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The Bubble Index - the graph that determines tech salaries, office and apartment rates in Israel
The Bubble Index - EV/NTMSales of software companies in Wall Street
Source: Morgan Stanley, Processed by Lucid Capital, Last Update: March 2024
The index shows the valuation at which SaaS companies are traded on Wall Street using the Next Twelve Month (NTM) revenues multiple for SaaS companies - Meaning the ratio between Enterprise Value (Market Cap net of cash and debt) and NTM revenues.
This index is the main reference point for valuing startups in Late-Stage rounds as well as IPO or M&A -
For example, if a SaaS company called Tuesday predicts that its revenues next year will reach $ 100M, and the NTM multiplie of SaaS companies at a similar growth rate is 15.
So Tuesday's valuation at the time of an IPO will be around $ 1,500M (= 100 * 15), in a similar way it could be used as a proxy for a late-stage round in the private market.
Why don't we use the Nasdaq index
Since 5 companies make up over 50% of the Nasdaq index (Apple, Microsoft, Google, Facebook, Tesla), the index has
de-minimis representation of SaaS companies that make up the majority of the ecosystem in Israel
Why does the Bubble Index matter to every Israeli
This index is a key benchmark for the valuation of rounds, IPOs and M&A of software companies (SaaS) - including Cyber, Fintech, Enterprises SW, AI & ML
Given that these companies make up the bulk of the tech ecosystem in Israel, it has a direct relation to the extent of funds being raised, which translates directly to employees' demand, the wages they will receive, the demand for office space, and of course the value of equity options that fuels Israel's central region real estate market.
However, it takes 12-18 months from the moment there is a sharp change in the bubble index until it seems to have an impact on the Israeli economy ("the high-tech"), and the longer the index stays high, the more funds are raised in the companies' balance sheets.