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Vimeo’s $6B Valuation, on A $300M Raise Since November, Isn’t Justified

[Updated Post Here: Vimeo’s Business Detailed In IAC’s S-4 Filing: All The Numbers and Key Takeaways You Need To Know]

I’m all for companies in the video space being valued by investors and Wall Street for the value they bring to the market, but I am also a firm believer that valuations needs to be realistic to set proper expectations with investors. Since November, Vimeo has raised $300M with a valuation of $6B. They had $199.4M in revenue for the first 9 months of 2020 and are expected to end the year with about $230M in total revenue. [Updated Feb 3rd] Vimeo ended the year with $283.2M in revenue. So even if they grow at a continued 40% y/o/y rate, they are valued at almost 19X projected 2021 revenue. Vimeo is competing in one of the most competitive and price sensitive markets around and they are not an enterprise platform. Their customers are SMBs with spends well under $100 a month and none of these video platforms for SMBs are sticky. Vimeo offers an easy to use and reliable video streaming service, but so do many other companies specifically targeting the SMB market.

Their parent company IAC keeps mentioning how Vimeo has “200 million users globally”, but those are not all paying customers and they don’t define what a “user” means. Vimeo doesn’t have any kind of proprietary service or platform and from the IAC investors and Wall Street people I have spoken to, many don’t really understand Vimeo’s business or the competitive landscape for their services. Yes, Vimeo has an easy to use service and it works well. But not to the tune of a valuation based on 19x revenue, which includes a 40% year-over-year growth assumption. Vimeo’s 2018 revenue was $147M, so assuming back-to-back years of 40% growth by itself is a big bet. IAC plans to spin Vimeo out and take the company public this year, so at some point in the next 3-6 months I would expect we’ll see them file an S-4 which will break down all their numbers. Updated: The S-4 has been filed. See my details on it here.