Is Pipedrive’s Valuation a Pipedream?

Last week we learned that Pipedrive, the sales CRM for SMBs, took a majority investment from Vista Equity Partners. TechCrunch reports the deal values Pipedrive at $1.5 billion.

Pipedrive reports 95,000 companies are currently using its CRM software. Assuming roughly two uses per customer, this means the company likely has upwards of 200,000 users on the platform. A $1.5 billion valuation on 200,000 users suggests a $7,500 per user valuation. At an average of $25 per month per user, that is 300 months or 25 years.

Our back of the envelope math suggests Pipedrive’s growth has to be pretty robust to justify a $1.5 billion valuation. This seems crazy to us. Yet perhaps not so crazy in the context of Salesforce’s $230 billion valuation. 

Pipedrive was founded in Estonia a decade ago. Over its lifetime, the company has raised just under $100 million in venture funding. Before Vista Equity Partners decided to take a majority interest that is.

You may recall that Vista Equity Partners took the then-public MindBody (the CRM for fitness studios) private for $1.9 billion in February 2019. MindBody had 67,000 businesses on its platform at the time. 

We suspect that deal doesn’t look as good to Vista today as it did in the winter of 2019. With gyms and fitness studios among the hardest hit by the on-going pandemic. You may recall the company took aggressive actions earlier this year and let some 700 employees go. 

With Pipedrive, Vista Equity Partners probably has a more stable business. In fact, Pipedrive may even benefit from the on-going pandemic. Pipedrive could benefit as SMBs gravitate toward using technology more and more to engage with their prospects and customers digitally.

Pipedrive has broadened its appeal well beyond just the CRM space with integrations across hundreds of apps that can perform tasks associated with CRM-related activities. Think email, payments, etc. In recent years the company has also applied more AI and machine learning to deliver salespeople the most qualified leads. 

CRM at Heart of SMB Tech Acceleration 

There is no shortage of cloud-based CRM platforms for SMBs. It is a very fluid and competitive space. And it’s one that is at the heart of the survival of local and small businesses. More acutely than ever, small business owners need to apply technologies to improve their customer interactions and engagement.

Those small businesses that do not step up to this challenge will be at far greater risk of failure. Particularly as the pandemic situation is expected to linger for another six months or longer.

John Stalder, Managing Director at Vista Equity Partners put it this way. “As more and more small- and medium-sized businesses looking to accelerate their digital adoption to grow and thrive, Pipedrive has proven itself an invaluable partner with solutions that drive revenue growth to its customers. We see a tremendous opportunity to work with the Pipedrive team and their partners to continue to grow the business and serve small- and medium-sized businesses globally.” We do too. 

Our own Localogy research points to the upward adoption of CRM solutions. According to our latest wave of Modern Commerce Monitor™ research, conducted in October, 40% of small businesses have adopted SaaS CRM for at least some of their customer management activity. This is up considerably since the pandemic hit. 

This still leaves a sizable portion of the SMB total addressable market up for grabs. While the wind may be at the backs of CRM providers, the competitive landscape will make the waters choppy for some time.

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