As a regulated bank that's also a technology company, Frode faces a valuation dilemma. Investors don't apply the high 20-30x revenue multiples of pure SaaS companies, but they also don't use low traditional bank multiples. This 'in-between' valuation reflects its hybrid nature and unique risk profile.

Massive early-stage valuations are not always based on hype. They can be rationalized by applying a standard multiple to next year's highly predictable revenue. If a company at $1M ARR has strong signals it will hit $25M in 12 months, investors can underwrite the valuation on that future number.

Investors must look beyond headline ARR figures from YC companies. High-growth numbers are often calculated by annualizing a single month's revenue, which can be misleadingly inflated by non-recurring, one-time hardware sales rather than sticky, subscription-based software revenue.

Not all growth is equal in an M&A process. A common reason for a valuation haircut is a poor "mix of growth." If revenue growth comes primarily from "squeezing the existing customer base" through upsells, buyers see it as less sustainable than growth from acquiring new logos.

Microsoft trades at a "conglomerate discount" because its diverse units—high-margin software, capex-heavy cloud, and low-margin hardware—appeal to different investor bases with conflicting valuation metrics. This mismatch means the company's whole is valued at less than the sum of its parts.

Valuing companies like Meta based on past P/E multiples is flawed because their business model is changing. The shift from a capital-light, high-margin software firm to a leveraged, hardware-heavy business means it should command a much lower valuation multiple.

Private market valuations are benchmarked against public multiples. Currently, public SaaS firms with 30% growth trade at 15-20x revenue, twice the historical average. If this 'bedrock price' reverts to its 7-8x mean, it will trigger a cascade of valuation drops across the private markets.

Scott Galloway states that subscription revenue is more stable, especially during recessions when ad budgets are cut but consumers are lazy about canceling subscriptions. This stability commands a significantly higher enterprise value multiple from investors.

The recent crash in public SaaS valuations isn't just investor pessimism; it's a rational reaction to a fundamental decline in business performance. The average public SaaS company's growth rate has plummeted from a healthy 30% to under 10%, breaking the compounding model that previously justified high multiples.