Let me tell you the story of a lovely business. It’s publicly traded; worth $50b. The company operates at 71% gross margin in a competitive industry in a very big market. Profitable and cash flow break even, this business enjoys a 19x forward revenue multiple.

What sector does this company operate in?

If you guessed a software company, I’m afraid to say I led you astray. It’s an unfair question given how much I write about SaaS companies.

The company is Public Storage, the self-storage company. Drive in, drop off your collection of lightbulbs, a cheetah print sofa, and a rusty Schwinn from your childhood, then sign up for a monthly fee. Public Storage trades at the same multiple as Hubspot, ServiceNow, Twilio, and Elastic - but it deals in atoms, not bits.

Wall Street loves SaaS companies. And they love Public Storage.

What do storage companies and software companies have in common that endears them to investors? Predictability.

Each of these businesses has predictable revenues coming into the business every month, every quarter, every year. In other words, they are bundles of annuities.

Software companies are bundles of annuities. Every month, every quarter, every year, people pay to use software. They show up, deposit their collection of bright ideas, photographs of cheetah print sofas, and get work to selling bicycles using software. And every year, they tend to pay 20-40% more, depending on the business.

That’s why software companies are valuable. They are bundles of annuities that grow over time.