Despite a decline in the valuations of publicly traded software as a service (SaaS) companies during the second quarter, that the downward trend did not extend to private companies in the sector, according to the Golub Capital report.
The sixth edition of the Quarterly Evaluation of SaaS Trends (QuEST) report released Thursday (8 August) showed that the index of publicly traded SaaS companies declined by 3.62 percent in the second quarter, an improvement over the 11.74 percent drop in the index seen in the first quarter.
As a comparison, Golub for the first time also included information about private company valuations based on companies its late-stage lending platform has invested in or reviewed over recent years. The snapshot of the private market provided by Golub compares public and private revenue multiples. The report also showed funding has stayed consistent from last year's levels in 2016, according to Golub.
Golub managing director Peter Fair said that aside from the myriad factors impacting all public markets, the removal of certain SaaS companies from the index as a result of being taken private recently also influenced performance of the publicly traded company index in the second quarter.
Fair also said some technology companies have raised sufficient capital in previous fundraising rounds and are now looking for help from lenders such as Golub to grow into existing valuations without diluting equity.
“We are enterprise-value lenders and if a company says they are worth a billion [dollars], we are going to come up with what we really think they are worth and lend against that number,” Fair explained. “We still do our own homework on that and try and figure out what their valuation is to us from a cushion perspective for our debt,” he added.
Overall, financial firms invested $8.7 billion in 379 deals in the sector during the second quarter, according to the report. That figure represents a 70 percent increase from the $5.1 billion in 376 transactions in the first quarter, according to the previous QuEST report released in June.
Golub's late-stage lending platform issued the report. The Golub credit platform has provided more than $4 billion in loans to software and technology companies. It typically underwrites and holds facilities of between $15 million and $100 million to growth equity or venture capital-backed companies with minimum recurring revenues of $15 million that may be experiencing reduced or negative growth due to reinvestment.
Earlier this month, Golub's late stage lending platform extended a $42 million long-term funding facility from the platform to xMatters, a software company. In August, it provided a $375 million term loan and $25 million revolver to support the acquisition of marketing software provider Marketo by Vista Equity Partners.