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With Its Latest Round, Squarespace Prices Its Revenue Cheaply

Morning Report: Squarespace just put new markers around software as a service valuations. Let’s take a look.

According to Bloomberg, Squarespace is raising $200 million at a $1.7 billion valuation.

The firm has been around since 2004, according to Crunchbase, having raised a total of $78.5 million previously. Prior to this new round, the firm raised a $40 million Series B in 2017, led by General Atlantic.

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All that aside, here’s what the Bloomberg story tells us:

  • Squarespace is profitable.
  • Squarespace grew about 50 percent in the last year.
  • Squarespace generated revenue of “about $300 million” in the last year.
  • The deal is largely secondary.

The fourth point doesn’t matter for our discussion. I only wanted to head off the obvious question as to why Squarespace would bother to raise at all.

Back to work, we can do some quick math to figure out what investors are paying for the company.

Let’s get a revenue multiple. At a $1.7 billion valuation, investors are paying about 5.66 times trailing revenue, employing on the $300 million figure. Astute readers will note that that is the nearly the same price-sales ratio that Box enjoys.

So Squarespace is raising private capital to cash out extant shareholders at public market prices.

But Box fails the Rule of 40 test, whereas Squarespace passes with flying colors. (The Rule of 40 test is the addition of a firms growth rate and profitability. The sum should be over 40 to pass.) Given this, you might think that the firm would be worth more on a per-dollar basis.

However, it is possible investors are betting that Box has a larger long-term market opportunity, or that Box’s revenue growth is slower on a percentage basis but from a higher revenue base.

Regardless, if it was going public, the website creation startup is setting its valuation right where it would want it to be. Of course, it won’t do so, as evinced by the secondary nature of the infusion. But the seemingly conservative nature of the funding round should be cautionary to others.

If Squarespace is willing to take on capital at this per dollar of revenue, what is your argument that your firm is worth more?

From The Crunchbase Daily:

Target buys Shipt for $550M

  • Finally, Alabama is in the headlines for something besides politics. This time, the story is about a local startup, Birmingham-based online grocery delivery service Shipt, which just sold to Target for $550 million. The deal marks the largest known acquisition of a venture-backed company based in Alabama.

Ginko Bioworks secures $275M

  • There’s apparently big money in microbes. Ginko Bioworks, which produces custom microbes for use in food, pharmaceuticals, and other industrial applications, has raised $275 million in a Series D round that reportedly values the company at over $1 billion. Boston-based Ginko will use the money to build out its production facility.

Apple picks cash over startups

  • Apple has the most cash of any tech company. Yet historically it’s spent less on acquisitions than other technology giants, a Crunchbase News analysis finds. Could this week’s purchase of music app Shazam and a big manufacturing investment signal a shift?

Andreessen launches biotech fund

  • Silicon Valley VC firm Andreessen Horowitz announced that it has raised its second bio fund, a $450 million investment vehicle focused on the intersection of biology and engineering. The fund will be stage-agnostic, investing across seed to growth rounds.

Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

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