SaaS stocks, as measured by the Bessemer-Nasdaq cloud index, closed at a 1,484.93 yesterday, a record, and just a hair under its intraday high of 1,491.59.
The raw numbers matter less than the index’s movement. From highs of around 1,400 in March, the index dropped to 892.60 during the early-year market selloff. Since then, SaaS and cloud companies have come roaring back. This is reflected in the new, higher valuation multiple that the companies are priced at by investors today, namley an enterprise value/revenue multiple of 14.7x.
Briefly, we observe movements in the value of public SaaS and cloud stocks because they inform private market investors about possible exit values for startups.
So is the run-up in SaaS stocks, therefore, good for startups? Yep. Now let’s get into why clouds shares are going up.