FORTUNE — Today, a company with no profits and just $13 million in 2013 revenue is going to begin trading on the New York Stock Exchange with a valuation in excess of $3 billion. Yeah, eat your heart out… every other unprofitable company ever.
The big ticket is Castlight Health (CSLT), an online application that lets companies provide employees with personalized shopping tools for healthcare benefits. It was co-founded in 2008 by Todd Park, the Athenahealth co-founder who later went on to create the original Healthcare.gov as chief technology officer of the U.S. Department of Health and Human Services. Since 2012 he has served as the nation’s second U.S. chief technology officer (where his responsibilities included fixing glitches with the revised version of Healthcare.gov has become a major job requirement). His fellow co-founders were current Castlight CEO Giovanni Colella, the former CEO of RelayHealth (acquired by McKesson) and Bryan Roberts, a partner with venture capital firm Venrock.
Castlight also raised around $160 million over two rounds of venture capital funding, from Venrock, Maverick Capital, Oak Investment Partners, Morgan Stanley, U.S. Venture Partners, The Wellcome Trust and T. Rowe Price.
To be sure, the company’s opening stock price is not a reflection of its barely-there fundamentals. There is more than a bit of IPO and SaaS froth involved, plus a pretty slick-talking CEO. But if you’re looking for tangible reasons why investors are buying big into Castlight, here are three.
1. It’s all about the healthcare trends.
Castlight is going public at a time of great upheaval in the U.S. health insurance market. Not only because of the Affordable Care Act, but also because so many employers are moving to high-deductible plans. What employees need most is an easy-to-understand platform for comparing their options, including price. That’s where Castlight comes in. And, for whatever reason, there aren’t many other startups hot on its trail. If you believe this sort of product is important, then Castlight is the stock you buy. “Total available market” trumps current achievements.
2. Best of both worlds
Castlight has a lot of Silicon Valley DNA, which is comforting to investors who sometimes think that enterprise healthcare tech companies are too focused on healthcare and too little on the enterprise. For example, chief operating officer Randy Womack previously was CIO for SuccessFactors (acquired by SAP for $3.4 billion), while chief revenue officer Michelle Law previously was COO and OpenDNS. Both also spent time at venture capital firm Greylock Partners.
3. Backlog
Castlight may only have generated $13 million in revenue last year, but it signed plenty of long-term contracts that don’t really kick in until this year or next. For example, it had $108.7 million worth of agreements that had not been billed as of Dec. 31, 2013. Around $51 million of that was “non-cancellable.” If you begin to add this into your calculations, then suddenly Castlight’s valuation multiple doesn’t actually look too different from that of some other SaaS companies that have gone public over the last couple of years.
Now if you want to argue that all of them are overvalued and taking advantage of an IPO window large enough to drive a cruise ship through. Or that the above “bull case” is easily overwhelmed by risks like not actually owning much of the necessary pricing data (instead getting it via sharing agreements) and that this entire thing is going to end in a flood of tears… well, then that’s a different conversation…
Sign up for my daily email newsletter on deals and deal-makers: GetTermSheet.com
