When raising at a 40x multiple makes sense

Webflow, a well-funded no-code startup that helps customers build websites, raised a new round of capital this week.

Per Forbes reporting, Webflow landed $120 million in fresh funds at a $4 billion valuation. Forbes also writes that the company will reach the $100 million annual recurring revenue (ARR) mark shortly, has more than 200,000 customers, and currently earns around 8% of its total top line from enterprise customers.

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The above comes a little over a year after Webflow raised $140 million at a $2.1 billion valuation, giving the company a roughly 2x valuation bump with its new capital.

But what we care about more than the company’s raw valuation is the revenue multiple that the figure represents. Why? Because while nine-figure startup rounds are still getting done, we’re hearing from investors and founders alike that terms are tightening.

Even more, the public market has dramatically cut the value of software revenues, leading to some concern that late-stage startups are going to suffer when they go back to raise more capital. (This sentiment, for example, was echoed this morning in CNBC.)

A few days ago we noted that the era of startup valuations at 40x ARR was fading and that more conservative metrics were becoming common. With a $4 billion valuation and roughly $100 million ARR, however, Webflow is valued at precisely the number that we cast as a figment of yesteryear.

Are 40x ARR multiples still fair game for startups that have reached revenue scale? The answer is that they may prove increasingly rare, but that Webflow has a few things going for it that are likely affording it a valuation premium. It’s worth weighing Webflow itself in the context of its rich multiple — but perhaps not presuming that other startups will be able to follow its example this year.

So let’s do that.

Webflow and the 40x question

To understand Webflow’s latest round and resulting ARR multiple, we have to do a little historical digging. Pulling from our coverage of the company’s previous round, and a set of notes from an interview with Webflow CEO Vlad Magdalin, the following: