23 Daily — According to saastr.com, Salesforce recently agreed to acquire marketing automation software provider Braze for $5.66 billion, equivalent to 6.8 times Braze's trailing twelve months revenue. While this price is typical for many B2B software sectors, it represents a 58% premium within the go-to-market (GTM) software field, given Braze traded at a 3.7x revenue multiple shortly before. This deal has spotlighted concerns over valuation bubbles in the GTM software market.
Valuations in GTM Software Significantly Lag Infrastructure and Security
Market data indicates the median enterprise value to trailing twelve months revenue multiple for GTM and front-office software is approximately 2.7x, while infrastructure and security firms like Cloudflare, Datadog, Snowflake, and CrowdStrike have median multiples around 22.6x, nearly 8 times higher. Although infrastructure companies exhibit slightly faster growth rates in the mid-30s percentage range, growth for companies like Braze and Klaviyo in GTM software is comparable (around 26%). The valuation gap is largely attributed to investors' expectations for how AI will boost each company's revenue over the next five years.
AI Reshapes Revenue Models, Driving Market Valuation Differences
GTM software generally charges based on seats or contacts, but AI agents can replace multiple human seats, reducing seat-based revenue potential. Conversely, infrastructure companies benefit from AI agents generating more API calls, data storage, and logging events, which increase usage-based fees. For example, Twilio's pricing per message and per minute benefits from AI-generated billable events, supporting higher valuations. In contrast, companies like Braze and Klaviyo tied to seat counts may see revenue pressure due to AI automation.
Private and Public Market Valuation Gaps Reflect Divergent Investor Strategies
Private market investors are paying significantly higher valuations for GTM software companies providing AI agents, with companies like Clay raising funds at approximately a $7.1 billion valuation—around 35 times its annualized revenue—far exceeding HubSpot’s public market multiples of about 3x. Other startups, including Sierra, Rox, and Profound, also hold extremely high valuations, often exceeding 30 to 100 times their revenue. These companies do not sell traditional human seats but offer AI-driven, outcome-based pricing models, differentiating them from conventional GTM software business models.
Editor's take: GTM Valuation Bubble and Entrepreneurial Opportunities
The Braze acquisition by Salesforce highlights extreme valuation volatility in the GTM software market caused by AI disruption to traditional revenue models, particularly affecting seat-based pricing. For entrepreneurs, this points to an opportunity to develop AI-powered GTM solutions that charge by usage or outcomes, which may command higher market valuations. Validation can involve benchmarking growth and multiples against infrastructure software peers integrating AI, demonstrating added revenue potential. Also, creating separate reporting for AI-generated revenue can boost investor confidence and valuation prospects.