Valuations in Publicly Listed Technology Companies

Despite the global contraction in investments in recent years, technology companies have continued to grow. This week, we wanted to share our views on valuations, supported by a few key data points.

Despite the global contraction in investments in recent years, technology companies have continued to grow. This week, we wanted to share our views on valuations, supported by a few key data points.

The past 2–3 years have clearly been challenging for technology companies. Economic instability, high inflation, and rising interest rates forced them to reassess their business strategies, growth methods, and hiring plans. At the same time, we witnessed notable progress. Recently, as technology companies embraced generative artificial intelligence (AI), they ushered in a new era of innovation—delivering faster and more cost-effective products and services.

Naturally, as AI continues to integrate into products and services across gaming, healthcare, e-commerce, and financial industries, technology stocks—despite valuation declines in recent times—have emerged as the biggest driver of the current bull market and the strongest performers. While some investors and analysts argue that tech valuations are inflated, we can reasonably suggest that the adoption and advancement of AI has not only supported but also driven valuations higher.

In this article, we examine the valuations and valuation metrics of publicly traded technology companies. We focus on popular and widely used multiples such as EV/Revenue and EV/EBITDA, classifying sub-sectors of technology and evaluating both historical data and projected ratios for upcoming years.

Public Gaming Technology Companies and Their Valuations

Forward-looking adoption of technological approaches is critical for gaming companies’ valuations. Investments in cutting-edge graphics, gameplay mechanics, and robust backend infrastructure—covering server management, data analytics, and content distribution—are essential for ensuring seamless gaming experiences, user retention, and revenue generation.

• From 2021–2023, publicly listed gaming companies had an average EV/Revenue multiple of 4.1x.
• For 2024–2025, this is expected to rise to 4.6x, fueled by AI, virtual reality (VR), and other technological advancements.

This trend indicates that gaming companies at the forefront of innovation often command higher valuations, as they set new industry standards and attract investor interest.

Public SaaS Technology Companies and Their Valuations

SaaS (Software as a Service) companies have seen unprecedented growth over the past few years, establishing SaaS as the dominant model in the software ecosystem.

• SaaS valuation metrics surged between 2015–2020, with COVID-era stimulus further boosting them.
• However, with aggressive interest rate hikes in early 2022, valuations declined sharply.
• By 2023, valuations recovered significantly, largely driven by giants like Crowdstrike, Salesforce, and ServiceNow, though smaller SaaS firms remained stagnant.
• In 2021, SaaS companies’ median EV/Revenue multiple stood at 24.9x, but by 2023, it had fallen to 12.3x despite recovery signs.
• The median EV/EBITDA multiple over the last 3 years was 46.8x, supported by predictable recurring revenues (ARR) and AI-driven low-cost solutions.

Looking ahead to 2024–2025, growing competition in the SaaS sector—through tougher contract negotiations, renewals, and pricing pressures—suggests a downward expectation in valuation multiples.

Public Financial Technology (FinTech) Companies and Their Valuations

Since 2021, valuations in the FinTech sector have faced downward pressure. The main reason is rising inflation in many countries, which created challenges for FinTech firms to deliver returns to investors.

• Smart banking-focused companies, heavily reliant on cash reserves, were particularly vulnerable in high-interest environments.
• Payment processing giants like Mastercard fared better, as their revenues are tied to consumer spending and less impacted by inflationary costs.
• Newer FinTech entrants, however, struggled with rising labor costs eating into profitability.

High 2020–2021 FinTech valuation metrics gave way to corrections post-2022, as analysts increasingly argued that historical FinTech valuations had been overstretched.

Public E-Commerce Technology Companies and Their Valuations

E-commerce technologies have become increasingly vital for businesses, but the industry faces unique challenges in sustaining high valuations.

• Valuations peaked in 2021 and remained elevated until early 2022.
• Supply chain issues, particularly in late 2021, and rising PPC (pay-per-click) costs made scaling revenues and margins difficult.
• This lack of sustainability triggered a downward trend in both EV/Revenue and EV/EBITDA multiples from early 2022.

Geopolitical uncertainties, including the war in Ukraine and tensions around Taiwan, further weighed on valuations. Given continued supply chain reliance on China, no significant uptick in e-commerce valuation metrics is expected for 2024–2025.

Public Healthcare Technology Companies and Their Valuations

In times of abundant capital, VC investors competed aggressively for healthcare tech opportunities, inflating private valuations unsustainably. Growth in ARR often took priority over margins or unit economics.

Now, the focus has shifted: investors are prioritizing profitability or paths to profitability. This shift is reflected in both public company valuation metrics and private markets. Healthcare technology valuations today are more balanced, rewarding sustainable models over unchecked growth.

The Largest Public Technology Companies and Their Valuations

The AI revolution has propelled major technology companies to new heights, driving unprecedented valuation growth.

The so-called “Magnificent Seven”—Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla—have dominated the last decade with high technology adoption, rapid growth, strong margins, lofty valuations, and robust returns.

• From mid-2020 to early 2022, remote-work adoption fueled a massive surge in innovation, hiring, and valuations.
• However, wars in Europe, high inflation, rising interest rates, uncertainty, and a banking crisis in Silicon Valley triggered a deep valuation downturn.

Now, in Q3 2024, we are asking: what comes next for the tech ecosystem?

• 2023 was a golden year for tech investors.
• In 2024, AI—particularly generative AI (GenAI)—is expected to lead the renewed confidence in the sector.
• The shift from the 2021 boom to the 2024 normalization is not only healthy but necessary.

Valuations remain near decade lows compared to the 2021 highs, largely due to costlier capital and prior overinflated multiples. Yet, as advanced technologies like AI continue integrating into products and services, tech valuations are moving away from the perception of being “inflated.”

The prevailing view is that the largest and best-performing companies will continue to shape the sector outlook, partly because they stand to benefit the most from AI adoption.

We believe that the upward valuation momentum of tech companies will likely continue into the second half of 2024. With inflation trending downward in the U.S., Europe, and the U.K., the likelihood of central banks cutting rates has increased—signaling further upside for valuation metrics.

Our analysis indicates that after a recovery period, valuations in technology companies are now positioned for further upside, driven by AI and generative AI. The tech world, shaped by past volatility, is advancing steadily toward a more resilient, innovative, and sustainable future.

Boğaziçi Ventures Perspective

For over a decade, we have worked with dedication to contribute to Turkey’s technology entrepreneurship ecosystem and create value. With our deep expertise and strong network, we continue to support entrepreneurs. At Boğaziçi Ventures, as we shape our AI-related investments, we believe in leveraging technology’s power across multiple verticals to deliver sustainable and smart solutions.

We invite entrepreneurs to apply for investment discussions with Boğaziçi Ventures via [email protected]
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