Joining a Startup Valued at 60x Revenue: Smart Move or Sucker’s Bet?

3/30/25 Benchmarks for Operators

👋 Hi, it’s CJ Gustafson and welcome to Mostly Metrics, my weekly newsletter where I unpack how the world’s best CFOs and business experts use metrics to make better decisions.

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A friend of mine is considering a mid level leadership role at one of the most hyped AI companies. If you heard the name, you’d recognize it; they’re one of the fastest ever to hit $50M in revenue, and are on track to obliterate $100M in short order (hell, they could be there next month).

The (potential) problem? The valuation. Their last round was done at something close to 60x current revenue.

Should he take it?

Here’s the framework I’d use:

1. What’s the gap between strike price and preferred?

Do the math.

• The strike price is determined by the 409A valuation. You can ask their CFO for this.

  • (If you want to get smarter on these mythical creatures, go here.)

• The preferred price is what the last investors paid per share to get on to the cap table, and is a key input for pricing the 409A.

The larger the gap, the more you’re theoretically “in the money” on day one.
For example, if the last round was at $20/share and the strike is $5/share, you’re $15/share in the money on paper—assuming someone would actually pay the same price for a common share, which may be a stretch, but does happen in some markets when the company is in high demand (like this one).

2. What’s the company’s revenue forecast for this year?

Validate their growth plans.

This is something you should always ask in the interview process.

If they’re projecting 200% YoY growth (which seems plausible for a company still somewhat subscale), then the next twelve months (NTM) revenue multiple—a more common shorthand for valuation—drops to 20x.

So the 60x current revenue multiple gets cut to a third when contemplating their near term growth plans…

That’s actually pretty reasonable when you consider the best public companies are trading at about 20x forward revenue (see below).

3. How diluted will you get?

A harder-to-quantify but crucial factor:

• Will they need to keep raising capital to sustain this growth?

• How many people will they need to hire?

If they raise every 1.5 years for the next five years, you could get significantly diluted by new investors. And if they need to top up the employee equity pool to hire thousands of people, you’ll get diluted. That means your linear math on valuation vs. share count might actually be worth half as much in the end.

(If you want to go deeper on dilution, check out this piece.)

That said, dilution is just the tax you pay to play the game.

4. Is this a generational company?

If so, all this math goes out the window.

Who cares if they’re valued at ~$3B today if you truly believe they could be worth $30B (Canva), $90B (Stripe), or $160B (OpenAI) someday?

Even if you get diluted down to half your original stake (yikes!) you could still be a multi millionaire many times over (see: Wiz employees… my friend

OnlyCFO

did a piece on their estimated windfalls here).

A small stake of something generationally massive is still really big to you personally.

Final Thought: Bet on the Right Horse

At the end of the day, taking a job at a high-growth startup—especially one valued at 60x current revenue—is a bet. After all, you are an investor too - you invest your time and efforts, and can only vest at one place.

It’s not just a bet on the valuation. It’s a bet on the company’s trajectory, the team’s ability to execute, and how much of the upside you’ll actually get to keep.

If the company is truly a generational winner, the dilution, the high multiple, and the strike price won’t matter in the long run. What will matter is whether you were on the rocket ship—or watching from the ground.

For my friend, the real question isn’t just “Should I take this job?” It’s “Do I believe this company is the company?” Because if the answer is yes, the math is just noise.

And that’s coming from the guy who writes about valuation math stuff for a living, lol.

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Data source: Koyfin

TL;DR: Multiples are DOWN week-over-week.

Top 10 Medians:

• EV / NTM Revenue = 15.2x (DOWN 0.5x w/w)

• CAC Payback = 30 months

• Rule of 40 = 52%

• Revenue per Employee = $392k

  

  Data source: Koyfin

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Data source: Koyfin

• Figures for each index are measured at the Median

• Median and Top 10 Median are measured across the entire data set, where n = 109

• Population Sizes:

  • Security: 18

  • Database and Infra: 13

  • Backoffice: 16

  • Marcom: 16

  • Marketplace: 15

  • Fintech: 16

  • Vertical SaaS: 16

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.

Data source: Koyfin

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 Benchmarks

Companies that can do more with less tend to earn higher valuations.

Data source: Koyfin

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

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• 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)

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• 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 %

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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.

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Operating Expenditures

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.

Data source: Koyfin

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.