We have good news for tech companies big and small this fine Wednesday morning: valuations are heading higher, though at a modest pace.
New public market data indicates that software stocks are rising to their highest points so far this year. And to make it sweeter, the underlying revenue multiples at public companies are expanding as well, especially at the faster growing subset of software companies.
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Investors today seem to think public software companies are worth more per dollar of revenue in aggregate. That will lift some pressure from startups struggling to raise new capital at attractive prices or harmonize legacy private-market companies’ valuations with their hoped-for IPOs. Clearing the massive startup liquidity backlog will take more than a modest reinflation of software valuations, but it’s a start.
Starting with high-level numbers, here’s a look at the Bessemer Cloud Index’s performance this year. Note that the value of the constituent companies kicked off the year strong, gave back most of those gains, and then starting in May, began to pick up steam once again (YCharts data):