Discord’s Value Drops by 32% Year-over-Year – Is It Still Worth Investing In?
In the world of tech startups, valuations can be as volatile as the stock market. No one knows this better than Alex Wilhelm, Senior Reporter for TechCrunch. In his latest article, Wilhelm takes a closer look at the valuation of Discord, the popular communication platform that has been making waves in the industry.
The Peak of Optimism
Discord raised $100 million in funding at a valuation of $15 billion in December 2021. This was during the peak of investor optimism, when venture capital firms were throwing money at startups like there was no tomorrow. However, as Wilhelm points out, this was also a time when revenue multiples were soaring to unprecedented heights.
The Market Reprices
Fast forward to today, and the market has repriced. Revenue multiples have come crashing down, with the top quartile of cloud companies seeing their multiples fall from 29x last year to around 10x today. This is according to the Bessemer Cloud Index, which tracks the performance of leading cloud companies.
Is Discord Really Worth Less?
So, is Discord really worth 32% less than it was a year ago? Wilhelm’s analysis suggests that yes, it probably is. With revenue multiples falling across the board, Discord’s late-2021 valuation looks increasingly overstated. However, this doesn’t mean that Discord shouldn’t have taken the Microsoft money when it was offered.
The Microsoft Offer
Microsoft had offered to buy Discord for $10 billion in 2019, but the company declined. Looking at the current market, Wilhelm argues that the price Microsoft was willing to pay is more closely aligned with what the company is worth today than where it was valued at the peak of investor optimism.
Continued Growth Required
For Discord to justify its current valuation, continued strong revenue growth is required. If the company can maintain a revenue run rate of around $390 million and keep growing at 50% or more, then its multiple might come down from the stratosphere. However, this is no guarantee, and Wilhelm’s analysis suggests that Discord’s valuation still looks expensive.
Conclusion
In conclusion, Wilhelm’s article highlights the volatility of tech startup valuations and the importance of continued growth for companies like Discord to justify their current prices. As investors, we would do well to remember that market conditions can change rapidly, and what looked like a good investment last year may not be so today.
Recommendations
- Continued Growth: For Discord to justify its current valuation, strong revenue growth is required.
- Market Conditions: Investors should be aware of the changing market conditions and their impact on startup valuations.
- Diversification: Diversifying your portfolio can help reduce risk in the face of uncertain market conditions.
