Jason M. Lemkin argues Wall Street made a critical mistake valuing all software companies the same way. Companies with high gross margins, large contract values, long deal lengths like 5-10 years, and predictable renewal rates deserve higher multiples than smaller-deal, lower-margin competitors. ServiceNow exemplifies a company that shouldn't trade at the same multiple as monthly-billing SaaS.
And I think, I think where Wall street kind of got it wrong is, is they were treating literally all software the same again, indiscriminate of, of what's the gross margin, what's the, what is the contract value size? What is the renewal rate of that company? Is, are they doing five or ten year deals or are they on monthly billing? And like all these things end up sort of compounding over time one way or another where ServiceNow should not be valued at the, at the same multiple of a company that is much less gross margin, much, much smaller deal size. But that's what the market.
