This is to raise the TAM
The biggest story coming out of the post-March stock boom was explosive growth in the value of tech stocks. Software publishers in particular have seen their fortunes recover; Since the bottom of March, valuations of public software companies have more than doubled, according to a basket of SaaS and cloud stocks compiled by a Silicon Valley venture capital firm.
These gains are good news for startups of all sizes. For newcomers at a later stage, the appreciation of software sharing helps create a welcoming public market for outings. In addition, strong public valuations can help steer private dollars to related startups, allowing capital to flow.
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For software-focused startups, especially those chasing recurring revenue models like SaaS, it’s a surprisingly good time to live.
Indeed, after COVID-19 hit the United States, layoffs and increased software sales were key factors, worrisome indicators from startups. Since then, the data has changed.
As TipsClear reported in June, layoffs of startups have declined and the software churn has recovered to the point that enterprise-oriented SaaS companies and businesses are on the rebound.
But instead of just returning to levels close to those before COVID, software stocks continued to increase. Indeed, the Bessemer Cloud Index (EMCLOUD), which tracks SaaS companies, has established a series of historical summits in recent weeks.
There is a logic to the rally. After speaking to venture capitalists in recent weeks, notes from Alastair Mitchell from EQT Ventures, Jai Das from Sapphire and Shomik Ghosh from Boldstart Ventures paint a picture of a digital transformation that could s ” accelerate for some software companies, driven by COVID-19 and its related impacts.
The result of the trend could be that the total addressable market (TAM) for the software itself is larger than expected. A higher TAM could mean higher future sales and higher future cash flows for some software companies. This argument helps to explain part of the current enthusiasm in the market for public technological actions, and in particular the actions of software publishers.
We will not be able to explain every point that the Nasdaq has won. But the TAM argument deserves to be understood if we are to capture much of the optimism that helps drive technological assessments, private and public.