In this Chart of the Week, we’re looking at the industries with the highest and lowest revenue multiples for companies raising in the equity crowdfunding markets (Regulation Crowdfunding and Regulation A). We’re highlighting the four industries with the highest median revenue multiples and the four industries with the lowest median revenue multiples. Revenue multiples are calculated by dividing a company’s pre-money valuation (or valuation cap for SAFEs) by its most recent annual revenue figure. We calculated these figures for all raises that opened between January 2021 and April 2023.
Note: We only included companies with more than $50,000 in revenue. We also used medians instead of averages to control for outliers.
The industrials industry had the highest median revenue multiple. It should be noted that just seven industrials companies raised during the nearly 2 1/2-year period we’re analyzing. Therefore, the outliers will skew the data a bit. However, it is not surprising that companies in the industrials industry have high revenue multiples. Many startups in this space are coming up with innovative new ways to make manufacturing processes more efficient. Companies like BNNano — which develops additives for manufacturing materials to make them stronger — are just beginning to provide samples and generate revenue. Given the often huge upside that these kinds of companies can offer, valuations are generally higher in this space (which leads to higher revenue multiples).
The same can be said for security and cybersecurity companies, as innovative ways to help enhance security in the online world are hugely valuable. Therefore, companies can afford to raise at premium valuations. Other top quartile industries like renewables and financial products also demand premiums due to these companies generally having major upsides and clear road maps to hyper growth.
On the flip side, the retail shops and department stores industry had the lowest median revenue multiple at just 6.81x. Retail stores are a dying industry without much upside. Therefore, investors must be given a bargain price to compensate for limited upside. The same can be said for the other bottom quartile industries like beauty and personal care, pet health and food, and apparel and fashion. These tend to be retail-based industries that don’t have much room for innovation or hyper growth. Therefore, it makes sense that these industries have the lowest revenue multiples.
Note: All data used for the Chart of the Week comes from the KingsCrowd database and represents a snapshot of the crowdfunding market.
Wall Street has Morningstar, S&P, and Bloomberg
The equity crowdfunding market has KingsCrowd.
About: Teddy Lyons
Teddy comes to KingsCrowd with a background in venture capital and investment banking. He worked at Deutsche Bank as an Investment Banking Analyst in the Technology, Media, and Telecommunications group. Prior to that, he served as an Associate at Alchemi Capital, a venture capital firm in Boston that invests in early-stage technology companies. Teddy holds a degree in Economics and Psychology from Wesleyan University, where he was captain of the varsity soccer team. He is currently enrolled in the M.S. in Finance program at Boston College.