Tech Sector Valuation Trends: Return to Fundamentals

For the past decade, the tech sector enjoyed high valuation premiums, with "Growth at all costs" being the dominant logic. However, with changes in the macroeconomic environment, this logic is being rewritten.

Shift in Valuation Paradigms

From P/S to Cash Flow

Investor tolerance for loss-making growth has sharply declined. Valuations are now anchored more on Free Cash Flow (FCF) and EBITDA. The "Rule of 40" for SaaS companies remains valid, but the weight has shifted towards profitability.

Capital Efficiency Metrics

• CAC Payback Period: Customer acquisition cost payback periods must be shortened.
• NDR (Net Dollar Retention): Extracting value from existing customers is valued more than new acquisition.
• Revenue per Employee: A key indicator of operational efficiency.

Impact on Corporate Financing

For tech companies seeking financing or IPOs, this means the narrative must be adjusted.

• Show the Path: Clearly demonstrate the path and timeline to profitability.
• Refined Operations: Prove management's ability to operate efficiently under resource constraints.

Longitude Advisors' Insights

We help tech companies refine the underlying logic of their financial models to match current capital market preferences.

Advisory Services: Whether for private placement or IPO preparation, we provide full-process consulting from financial modeling to roadshow story polishing. We do not participate in stock underwriting or fund raising, providing only professional financial advisory services (FA) to maximize client interests.

Returning to fundamentals does not mean giving up dreams, but building dreams on a more solid financial foundation.