Postman, a prominent Indian-origin SaaS startup valued at $5.6 billion, recently conducted secondary transactions at a 30-40% discount, according to sources. This steep markdown, compared to the typical 10-15% discount in such deals, reflects a broader trend of declining valuations for SaaS companies based on revenue multiples. Early-stage and angel investors have partially sold their stakes in the Bengaluru- and San Francisco-based firm.
Many SaaS companies were considered overvalued during the peak funding cycle of 2021. Postman, after a significant valuation increase from a $225 million funding round, is now facing adjustments due to more realistic revenue projections. The company has seen smaller secondary deals, and more are expected within the same discount range.
Some existing investors, including Nexus Venture Partners, Bond Capital, and Battery Ventures, have reportedly purchased shares that were put up for sale. The overall slowdown in SaaS investments has been notable, with late-stage firms raising significantly less capital in 2023 compared to 2022. Mid-stage investments have also seen a decline.
Founded a decade ago, Postman provides an application programming interface (API) management platform for enterprises, facilitating interactions between apps. The company’s challenges include delays in monetizing its user base, affecting its annualized recurring revenue (ARR) growth.
Similar trends are observed in other SaaS firms like Icertis and Innovaccer, which are experiencing recalibrated valuations and cautious market investment. Icertis has an ARR of approximately $270 million, while Innovaccer stands at $130 million.
Overall, revenue multiples for publicly traded software companies have stabilized at around six times revenue, lower than pre-pandemic levels. Indian enterprise tech companies continue to trade at a premium compared to their US counterparts, though private investors are often cautious about matching these valuations.
Postman and similar companies face a challenging market environment, with their future growth and valuation contingent on successfully monetizing their platforms and achieving sustainable ARR growth.
