as long as possible.
TL;DR: Medan Multiples are DOWN week over week.
The overall tech median is 2.9x (DOWN 0.2x w/w).
What Great Looks Like - Top 10 Medians:
EV / NTM Revenue = 14.1x (UP 0.9x w/w)
CAC Payback = 23 months
Rule of 40 = 50%
Revenue per Employee = $696k
Figures for each index are measured at the Median
Median and Top 10 Median are measured across the entire data set, where n = 144
Recent changes
Added: Navan, Bullish, Figure, Gemini, Stubhub, Klarna, Figma
Removed: Jamf, OneStream, Olo, Couchbase, Dayforce, Vimeo
Population Sizes:
Security & Identity = 17
Data Infrastructure & Dev Tools = 13
Cloud Platforms & Infra = 15
Horizontal SaaS & Back office = 17
GTM (MarTech & SalesTech) = 18
Marketplaces & Consumer Platforms = 18
FinTech & Payments = 28
Vertical SaaS = 17
Revenue Multiples
Revenue multiples are a shortcut to compare valuations across the technology landscape, where companies may not yet be profitable. The most standard timeframe for revenue multiple comparison is on a “Next Twelve Months” (NTM Revenue) basis.
NTM is a generous cut, as it gives a company “credit” for a full “rolling” future year. It also puts all companies on equal footing, regardless of their fiscal year end and quarterly seasonality.
However, not all technology sectors or monetization strategies receive the same “credit” on their forward revenue, which operators should be aware of when they create comp sets for their own companies. That is why I break them out as separate “indexes”.
Reasons may include:
Recurring mix of revenue
Stickiness of revenue
Average contract size
Cost of revenue delivery
Criticality of solution
Total Addressable Market potential
From a macro perspective, multiples trend higher in low interest environments, and vice versa.
Multiples shown are calculated by taking the Enterprise Value / NTM revenue.
Enterprise Value is calculated as: Market Capitalization + Total Debt - Cash
Market Cap fluctuates with share price day to day, while Total Debt and Cash are taken from the most recent quarterly financial statements available. That’s why we share this report each week - to keep up with changes in the stock market, and to update for quarterly earnings reports when they drop.
Historically, a 10x NTM Revenue multiple has been viewed as a “premium” valuation reserved for the best of the best companies.
Efficiency
Companies that can do more with less tend to earn higher valuations.
Three of the most common and consistently publicly available metrics to measure efficiency include:
CAC Payback Period: How many months does it take to recoup the cost of acquiring a customer?
CAC Payback Period is measured as Sales and Marketing costs divided by Revenue Additions, and adjusted by Gross Margin.
Here’s how I do it:
Sales and Marketing costs are measured on a TTM basis, but lagged by one quarter (so you skip a quarter, then sum the trailing four quarters of costs). This timeframe smooths for seasonality and recognizes the lead time required to generate pipeline.
Revenue is measured as the year-on-year change in the most recent quarter’s sales (so for Q2 of 2024 you’d subtract out Q2 of 2023’s revenue to get the increase), and then multiplied by four to arrive at an annualized revenue increase (e.g., ARR Additions).
Gross margin is taken as a % from the most recent quarter (e.g., 82%) to represent the current cost to serve a customer
Revenue per Employee: On a per head basis, how much in sales does the company generate each year? The rule of thumb is public companies should be doing north of $450k per employee at scale. This is simple division. And I believe it cuts through all the noise - there’s nowhere to hide.
Revenue per Employee is calculated as: (TTM Revenue / Total Current Employees)
Rule of 40: How does a company balance topline growth with bottom line efficiency? It’s the sum of the company’s revenue growth rate and EBITDA Margin. Netting the two should get you above 40 to pass the test.
Rule of 40 is calculated as: TTM Revenue Growth % + TTM Adjusted EBITDA Margin %
A few other notes on efficiency metrics:
Net Dollar Retention is another great measure of efficiency, but many companies have stopped quoting it as an exact number, choosing instead to disclose if it’s above or below a threshold once a year. It’s also uncommon for some types of companies, like marketplaces, to report it at all.
Most public companies don’t report net new ARR, and not all revenue is “recurring”, so I’m doing my best to approximate using changes in reported GAAP revenue. I admit this is a “stricter” view, as it is measuring change in net revenue.
OPEX
Decreasing your OPEX relative to revenue demonstrates Operating Leverage, and leaves more dollars to drop to the bottom line, as companies strive to achieve +25% profitability at scale.
The most common buckets companies put their operating costs into are:
Cost of Goods Sold: Customer Support employees, infrastructure to host your business in the cloud, API tolls, and banking fees if you are a FinTech.
Sales & Marketing: Sales and Marketing employees, advertising spend, demand gen spend, events, conferences, tools.
Research & Development: Product and Engineering employees, development expenses, tools.
General & Administrative: Finance, HR, and IT employees… and everything else. Or as I like to call myself “Strategic Backoffice Overhead.”
All of these are taken on a Gaap basis and therefore INCLUDE stock based comp, a non cash expense.
Please check out our data partner, Koyfin. It’s dope.
Wishing you trade at a high revenue and EBITDA multiple,
CJ
