Continuing our irregular surveys of public markets, two things have happened this week that are worth our time. First one third Domestic technology company Alphabet has crossed the $ 1 trillion market cap. Second, software-as-a-service (SaaS) stocks hit record levels in public markets after declining last summer.
The two milestones, just modest events, show how temperate public waters are for technology companies today, a fact that should warm the private market that start-ups and their venture capitalists operate in.
The events are good news for technology startups for a number of reasons, including that large tech companies have never had so much wealth in hand to buy smaller companies, and strong SaaS ratings help both smaller startups fundraise as well as their bigger brothers in the possible exit.
In fact, the incredibly good reviews that big technology companies and their smaller siblings enjoy today should be exactly the market conditions under which unicorns want to debut. As long as public markets continue to grow, we will further clarify this point and evaluate tech companies that, like the flood of clichés, have already skyrocketed.
But while alphabet, Microsoft and Apple are valued at $ 3.68 trillion as a trio, and SaaS shares are now worth 12.3 times their sales (using enterprise value instead of market cap for those who score at home) from public ones Investors Largesse.
What about technical startups?
It is not clear to what extent the current expansion of technology assessment in the public market is helping companies that are increasingly being classified in the technological area. Some companies that went public in 2019 were quickly spat out by investors who were unwilling to support ratings that matched or exceeded their final private ratings. SmileDirectClub was such an offer.
The dividing line between what is considered technology – often blurred – seems to cut across the gross margin and the repeatability of the business. The higher the profit margin and the more frequent a company is, the more it pays off. This market reality is why the recent return of SaaS shares to their shape is not a surprise.
For Casper and One Medical, the first two hopefuls of the year supported by venture-backed IPOs, the more technology they can use in the meantime and the cheaper they are, the better. Because technology companies are so important these days, a little dusting of technology may save their ratings if they bridge the gap between private and adult companies.