Define "justified". For most purposes, the market looks at valuation on a relative basis¹.

Their S-1 says GitLab generated revenues of $152 million in FY 2021 (ending Jan 31), up 87% from the year before². For the sake of argument, let's assume their growth rate slows down "slightly" to 50%. That's ~$230 million projected for FY 2022

At $10 billion, that implies a forward revenue multiple of ~43.5x, which does seem high—but it's not necessarily "unjustified". I haven't read the S-1 and the market reaction to the IPO has been quite positive so far. You'd need to know the business and the market well to make your own individual assessment of why it commands this premium multiple. Customers, TAM, growth, churn, competition, etc.

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1. For better or worse, relative valuation is viewed as "more defensible". If you're wrong, you can simply say, "well, that's how the market was pricing it at the time" whereas if you are wrong with your intrinsic valuation model (like a DCF), you have no one to blame.

2. https://www.bamsec.com/filing/162828021018818/1?cik=1653482&...

How much of that revenue growth was driven by Gitlab more than quadrupling their price in the last two years? ($4 to $19 a month).

They can't pull that trick again.

Who knows? $400/month/dev, here we come!

ORCL, MSFT, SalesForce and a few others would pay 10B+ to own those relationships and control of the future of the product

If they were paying more than an IPO value they probably would buy already ...

Gitlab doesn't want to sell

GitLab Just (partially) sold.

However: If they don't want to (fully) sell basing the price on a value someone else might eventually pay for a (full) acquisition doesn't make much sense. (Unless you assume they revise the decision, but then the argument about not selling is moot again)

Look at Facebook. Zuck has no interest in giving up full control to someone else, but he does want to be a public company.

Yes, since FB is a money printing machine producing lots of revenue which is some argument forms one market value for parts of a company.

The argument Here was "ORCL, MSFT, SalesForce and a few others would pay 10B+" but those would pay those valuations only for full control.

FB's market cap is around 900B$. Gaining full control over FB would be valued a lot more.

First 6 months of this year Gitlab took in $108M in revenue, and had $177M in expenses. Would you pay $10B to own a company that loses $10M/month, with the hopes they will continue to increase revenue in the future and become profitable?

In the 6 months before their IPO - Square had net revenue of $200 million and expenses of $260 million, also losing $10M/month. Would you have paid $3 billion in 2015 to own that business?

If you had you would've had a 30x return today... (current market cap is ~$112 billion).

The large majority of the 30x return was over the past 2 years with the pandemic, which is not going to happen for Gitlab.

God forbids if you bought square long ago and didn't hold long enough, they had multiple years of ups and downs.

https://www.google.com/search?q=square+share

Personally I'd buy an aircraft carrier if I had $10B. Nevertheless, there are plenty of people willing to put it in Gitlab or they wouldn't IPO. A better question might have been: what's the bull argument for Gitlab?

The usage argument is: buy your own "self-hosted" cloud offering, deployed over any combination of AWS/Azure/GCP/onprem that you like.

The bull argument probably looks something like: replace Microsoft Office 365 / Azure with an integrated "self-hosted" solution, easily deployed to any commoditized compute...handled by GitLab for paying customers, assurances of "escape hatch" to DIY open-source when you stop paying.

There’s a Forbes article on the GitLab valuation which could be interesting to this thread: https://www.forbes.com/sites/greatspeculations/2021/10/12/gi...

As with GitHub, the bigger value is owning shift left disruptions for enterprise and cloud sw+he services: security scanning, backups, prod server hosting, ... .

It is hard to compete with AWS, and a lot easier if you own the UI+APIs for how software teams do CI+CD: you become a default preferred vendor for all IaaS/PaaS add-ins, and can proactively recommend and even trial them well before any competitor. IBM, Oracle, SalesForce, SAP, Alibaba, etc could all win big -- imagine if IBM bought GitLab instead of RedHat to fix their data center strategy.

Microsoft paid $7.5 billion for GitHub in 2018.

GitLab being ~$10B 4 year later seems like similar ballbark. There is always the possibility of acquisition in the future.

(EDIT: had names reversed)

Microsoft only paying 7.5 billion for GitHub definitely makes me less confident that GitLab is worth 10 billion.

Much as I personally prefer GitLab, GitHub had a bigger customer base back then than GitLab has now. GitLab may be gaining market share, but it’s mostly eating Atlassian’s portion of the market and not GitHub’s. It’s plausible GitHub undervalued themself in the sale to Microsoft of course, so a careful look at the numbers is required to evaluate the valuation, but the value comparison isn’t a great sign to me.

Separately of course, GitLab might be in line with the valuation of companies on the stock market in general which have ballooned heavily in recent years. Whether that's a bubble or permanent inflation in stock prices then becomes the relevant question to answer, I suppose.

>Microsoft only paying 7.5 billion for GitHub definitely makes me less confident that GitLab is worth 10 billion.

It's worth considering that between 2018 and now, tech valuations have exploded. MSFT is up 300%. QQQ is up 100%. I doubt GitHub is valued anywhere near 7.5B today.

It's also worth noting that projected value is not the same as sale value, so the two aren't that helpful to compare.

GitHub wouldn’t sell for only $7.5b today though, it would probably be in the $25b or higher place. The explosion in valuations, especially in enterprise SaaS stuff over the last few years has been remarkable. I don’t know if that is sustainable or not, but in three years, the metrics have changed significantly.

> Microsoft paid $7.5 billion for GitLab in 2018.

That's a bit of an alternate timeline.

how many users did github have at the time vs gitlab now?

Came to look for the same. I haven't found current or future projections on revenue to hang something on.

they have massive losses

https://www.sec.gov/Archives/edgar/data/0001653482/000162828...