Braze and UserTesting will begin to trade this morning, kicking off their lives as public companies.
But while it would seem we could simply lump the two companies into a bucket and call the day a win for tech upstarts and their venture capital backers, we can’t. Why? Because the two companies had very different final pricing results. And that means we have questions.
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Braze priced above its IPO range, while UserTesting priced underneath its range. Why? (You can read our initial notes on Braze here, if you’d like.)
Let’s parse the numbers, chat through what the two companies are worth at their IPO prices and discuss what we can learn from the information to better understand the present-day exit market for software companies.
We always care about software IPOs because they help us understand the market for software startups — how much public markets are willing to pay for a software company’s shares helps price startup funding rounds, for example. But we also have Nubank and Paytm heading out soon, two mega-IPOs that have us up at night wondering how they will be valued. So we’re collecting all the data that we can in advance.
That in mind, let’s figure out why Braze had a much better pricing result than UserTesting.
Two prices, two sagas
Braze targeted a $55 to $60 per-share IPO price range. It sold stock at $65 per share. In valuation terms, Renaissance Capital estimated that at the midpoint of its range ($57.5 per share), the company would be worth $5.9 billion on a fully diluted basis. That gives the company an estimated valuation at $65 per share of $6.7 billion
UserTesting targeted a $15 to $17 per-share IPO price range. It sold stock at $14 per share. In valuation terms, Renaissance Capital estimated that at midpoint of its range ($16 per share), the company would be worth $2.7 billion. That gives the company an estimated valuation at $14 per share of $2.4 billion.
Never cry for a company that goes out at a valuation of over a billion dollars. But, still, why the divergence? Here are their growth rates, with a bit more time under the belt for UserTesting because we have more recent data from it given a quirk in how Braze handles its fiscal calendar. (The Braze data compares the six months concluding July 31 of 2020 and 2021.)
- Braze YoY growth Q1-Q2 2020 vs. 2021: 52.5%.
- UserTesting YoY growth Q1-Q3 2020 vs. 2021: 45.4%.
Those figures are closer than I anticipated, frankly, and therefore do not answer our question.