Indications of a hot market abound as Freshworks, Toast price IPOs

News that Klarna is waiting for more favorable market conditions before going public felt a little odd yesterday. Today, hesitation to go public feels downright strange. New pricing information from U.S. tech unicorn Toast and Indian tech unicorn Freshworks indicate that the IPO market is more than welcoming.


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Toast raised its IPO range and priced above that raised interval. Freshworks also bumped up its IPO price expectations and then priced above that set of price targets.

If you are looking for an indication that it’s a good time to go public, this is it. Sure, both companies have yet to start trading, but even flat debuts would represent strong fundraising tallies and strong upward mobility in valuation terms.

This morning, we’re going to run the final numbers, calculating how much the companies are worth and what those figures say about startup prices, especially in the payments space. And then we’ll close with one of the more humorous answers I’ve ever gotten from a startup executive. Sound good? Let’s talk money.

Freshworks, Toast price well

Toast first targeted an IPO range of between $30 and $33 per share. The company then looked toward a $34 to $36 per share IPO price. It finally sold 21,739,131 shares at $40 apiece, with its underwriters having the option to purchase another 3,260,869 shares at its IPO price if they so choose. The company’s IPO fundraise could be worth as much as $1.0 billion in its debut.

Freshworks set its IPO price range between $28 and $32 per share. That didn’t last, with the customer support software company raising its range to between $32 and $34 per share. Freshworks priced at $36 per share, selling 28,500,000 shares with an underwriter option of 2,850,000 more shares. The company’s IPO fundraise could be worth as much as $1.1 billion.

Recall that Renaissance Capital valued Toast at $17.9 billion at $31.50 per share (the midpoint of its first IPO range), and Freshworks at $9.6 billion at $30 per share (again, the midpoint of its first IPO pricing interval), both calculated with fully diluted share counts. Simple math indicates that Toast is worth around $22.7 billion at its IPO price, and Freshworks at $11.5 billion, again using fully diluted share counts.

You will see lower numbers out there, likely calculated using a simple — more conservative — share count. Those are also valid.

In revenue multiple terms, Toast’s and Freshworks’ final IPO prices are good news for the companies. With $424.7 million in Q2 revenues, Toast is worth 13.4x its annual run rate. Freshworks is worth 32.5x its own run rate. The differential that we see there is the difference between the two companies’ business models. Toast is a majority payments/fintech company, while Freshworks is a more pure-play SaaS company. SaaS has stronger gross margins than payments revenues — and is stickier (i.e., recurring) than transaction incomes. So, it gets a higher multiple.