Infinite revenue multiples


Richard Dal Porto

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Today is Christmas Day, so I don’t know precisely how many of you are actually here. Hello to the seven of us avoiding our families, I suppose.

But before we’re called back to actually Talk To Other People, let’s talk about two quick things, yeah? Let’s have fun one last time in 2021. Thanks for reading, by the way. I appreciate you.

By far the best story of the week wasn’t Jack directly calling bullshit on web3, but a funding round. The round itself wasn’t that fascinating, but the story behind Airbyte’s round was.

Airbyte, for reference, is an open-source startup that helps customers move data. That’s a big market, frankly, because there is a lot of data out there, and it simply doesn’t stay put. Companies want to move it here and there. And doing so is hard work. I am not going to shout about extract, load and transform (ELT) at this juncture at you as there’s no need, but that’s the general market that Airbyte competes in.

In business terms, the company has a free open source product, natch, and a paid service. The paid version of Airbyte includes the usual enterprise-friendly tooling that you would expect; things like SSO, for example. And hosting. So, a pretty standard OSS play thus far, yeah?

Back to the money. Airbyte raised a seed round in early 2021 per Crunchbase data. Then the company raised a Series A in May. At that point the company had landed more than $30 million this year, which was a lot of money.

The sum was also diddly compared to what came next. Airbyte closed a $150 million Series B this week at a roughly $1.5 billion valuation. And even better, the company has revenues today of less than $1 million (annual recurring revenue, or ARR).

I joked on Twitter that the company was flexing a revenue multiple of 1,500x. People found that funny.

Turns out it was only half the joke. After the Airbyte news dropped, I heard that the revenue number is probably a bit more under the $1 million mark than I first thought. That means that Airbyte actually has an ARR multiple of way more than 1,500x.

Effectively it’s infinite. That’s amazing and is where venture capital was always going in 2021. What do I meant by that? Well:

  • Bigger funds have been investing earlier and earlier in the startup lifecycle lately to both deploy more capital and ensure that they can get allocation in later rounds of hot companies.
  • This means that more startups than ever have been able to raise huge rounds based more on FOMO than revenues than before.
  • Then 2021 came around and there was even more money floating around, seemingly, and the above two points got exacerbated.
  • I heard about Series B rounds being done at six-figure ARR, while back in the old days (2019) it was a rule of thumb that to raise a Series A, $1 million in ARR was the minimum.
  • And now, with Airbyte, it appears that we’re seeing there be no effective limit on how much a company can be valued when compared to its revenue base.

How did Airbyte manage the feat? I have a hunch. An open source company has a simply great set of non-revenue metrics that it can dangle in front of investors when it raises. For example, usage and contribution information for its open source project. So, my guess here is that Airbyte has a hot level of community usage, even if its paid products are more than nascent.

Is the Airbyte round dumb? Who knows! All we can say is that there was enough data somewhere for investors to feel comfortable putting nine-figures of capital into the company at a ten-figure valuation, despite far fewer digits of revenue.

This is bullish for open source startups, right? I reckon it is.

And finally, Juna​

I caught up with Juna founder and CEO Peter Arian the other day to chat about what his startup is doing. The gist of the startup is that it is working with insurance providers to provide low-cost sexual wellness testing for sexually active folks. It’s applying a hybrid DTC and health tech model to young people, hoping to shift the convention around testing to something that you do proactively, instead of reactively.

Not to drag COVID into everything, but I wonder if we’re all now a bit more accustomed to getting tested these days. I am off in a few minutes to get my nose poked by a swab, if that’s still how COVID tests go. The delights of modern life.

Juna is neat not only in that I think it’s product is cool and is something that I would have used when I was younger and not married but also thanks to its marketing strategy. You hear a lot about brands leveraging social media to garner attention, right? Well, Juna is making TikTok work for its business.

Per Arian, the company’s waitlist for access is growing between 15% and 20% per month, which seems pretty healthy. Juna is targeting a February launch, so it still has time to add more names. Perhaps its use of TikTok will keep paying out?

The company is putting together some capital but isn’t quite done with that yet. So, I’ll circle back to chat with Arian when he closes the round and opens the waitlist. Testing is not sexy, but sexing tested people is? Something like that.