are fintech startups Having one hell of a week.
After Boston-based software and payments company Toast’s strong IPO pricing, Remitly cost Shares at their opening above their proposed range last evening. The Seattle-based fintech company sold 12,162,777 shares (7,000,000 primary) at $43 per share. The company had previously set a maximum price target of $42 per share for its IPO equity.
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At $43 per share, Remitly looks like a fintech company with gross margins in the 50% to 60% range, as a low- and medium-scale public SaaS firm, flush with recurring revenue and net-dollar retention north of 100%. .
Toast, after seeing its shares rise sharply after starting trading yesterday, sports a similar revenue multiplier despite weak compounded gross margins.
The lesson from today’s public markets appears to be that revenue growth matters more than near-term margins for fintech companies, allowing them to secure valuations higher than their final private digits. This is an incredibly fast set of results for fintech startups; They are worth a lot more than they thought, or what their investors were willing to pay earlier.
All of the above is part and parcel of the exchange’s recent controversy that the IPO window is more than open to venture-backed companies. it’s probably even Better From this to fintech upstarts.
Let’s do the math, and then ask when the hell chimes and Clarna are going to get out of their duffs and go public.
Is Fintech the New SaaS?
In the second quarter of 2021, Toast Reported Revenue Revenue costs of $424.7 million and $336.3 million give the company a compounded gross margin of just under 21%. Toast has high-margin SaaS revenue, low-margin fintech revenue and then smaller business lines that float around the breakeven. This somewhat shakes the modest figure.
According to data from Yahoo Finance, this morning’s $30.856 billion worth of toast has a run-rate multiplier of 18.2x. To Bessemer data, this is roughly equal to the average revenue multiplier of public SaaS companies.
Our reading of the toast revenue multiple is that the public markets are placing it far more on growth than margin, meaning that fintech startup SaaS multiples may not mind their gross margins, provided there is a substantial near-term growth rate. Increase in revenue. remarkable.