Saturday, May 17, 2014

Analyzing Zendesk's Financing History

Since Zendesk just completed a successful IPO, I prepared this chart to understand Zendesk's financing history.  The chart compares Zendesk's financing history (as shown by the price per share of the newly issued preferred stock -- the red triangles) against the company's performance (as shown by annual revenues -- the green boxes).

Zendesk's company performance is amazing!  The company's revenues are growing exponentially.

Normally, we would expect a similar curve for the price per share of preferred stock.  The Late Stage Investors (Series C and Series D) clearly identified a great company.  The company has most likely met or exceeded expectations at the time of the Series C and D financing.  But, in hindsight, the valuation multiple was too high. The cause is obvious -- the public market valuation multiples for high growth software companies have declined by 50% in the last 60 days (drop in Valuation Multiples).  That's why i mentioned in a prior blog post that the late stage investors are truly experts in pricing (Late Stage Investors Resembling Sherlock Holmes).

Investing in hindsight is so easy.

1 comment:

  1. "late stage investors are truly experts in pricing" or maybe they are just speculators