Was Loom’s $975M exit a fair price?

When Atlassian announced last week its intent to acquire video messaging app Loom for $975 million, it would have been easy to think that the former unicorn was undervalued. But comparing 2021 valuations to the reality of 2023, when the dynamics between investors and their portfolio companies have changed so dramatically, really isn’t a fair way of looking at the recent deal.

When it comes down to it, Loom still sold for just a hair under $1 billion, and for a company that raised just over $200 million (per Crunchbase), that’s not a terrible return on investment. Sure, it’s not the $1.53 billion figure we saw in 2021, but show us a startup that could live up to the valuations of that time period in the current conditions.

Loom launched in 2016 and attracted some big-name investors along the way, including General Catalyst, Sequoia, Coatue and Andreessen Horowitz. It also got investment from industry luminaries like Figma CEO Dylan Field, Front CEO Mathilde Collin and Instagram co-founders Kevin Systrom and Mike Krieger. That’s some pretty heady company.

The company last raised in May 2021, and as Lou Reed once sang, “You know, those were different times”: It scored $130 million at the aforementioned gaudy unicorn valuation. Remember in May 2021, most offices were still closed. Large numbers of people were still working at home. Video messaging was hot. Everything was looking good.

The reality of the last two years changed the equation, and the value dropped as the interest rates rose. But that doesn’t mean it’s a bad deal, says Julie Mohr, an analyst at Forrester Research. “The acquisition cost is not too far off; I don’t think it is a bad deal for investors. Of course, investors always want to maximize their return,” Mohr told TechCrunch+.

But just how good was this deal, and what is Atlassian getting for its close to a billion bucks?

Video killed the radio star

Times are changing. As baby boomers age out of the workforce, younger workers who have grown up with TikTok and YouTube are comfortable using video as a medium to communicate, and that goes for leisure as well as work. And in that sense, this was a smart move by Atlassian.

“Teaming and collaboration is moving to async video, and that was the one big piece missing for Atlassian,” said Ray Wang, founder and principal analyst at Constellation Research. “Loom brings the key teaming features from transcription to engagement that Atlassian needed.”