So the headline is incredibly impressive. AI Support / Agent leader Moveworks at $100m+ ARR sells to ServiceNow for $2.85 Billion, a 20x-25x ARR exit and a huge, huge price in absolute terms.
It’s ServiceNow’s largest acquisition … ever.
A huge exit. But do the investors actually make any money here? And should you care?
The answers are murky. Why? Moveworks raised $200m of its $315m in VC Capital in 2021 … at a $2.1 Billion valuation
Add in dilution since 2021, carve-outs on the deal, etc. it’s most likely the last round investors just made their money back. A 0% gain.
$200m of the $300m+ raised came in the last round, so likely, 66% of the investor dollars made no return at all, no profit, on a $2.8 Billion exit.
Now everything is nuanced. Tiger Global and another late stage investor put up most of that $200m by leading the last round, although existing earlier stage investors also contributed. But the earlier investors all will make money on the deal, some a lot of money. So most VCs in the deal will make money. It’s just most of the money itself … won’t make money.
And the reality is, the last round was raised at a very high valuation in 2021. Selling for $2.8 Billion today is more than fair. But it also shows how challenging making money at the growth stage can be.
It used to be growth round investors often blocked these deals. I don’t see that as often today, as long as they get their money back.
Especially when the company’s chances for an IPO or another big round have dimmed. The growth investors then are often fine (not happy, but fine) getting their money back when it seems most likely there are no big gains to come. The last round investors in Loom’s ~$1B sale to Atlassian also made no money, as the last round was at a $1.2B valuation.
Still, somewhat a crazy world where you can see your B2B AI company for $2.8 Billion … and most investors don’t make a dime.
Maybe you think that’s the way the cookie crumbles. And so it does. Who cares about the investors anyway? But put your investor hat on. Would you want to invest and take a huge amount of not just financial but career risk for the individual investor … and 4 years later just get your money back with a 0% gain? It’s tough. I don’t know.
As a founder, I killed myself to make sure all my investors made money. Everyone that has ever invested in me, ever, from being a founder to SaaStr Fund itself, has made at least 3x their money. Some a lot more, but everyone at least 3x. I took delivering those returns as the job, a professional and moral obligation, and as a steward of capital. But perhaps that’s a dated view of things in tech.
I’ll update this post with any more good color here. In the end to me, it’s just another remind to be thoughtful about raising at that crazy valuation if you don’t 100.00% see an IPO really coming. Because while this was an incredible exit in headline terms, it also suggests … they didn’t see a bigger IPO coming. And that likely any other exit would be a worse return.
A related post here:
