Software startups are crashing the 100x revenue club

The new coolest startup club: getting a 100x revenue multiple.


November 2, 2020

Over the past year, the tech scene has seen the rise of the 100x Club, startups that score a valuation that is at least 100x revenue.

Per The Information, here are recent deals that cleared the bar:

Clubhouse broke my calculator as its $100m valuation is based on zero revenue while Notion ($30m; $2B) and Postman ($25m; $2B) are lurking.

What’s driving these eye-popping valuations?

There is too much money chasing too few ideas.

In 2020, US venture firms have raised $60B — that’s >3x the amount raised in 2010, according to Pitchbook.

Investors are looking everywhere for yield as governments have aggressively slashed interest rates in response to the pandemic.

Many have also been emboldened by Snowflake’s blockbuster IPO — the company is valued at 123x this year’s projected revenue, which seems to justify the existence of the 100x Club.

A big valuation = less founder dilution + more media headlines

But there are definite drawbacks:

  • Startups may be forced to grow too fast
  • It can be hard to raise subsequent rounds of money as future valuations may be harder to justify (and investors don’t like “down rounds”)

The scooter startup Lime was forced to slash its $2.4B valuation by ~80% in March, destroying significant paper wealth for investors and employees.

As Lime shows, the 100x Club is no guarantee of getting into another more popular club: the tres comma club.

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