The "R-Word"

It is official. We have two-quarters of consecutive contracting GDP. So, of course, everyone is debating what constitutes a recession, even though the definition is pretty straightforward. I feel that people don’t like using the “R-word” because everything in the media gets catastrophized.

As of yesterday, the median SaaS NTM revenue multiple is 6.2x, and the 10-year treasury is 2.7%. Ultimately the greater the 10-year treasury goes up, the less attractive public markets are for investors. Why would someone want to risk their money on the market if they can get a 5%+ return? This, in my opinion, is the most significant risk in our economy today - rates becoming so high to tame inflation that we halt growth and go into a stagflation environment.

Ultimately we are still in “no man's land” with great uncertainty. Pricing in interest rates increasing into revenue multiples is a good idea for early-stage investing. Valuation risk is high in the early stages.