More Vertical, Niche SaaS Startups

Over the past few months I’ve talked to a number of entrepreneurs with vertical, niche Software-as-a-Service (SaaS) products. As expected, mainstream SaaS platforms are being carved up into small, specialized point solutions, while also providing a better experience to their customers. Most venture investors are looking for large, platform-like SaaS startups, but more entrepreneurs are going to…

Public SaaS Company Valuations Q1 2015

Once a year I like to take an inventory of the public Software-as-a-Service (SaaS) companies regarding their valuation, revenues, and employee count. On the public equities side, I don’t pick individual stocks (I’m a fan of Vanguard Index Funds), so I only hear about things when a stock makes a big swing. Here’s a snapshot of public…

Rule of 40% for SaaS Companies

Brad Feld wrote a great piece last month titled The Rule of 40% for a Healthy SaaS Company. The idea is that growth plus profitability should be 40% or greater once at scale (double digit millions of revenue). As an example, if a SaaS company grew 100% year-over-year, and had negative margins of 60% (burning…

When a Product Works but a Business Doesn’t

An entrepreneur emailed me recently asking for advice about his Software-as-a-Service (SaaS) business. After several years of working on it, and signing up hundreds of customers paying a small amount of money, it became clear that it wasn’t a viable business. That is, by all accounts, product-market fit was reached but no matter how hard…

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…