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Want to see what your peers are doing—and how to do it better?
Big news: I’ve launched a recruiting service
Well, not a recruiting service in the old-school sense. Think of it more as a thoughtful matchmaking function between two groups I think I know really well:
The amazing CFOs I’ve built relationships with through Run the Numbers podcast and the in person dinners I host
And the tens of thousands of finance pros who read this newsletter and are quietly open to new opportunities
Why now?
Because AI has broken the candidate discovery process.
A friend of mine recently posted a Finance Manager role. Within 48 hours, he had 1,700 applications. And this wasn’t, like, a good thing. It was a flood of AI-generated generic brain dead slop.
My service will be different. There won’t be bots. There won’t be ChatGPT resume spam. It will be human. Curated. And rooted in the community we’ve built here.
This is the furthest thing from “agentic”.
Who we’ll place:
We’ll specialize in three levels: Manager, Director, and VP.
And we’ll focus on two core areas: FP&A and Accounting.
Looking to hire the type of talent that reads this newsletter?
If you’re a company looking to hire one of the brilliant readers of Mostly Metrics CLICK HERE.
We will be stupid simple to work with. Because I’ve burnt millions of dollars on recruiting fees myself, and know what pisses CFOs off lol.
Want to work for one of the top tech companies?
And if you’re a finance brainiac who’s passively open to new opportunities and wants to be kept in a warm pool of talent CLICK HERE
It’s all confidential. We’ll just float opps your way from time to time. Up to you if you take the call.
OK, on to the meat and potatoes of today’s email…
Would you buy a used Subaru from this man?
How Much Revenue Do You Need to IPO in 2025?
Oh shit! (Mini) documentary alert!
Thought I’d show you instead of tell you this week (did I do that phrase right?)
It used to be that if you built a good company, showed solid growth, and had decent unit economics, you could go public. But today? The bar has been raised… big time.
Let’s take a trip through the last ~15 years of tech IPOs to put today’s market into context and zoom in on the most recent companies to go public.
Tune in and tell our new creative director (dictator?) Ben how awesome he is.
The overall median still hovers below 5.0x, which is lower than we’ve historically seen.
The top ten median still trades at nearly 20x, more than 4x the overall cohort.
Top 10 Medians:
EV / NTM Revenue = 19.6x (UP 1.3x w/w)
CAC Payback = 20 months (flat w/w)
Rule of 40 = 49% (DOWN 2% w/w)
Revenue per Employee = $575k (DOWN $36K w/w)
Figures for each index are measured at the Median
Median and Top 10 Median are measured across the entire data set, where n = 144
Population Sizes:
Security & Identity = 17
Data Infrastructure & Dev Tools = 13
Cloud Platforms & Infra = 15
Horizontal SaaS & Back office = 19
GTM (MarTech & SalesTech) = 19
Marketplaces & Consumer Platforms = 18
FinTech & Payments = 25
Vertical SaaS = 18
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 a clean ass cap table,
CJ
