Skift Take
Online event software is one of the few niches that has greatly benefited from the pandemic and has experienced unprecedented investment interest throughout the past 13 months. In particular, virtual event platform Hopin has generated a lot of buzz following four investment rounds since February 2020. The company recently closed out its Series C round, raising an additional $400 million and bringing its total funding to $565 million.
This last round saw the company — which was founded less than two years ago — valued at $5.65 billion. This represents 80 times its annual recurring revenue (ARR) of $70 million, and almost three times its last valuation of $2 billion in November 2020.
At first glance, this valuation may seem overblown, but is that the case?
Breaking Down Hopin’s Impressive Valuation
When considering Hopin’s valuation, it’s important to keep in mind that, for now at least, it is still a private company, meaning that there are inherently fewer metrics that investors can use to assess its value.
According to a recent Business Insider article, venture capitalists generally go about valuing startups like Hopin “by benchmarking them against similar public firms, then calculating an appropriate multiple of annualized or forward revenue and other metrics.”
In this case, the most similar publicly-traded company to Hopin is Zoom, which, by comparison, is currently valued at about 27 times its ARR. Add to that the fact that the overall stock market generally trades at a revenue multiple of about 20-25 times, and it’s clear that Hopin’s valuation stands out.
However, while the valuation of public companies is based on the billions of transactions that take place on the stock market every day — in other words, there are a lot of traders and investors constantly weighing in on a company’s expected growth — valuations of private companies reflect the analyses and outlooks of far fewer people. As such, they should be taken with a grain of salt.
What Hopin’s valuation does tell us is that the company’s investors expect extremely strong growth in the future — potentially close to four times the growth of standard companies. That said, it remains to be seen whether their confidence pans out.
Is Hopin Overvalued?
Hopin’s valuation is unquestionably high, but the investments in the company are all about expected future growth rates. The ‘80 times its ARR’ metric might be confusing for some, but if companies are normally valued at 20-25 times their ARR, what this means is that investors expect it to grow three to four times faster than the average company.
Therefore, if Hopin is able to sustain its rapid growth rate, as investors are counting on, its valuation will become more reasonable in the coming quarters. If it were to double its revenue, for example, its revenue multiple would drop to 40x, assuming no further change in its valuation.
The entire event tech market is currently subject to anomalous conditions, and while no one knows for sure what’s in store, it’s betting on the continued need for and popularity of online meeting tools well after the end of the pandemic. If it’s any indication, Zoom expects even higher revenues in the coming year following a strong showing in its fiscal year 2021.
In addition, Hopin’s investors are in the business of buying into high-growth companies — many were early adopters of some of the most successful platforms around. For example, Accel and Northzone participated in Facebook’s and Spotify’s Series A funding rounds, respectively. Investors like these are generally not risk averse.
They clearly have a strong track record, and while Hopin’s valuation is certainly an aggressive bet, it’s one that may very well pay off in the near future.