The public software market is in a recession. At the same time, PLG is also at the top of the Gartner Hype Cycle.
What is interesting is to look at companies that are in the Variance Public PLG Index (43) versus their public market peers that are not PLG (64). As a reminder, what makes a company PLG:
- Must allow for a frictionless signup experience (eg. a user can sign up on the website without talking to sales)
- Must offer transparent pricing (eg. at least one of their pricing stages gives a price, even if the enterprise edition might say something like, contact sales)
Median PLG company market cap: $6.7B.
Median Non-PLG company market cap: $4.2B.
Median PLG company Enterprise Value (EV) / Next Twelve Months (NTM) Revenue: 6.1x.
Median Non-PLG company Enterprise Value (EV) / Next Twelve Months (NTM) Revenue: 6.1x.
Median PLG company Revenue Growth: 35%.
Median Non-PLG company Revenue Growth: 24%.
The data speaks to an interesting market dynamic.
- PLG companies have a 37% higher market cap than their Non-PLG peers.
- PLG companies have the exact same revenue multiple at 6.1x their next twelve months of forecasted revenue as their Non-PLG peers.
- PLG companies are growing revenue 32% faster than their Non-PLG peers.
In other words, PLG companies are bigger and growing faster, but their revenue multiple is the same as their Non-PLG peers. Why is the market discounting PLG companies? Is that how you would value PLG companies versus Non-PLG companies at a time like this?
Curious on your thoughts.