Amplitude's Valuation Collapse: Lessons from the SaaS Bubble
The Dramatic Fall of Amplitude's Valuation
Amplitude is the leading analytics solution for mobile-first and cross-platform companies. Anyone building mobile apps knows Amplitude as the main solution to track any in-app events and metrics from MAU and DAU to any custom conversions and retention metrics. It's powerful yet simple-to-use analytics that allows the creation of flexible dashboards and charts to understand users and make business decisions.
Amplitude was founded in 2014, a time of rapid growth for mobile apps. The company IPOed in 2021 at a $5B valuation with revenue of around $140M, growing 50% year over year. The revenue multiple was a staggering 35x. The shares of the company climbed from $50 to $80 in the months following the IPO, pushing the valuation even further to $8B. What was the revenue multiple then? An insane 60x revenue.
Within just four months of the IPO, the shares fell below the IPO level, and then the fall accelerated. Three years later, the company's shares traded at $8, with the company valued at roughly $1B. Meanwhile, the revenue grew to $280M. So the current multiple is just about 3x revenue.
Slow revenue growth is one of the reasons for the current low valuation, besides the SaaS bubble valuations of 2021. The annual growth rate is below 10%. The company is also loss-making, with almost $100M in annual loss. Selling and Marketing expenses are the largest expense category, around 55% of revenue. So if the company wants to get closer to profitability, it could reduce these expenses, meaning potential redundancies in the sales team. According to LinkedIn, the company's headcount is just below 900, with 150 in sales, and it has been steady for the last two years.
I've used Amplitude for several of my projects, and the product is great. The company is also considered one of the most successful companies out of YC, and obviously, this was a successful journey for the founders. Yet investing in the company's shares at IPO could have turned into a massive loss. So great products do not always mean great returns to investors. With the current growth rate, it's hard to expect the company to get anywhere near the valuation it had at the IPO years ago.