Maintaining the random surveys of the public markets, two situations happened this week that are worth the time.
First, a third national technology company — Alphabet — crossed the $1 trillion market capitalization inception.
And, second, software as a service (SaaS) stocks touched record-breaking highs on the public markets after leaving over last summer.
What Does This Indicate?
The two events, only moderately related events, show how reasonable the public waters are for technology firms today, a reality that should spread warmth into the individual market where startups, and their investment capital supporters, work.
The events are good headlines for technology startups for plenty of reasons, including that significant tech players have never had as much money in hand with which to acquire smaller companies, and stable SaaS valuations benefit both smaller startups fundraise, and their bigger brethren probably exit.
Certainly, the stridently good valuations that larger tech companies and their smaller siblings have today should be just the kind of market circumstances under which unicorns desire to debut.
However, while Alphabet, Microsoft, and Apple are worth $3.68 trillion as a trio, and SaaS stocks are presently worth 12.3x times their income (using business value rather of market cap, for those keeping count at home), not all private, venture-backed company will surely profit from public investor largesse.
How much the latest public-market tech valuation increase will support companies that are frequently sorted into the tech-enabled bucket is not clear; a few companies that went public in 2019 were immediately spat up by investors opposed to supporting valuations that met or raised above their final individual valuations.
Other Tech Company Examples
SmileDirectClub was one such libation.
The dividing boundary between what adds as tech — often blurred — seems to be slicing along gross margin lines, and the repeatability of business.
The bigger the margin and more returning a company are, the more it is worth it.
This market presence is why SaaS stocks’ recent return to work is not a shock.
For Casper and One Medical, the original two venture-backed IPO hopefuls of the time, the higher tech-ish they can look between now and value the better.
Because technology companies now are estimated so highly, maybe even a faint dusting of tech will preserve their valuations as they cross the gap between private and adult.
For more updates and the latest tech news, keep reading iTMunch.