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Here's one way to think about Smartsheet

What if the Zuora playbook worked just a little less well across the board? What if the basic venture-backed saas proposition was the same BUT:

  • the founders had a little less of a track record,

  • and fewer of them stuck around for the long haul,

  • and the haul from inception was a little longer,and the revenue base was smaller (but growing a little faster off that smaller base),

  • and the EBITDA margins were a little worse,

  • and the founding CEO owned less of the Company after numerous dilutive financings,

  • and the VC backers were a little less good,

  • and the Board had a little less firepower (although one overlapping director),

  • and the competitive differentiation was a little less good,

BUT

  • the business model strength was about the same?

The answer is a 6.02 Triton Score, vs. Zuora’s 6.65.

This puts Smartsheet in the 35th percentile among tech IPOs in the last four years, right between AppDynamics (6.00 Triton Score) and Apptio (6.04 Triton Score).   Zuora by contrast was in the 55th percentile, and performed exactly as its Triton Score would indicate in its IPO last week. Here’s one aspect of Smartsheet that is not a discount to Zuora: the price!  :

  • The midpoint of Zuora's initial filing range ($10) implied a 6.1x trailing revenue multiple,

  • the midpoint of the increased range ($12) took that multiple to 7.4x,

  • Zuora priced at $14 – an 8.7x revenue multiple,

  • and Zuora now trades at around $20, a 12.5x trailing revenue multiple.

At the mid-point of its filing range ($11) Smartsheet is asking for a 9.5x trailing revenue multiple – a 56% premium to Zuora’s initial range, and a 9% premium to Zuora’s IPO price.  

Zuora's IPO discount appears reasonable only in comparison to Zuora’s current price – which pre-supposes that Smartsheet and Zuora should have the same multiple.

Can’t blame them for asking for this rich valuation, but why IPO investors would pay it is not at all clear.

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