Don't Look Now But Web3 Companies are Beginning to Trade Like their Web2 Counterparts
This chart shows the relationship between the top 100 public web3 projects’ revenue and their trailing revenue multiple. There’s none. The correlation asymptotes to zero. At least when looking at the ecosystem as a whole.
But let’s break the data down by category into the top 5 by revenue: L1s (blockchains), DEXs (decentralized exchanges), Credit (lenders), NFT Marketplaces (buy & sell Bored Apes), & Yield Aggregators (systems to maximize interest rates on deposits).
These correlations to revenue growth resemble web2 software companies in the strength of their correlation.
Two weeks ago, revenue growth correlated to?public software companies multiple at 0.61?compared to 0.54 & 0.49 for NFT Marketplaces & Yield Aggregators. DEXs & Lenders are still mostly uncorrelated to revenue growth.
As for the multiples themselves, these four categories have multiples bounded between 3x - 9x, which resemble web2 businesses. L1s live off the chart, their multiples measured in the thousands!
领英推荐
Web2 market places (a basket of etsy, eBay, Fiverr, & Udemy) trade at 3.3x trailing compared to 3.9x median for web3 NFT Marketplaces - strikingly similar, doubly so since I’m not normalizing for gross margin or any other metric.
Web2 exchanges (a basket of Intercontinental Exchange, Nasdaq, London Stock Exchange & the CME) trade at 8.7x trailing compared to 11.9x for the 21 DEXs in the top 100 web3 apps by revenue.
I’m not sure there’s a public market equivalent of a yield aggregator - maybe roboadvisors. The same is true of the crypto lending companies since they are a mix of secured & unsecured lending, so I’ll leave the comparison there. But I’m open to suggestions so message me with ideas.
For these two categories at least, investors have begun to value web2 & web3 businesses similarly. I wrote about other convergences between?web2 & web3 in these predictions. In the end, an investor with a dollar must decide the best place to put it. So it stands to reason that similar companies should trade at similar multiples, irrespective of their underlying architecture (centralized vs decentralized).
The settling of multiples across the non-L1 categories should cascade to early stage valuations. Web2 & Web3 marketplaces should trade at similar prices irrespective of novel token dynamics. In addition, the market’s coalescence on classical valuation methods will focus web3 companies on revenue as a north star metric - something largely absent to this point. And for good reason: web3 remains in the installation phase of?Carlota Perez’s framework.
L1s’ valuations remain unconstrained by comparables to others for the moment. L1s are indices on the entire market: they capture revenue across every application built & yet to be built. The colossal multiples suggest investors expect stratospheric revenue growth as developers adopt decentralized databases & infrastructures en masse.
All in all, this data suggests web3 continues to mature, an exciting prospect because as valuations normalize, more dollars, interest, & effort follow.
Bachelor of Commerce - BCom from Nizam College at Hyderabad Public School
2 年????
Project Manager at Project Blue
2 年Love seeing the analysis. Data maybe a bit of a challenge. I maybe biased however, my dollar always goes on the greater risk. Bigger fall however this is about to head to the moon. #NFT. I think of analytics in basic Web2 and its time that tells so I know that time also kills. Jump on the rocket now!
Founder, CEO at Invoke // Solving Generative Media for Professional Creatives
2 年Fascinating analysis Tomasz Tunguz! Sharing some thoughts on the L1 commentary - Agree that these serve as a broader index on the market, but unclear how you're calculating "revenue" for these. Are you basing this on quantifiable "revenue" (e.g., staking rewards?) or theoretical "revenue" unrealized by any real organization (e.g., Transaction fees?) Ultimately, I'd hypothesize analyzing any multiple on either wouldn't make as much sense. As I see it, valuation of L1 would be multifaceted, based on not only value in generating staking rewards (a quantifiable ROI), but also priced as a function of known supply and expected demand for enabling on-chain transactions. All to say, there's certainly some speculation going on with respect to the future value of gas for the "smart contract engine", but the model of "revenue multiples" seems like a misfit for the context. All in all, love the thought pieces here. ??