Hey, I'm Dan! I invest in startups at Madrona and write the DL, a weekly newsletter about tech in the Pacific Northwest

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What $500M Buys You in Seattle

Here are some financial metrics for three Seattle area companies. They look very different, but all are valued around $500M. Can you guess what each of them are?


Company A is a high margin, unprofitable business growing at a good (but not great) pace. It should reach $100M in revenue in a couple years, and it is currently valued at ~7x revenue. Definitely looks like a tech company with that gross margin, but the multiple looks a bit low for SaaS.

Answer: Porch. Definitely a tech company, but 90% of revenues come from transaction fees, so their multiple is lower than a SaaS company. Here’s the investor deck from the SPAC that is taking them public.


Company B is worth $500M+ but has no revenue, so half of the value comes from the $285M of cash on the balance sheet. The (estimated) gross margins and cash burn make it look like a tech company, but normally startups can’t raise this much money without some revenue progress.

Answer: Athira Pharma. Biotech funding is so different than tech. Drug companies need much more money and take a lot more dilution. Athira raised $200M+ in an IPO last month, just three months after raising an $85M Series B. They also only have 25 employees, which explains the low burn rate.


Company C. Ok, so what the heck is this company that makes $24B in revenue but is somehow only worth $560M? That is insane!

Answer: Rite Aid. So last week Rite Aid acquired Bartell’s for $95M, and my first reaction was, “Holy crap, that’s a 2020 seed round.” Bartell’s has 67 stores that did $550M in sales last year (which means if they were a software company, they could be worth $70B), so that led me to look at what’s going on with pharmacy valuations.


Obviously, Rite Aid has been heavily impacted by COVID, but the short story is they trade at ~6.5X Enterprise Value/EBITDA, and they will generate ~$500M of EBITDA this year. They also have ~$3B of debt, so that’s why their market cap (i.e., equity value) is only ~$500M.


Pretty interesting seeing three totally different companies with similar equity values here in Seattle (I’m loosely counting Rite Aid as a Seattle company now). It really puts early stage startup valuations into perspective, and it’s a good reminder that eventually companies need to make money!


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