Deepwater Asset Management reposted this
Midjourney does $200m in ARR. CB Insights says that would make it a $10b company at 50x revs (in the ballpark of rumored rev multiples for OpenAI). What would Midjourney have to generate as a business for that to be a fundamentally great investment? Napkin math: - Internal studies we've done at Deepwater Asset Management suggest great long-term growth stories return the value of the company in FCF over 10 years. Some of the best do it even faster. - Simple math I ran: Midjourney would need to generate some where around $10b in revenue in year 10 (2033) with 30% FCF margins (roughly in-line with software greats) to clear that hurdle. - Assume a blended customer ARPU of $150 currently (base plan is $98/yr), the company has around 1.3m subscribers now. ChatGPT+ probably has close to 3 million by now. - Assume ARPU goes to $200 over the next 10 years, that would be ~50 million paid subs to Midjourney. A high bar, but Adobe has 10s of millions. More likely, Midjourney does more to serve enterprise and blended ARPU is much higher. - Is a FCF return of $10b in 10 years possible for Midjourney? Certainly possible. Hard to argue probable, but that's always the case for great growth companies. The valuation will never feel comfortable. If it does, it's probably not a great growth company. (Disclosure: Subscriber and fan of Midjourney). https://lnkd.in/eHeAxUYT
