Quickly Evaluating a Potential SaaS Investment

Earlier this week a friend sent over an executive summary and financial model for a Software-as-a-Service (SaaS) startup and asked for my advice in evaluating it. While he hadn’t been an angel investor before, he was thinking about becoming one and this would be his first investment. After looking through the two PDFs, I told him…

Triple, Triple, Double, Double, Double

Neeraj Agrawal has an interesting article up titled The SaaS Adventure where he talks about the seven phases of go-to-market success for Software-as-a-Service (SaaS) companies that have gone public recently: Phase 1: Establish a great product-market fit. Phase 2: Get to $2 million in ARR (annual recurring revenue). Phase 3: Triple to $6 million in ARR. Phase 4:…

Rise of Sales Development

SalesLoft put on an amazing event these past two days as part of their Rainmaker 2015 conference. With over 200 sales professionals attending, it’s clear that sales development is a major growth area. Two of my favorite sales speakers, Derek Grant and Allen Nance, headlined the early afternoon session. Modern sales development was popularized by Aaron…

SaaS Funding Relative to Recurring Revenue

Recently I was talking to an investor and he mentioned they were looking at a deal, liked the company, but were concerned with how much cash the startup had burned relative to current annual recurring revenue. For Software-as-a-Service (SaaS) startups, it’s especially difficult to get the business model going, and once it’s going, it’s especially cash-intensive…

SaaS Value Creation is Back-Loaded

One interesting aspect of Software-as-a-Service businesses is that most of the value creation is back-loaded. What I mean is that the majority of the valuation growth occurs in the later years, assuming the startup makes it there and has a rapid growth rate. Here’s an example five year trajectory with amount of recurring revenue and corresponding…