MariaDB goes private for a pittance and the decline of SaaS

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Via John Salvino

MariaDB and the decline of SaaS

MariaDB is going private for a pittance. TechCrunch has the details of the transaction here, but the gist is that K1 Investment Management picked it up for less than $1 per share. The transaction calcified into rictus throughout the year, and we can now count down to the formal end of MariaDB as a public company.

A former SPAC combination struggling is hardly a shock. But I think that the MariaDB mess underscores a problem in SaaS today: Growth is slowing, and profitability is not rising quickly enough to allow software-as-a-service companies to flip from revenue-based valuations to profit-based multiples. Call it the SaaS valley of share price despair.

Why did MariaDB have to go private? The prosaic answer is that it ran out of cash. In its most recent 10-Q, the company reported $1.08 million in cash and equivalents against $10.6 million worth of operating cash burn in its preceding three quarters.

The more interesting answer to the question why MariaDB is going private is that its growth rate was too slow to attract more capital, leaving the small public company in without other options.

Losing money is not a sin in the technology industry, so long as your revenue is growing by leaps and bounds. MariaDB, however, posted a very thin 4% growth rate in the June 30, 2024 quarter.

That’s not entirely fair. The company’s subscription revenues actually grew 7.5% in that three-month period, moderated in the aggregate by falling services incomes. Swapping lower margin revenue for higher margin revenue is never bad, but MariaDB simply had too high a cost basis compared to its gross profit to survive alone. And with little for investors to look for in terms of future cash flows, the company’s value went to all but zero. And it got snapped up for peanuts.

MariaDB is on track to do more than $50 million in revenue in its current fiscal year. And it’s worth just about nothing — less than 1x revenue. There’s a lesson there.

But not one merely for software companies that went public via a SPAC. The MariaDB situation is not unique. Certainly, I don’t think that its precise combination of not-quite-public-market revenue scale, thin checking account, and exact growth rates are the norm. But I do wonder how many private-market SaaS companies are growing not that much faster than MariaDB, with a similar revenue base and similarly sticky losses. What are those companies worth?