Renowned for its API management platform, software-as-a-service (SaaS) firm Postman has seen a significant decline in valuation in recent secondary transactions. Sources claim that Postman’s valuation has dropped between thirty and forty percent from its peak. This result highlights the overall pattern of dropping SaaS industry prices, which is indicative of a difficult investing environment.
Postman’s Recent Valuation Adjustment
At its peak, Postman, the most valuable SaaS startup of Indian descent, was valued at $5.6 billion. Recent secondary transactions, however, have been carried out at a substantial discount. Postman’s recent agreements have been done at a substantially higher discount than the typical secondary transaction discount of 10% to 15% to the most recent primary value. This modification emphasises the recalibrating of SaaS company valuations, which had skyrocketed in the 2021 peak fundraising cycle.
During these recent secondary sales, angel and early investors have partially divested their holdings in Postman. Some of the company’s current investors, including Nexus Venture Partners and Bond Capital, have purchased the shares that are now available, according to the Bengaluru and San Francisco-based business. It has been noted that multiple SaaS unicorns are experiencing a valuation correction trend.
Impact of Market Dynamics on SaaS Valuations
SaaS companies were overvalued at their peak investment periods, which is why SaaS valuations have declined sharply. Postman is undergoing a readjustment based on sales predictions, having attained a high valuation following its $225 million financing. Smaller batches of secondary deals have reportedly happened, and more might happen at comparable discount rates, according to sources.
Venture Intelligence data shows a noticeable slowdown in SaaS investments at various stages of the company lifecycle. The $1.53 billion that late-stage SaaS companies raised from venture capital and private equity funds in 2022 fell to $421 million in 2023. Investments in mid-stage software as a service (SaaS) companies decreased from $2.1 billion in 2022 to $920 million in 2023.
Postman’s Financial Performance and Market Position
Established in Bengaluru ten years ago, Postman provides businesses with an application programming interface (API) management platform that enables communication between apps and their features. The financial records of the corporation show an annualised recurring revenue (ARR) ranging from $120 to $150 million. On the other hand, the overall ARR growth rate has been hampered by delays in user monetisation.
In contrast, comparable value changes are being navigated by other SaaS companies such as Icertis and Innovaccer. While Innovaccer, with an ARR of $130 million, has seen its valuation decline from $3.2 billion to a blended valuation of $2.5 billion, Icertis, with an ARR of roughly $270 million, was last valued at over $5 billion.
Broader SaaS Market Trends
The entire SaaS industry is going through a recalibration of valuations. Through a secondary deal, Goldman Sachs is in advanced talks to invest $35–50 million in MoEngage. Two turns below pre-pandemic levels, the revenue multiples for listed software companies with an enterprise value of over $1 billion have stabilised at six times. The revenue multiple premium that high-growth companies formerly enjoyed has been considerably decreased as a result of the growth pressure during the last three years.
According to a report by DC Advisory, private capital providers frequently exhibit reluctance to match the three-turn revenue multiple premium that Indian enterprise software firms continue to trade at over US SaaS multiples. According to Bessemer Venture Partners, the Nasdaq emerging cloud index shows that the average valuation of SaaS companies is 6.7 times their revenue.
Final Thoughts
Postman’s recent secondary sales have seen a large valuation decrease, which is consistent with the general market trend of declining SaaS prices. Businesses such as Postman are modifying their financial projections and tactics as the Software as a Service industry persists in navigating these difficult funding conditions. In the ever-changing SaaS market, this recalibration emphasises the necessity of reasonable valuation estimates and sustained growth.
