Software companies spend more on R&D (research & development) & less on Sales & Marketing (S&M) as a per cent of revenue today than six years ago.
During October, Tomasz Tunguz held Office Hours hosting Carilu Dietrich, marketer and advisor at Atlassian to discuss how to successfully run a PLG program. Dietrich shared the 5 pillars in this guest post from Tomasz Tunguz.
Both the Customer-Centric and Industry-Centric classifications provide valuable frameworks for evaluating SaaS companies. The CFO’s role is to provide operational and financial insight to the management teams and translate business performance into reporting for investors. Therefore, the CFO must understand both frameworks to succeed as a SaaS CFO.
New market leaders have emerged that are far exceeding the performance gold standard Rule of 40, hitting numbers in the 50s, 60s, and even 80s. In this article, Bain has identified four archetypes among these superperformers.
According to a new Bain brief, there are 3 time-tested principles to navigating changing market conditions, or a recession and using data and analytics to thrive. Data and analytics alone won’t get you there, but by following basic best practices, research shows you have a high chance of succeeding.
Reporting of the Remaining Performance Obligation (RPO) Saas metric began with the adoption of ASC 606. In this guest post from Eric Mersch, he explains how this SaaS metric is calculated as the sum of Deferred Revenue and Backlog and why it has become an important indicator of SaaS financial performance.
Private equity blew the doors off in 2021: over a trillion dollars was invested last year by global private equity firms and almost a trillion dollars was returned in exits. The technology and specifically the software and SaaS sector represented 25% of the value invested and 31% of the number of deals. According to new Bain & Company research, over 50% of software deals returned 2.5x or more to investors. Bain also predicts that SaaS and software multiples will continue to be high in 2022 – read more here from Bain’s research on how Private Equity keeps winning in Software.
In this guest post from FLG Partners, author Eric Mersch focuses exclusively on Small/Mid-Market SaaS companies, and how CFOs must continually monitor the competitive market dynamics to serve as a powerful business partner.
Technology was a driving force behind the boom in venture investments over the past decade.
From 2010 through 2020, tech start-ups made up a majority of venture funding across all deals by independent venture capital (VC) firms and corporate venture capitalists. This guest article from Bain provides insights from their analysis using their Startup Investment Cruncher database.
According to Tomasz, there hasn’t been an architectural shift in SaaS since the advent of the multi-tenant database, which allowed SaaS companies to put all of their data across customers on a single database. This may be the next shift.
This guest post from Tomasz Tunguz explains the innovation and implications of having two feedback loops: 1) influencing customers and users, and 2) outputs data products and insights that are then fed into the data warehouse layer for downstream consumption.
With software and technology becoming mission-critical for businesses throughout the economy, CEOs in every industry are recognizing that their ability to compete comes down to one thing: having the right talent.
As a result, the war for technology talent is getting fiercer and spreading to new fronts as demand for crucial roles skyrockets. In this guest post from Bain & Company how tech companies can be disrupted due to the talent war.
In this guest post, CFO Dive shares how you can manage your cash flow can have a big multiplier effect on your company valuation. Also, explain why most finance tools are not optimizing for that.
Business operates in a climate of constant change. Here’s how you can make your planning and budgeting process more Agile.
As companies commit to transforming their FP&A function, choosing the right focus and pace is essential. They should align with business leaders on the sources of value creation for the future, then work backward to redesign FP&A around them. And they should carefully choose their spots for investment. That will raise the odds of FP&A shifting its role from scorekeeper to a true business partner.
Where is the SaaS world relative to how far it can go? With valuations of as-a-service companies and all-time highs or close to it, and more and more startups leveraging this model to serve an ever-larger number of consumers, I wondered how much more business is there to capture? Let’s try to estimate. We do […]
If the shelter-in-place order were to remain in place for another 12 months, how would you change the way you run your business? Over the past two months, CEOs and founders have managed the turbulence imposed by the coronavirus onto their companies. Most of the time, we’ve implemented short-term plans. This week, the first companies […]
The SaaS 2020 outlook for CFOs reminds me of swash (look it up – turbulent water caused by an incoming wave hitting the shore and meeting the outgoing backwash from the previous wave). More capital invested, more SaaS offerings, continued expectations of rapid growth are running smack into limits on the availability of qualified employees […]
As Chief Credit Officer at Lighter Capital, I work behind the scenes grappling with the data that informs all of our decision-making regarding financing deals, from revenue-based financing (RBF) to term loans and lines of credit. Similar to a venture capitalist (VC), I try to understand where startups are in their life cycles — and where they can expect to […]
SaaS multiples look great and made a nice comeback from Q4 2018: of the 72 SaaS companies we follow, the average public SaaS business is trading at 10.51x revenue while the median is 8.94x. Interestingly, the gap between the average and median has never been larger for the time period shown, meaning more attractive SaaS companies are being rewarded with big premiums.
You’ve found product market fit. You’ve hired a team, including some managers. Your initial, small customer base is very happy. You’ve discovered an initial channel of customer acquisition that’s working. You’ve raised a meaningful round of capital. And then, right then, product innovation decelerates to zero. The fast pace that characterized the past 12-18 months, […]
What valuations are founders asking for when they raise their Series A? Since May 2018, we’ve had conversations with 329 companies about their Series A rounds. Below is aggregate data on these raises with names redacted to preserve confidentiality. Figures like revenue, valuation, and round size are medians from conversations with founders. Remember the valuations […]
In the first half of 2019, total VC deal values hit $66B and is nearly on pace to match 2018’s record of $134.7B, according to the latest report released by PitchBook and the National Venture Capital Association. The size of VC funding deals continues to trend upward, while angel and early stage investing is holding its own in terms […]
If you don’t prepare ahead of time, you could get stuck not producing the top 5 SaaS metrics that investors want to see when they’re considering whether to invest in your next round. Not preparing the right SaaS metrics by venture stage for your VCs can ultimately reduce valuation, or even kill your fund raise. […]
In a recent meeting, a founder asked me what I thought of the fundraising environment. My answer was: it’s become incredibly sophisticated along three dimensions: diversity of product offering, pricing sophistication, and efficiency of investment processes. If you read eBoys or Done Deals or Creative Capital, you’ll get a sense of the early days of […]
A few days ago I wrote that there’s more than one path to $100 million. I argued that while it’s awesome to see that some companies are able to get from 0 to $100 million in ARR in 7-8 years or even less, trying to grow that fast may not be the best choice for […]
Today’s syndicated article was written by Sammy Abdullah, Co-Manager at Blossom Street Ventures. The chart below is a good set of data from recent SaaS IPOs and their R&D spend. Building out, maintaining, and upgrading a technology stack requires a constant commitment to developers and engineers, so what is an appropriate level of development or R&D expense […]
Here are some predictions for 2019 and a review of my thoughts for 2018, many of which were wrong. The M&A market slows meaningfully, especially at the multi-billion dollar level. The recent seasickness in the public markets forces most CEOs adopt a more conservative approach to acquisitions. Facing large swings in valuation, these leaders may […]
Raising capital can be a challenging, sometimes grueling, process. In the last 20+ years, I have seen how the sausage is made from many different perspectives. Prior to starting SaaS Capital in 2007, I was a partner at a venture capital firm with a focus on funding Series A and B for software companies. It […]
Your startup is just getting off the ground. You might have a few account executives and a sales leader in place; maybe some revenue and a handful of customers. The sales team costs real money, and the question before the company is: how do know what quota plan to assign to the account executives? I’ve […]
A founder asked me recently if there were any trends in the economics of professional services across public SaaS companies. I had examined the gross margins and share of revenue from professional services about 3 years ago. Professional services are consulting fees software companies charge to customers for software configuration, customization and education. What has […]
From time-to-time, you may need to find consultants to help you with your business. Sometimes, those needs are high level, like setting strategies or marketing plans. And, other times, those needs are more point solutions, like a pro in search engine optimization or product sourcing. Whatever your need may be, there is most likely a […]
In early markets, customers prefer entire solutions, not best in class point products. These solutions often include significant professional services and education. At the beginning of a new wave, most customers don’t understand the technology well. So, they seek experts to guide them. Companies that provide services and education often win the early market. They […]
I’ve written quite a bit about the public market software multiples. They’ve increased to near historic levels with forward revenue multiples approaching 9x. As the public markets have appreciated, something has happened that I didn’t expect. Some public companies are now fetching the mulitples of the most attractive private companies. I thought valuations between the […]
Recently, people have been asking just where are we in the SaaS valuation cycle. I last updated the chart above more than six months ago. The answer is close to ten year highs. The chart above shows the median enterprise value to forward revenue multiple to multiple. Enterprise value is the market of a publicly […]
There are five forces driving the startup ecosystem today. They are working together to reinforce a high valuation environment. These forces are: An infusion of capital into Startupland. There are many reasons for this. The money supply in the US has doubled in the last 10 years. A low interest rate environment means a low […]
Over the past 12 months, a number of our benchmarking customers have either filed or completed SaaS IPOs. And Adaptive, a customer and partner, filed for an IPO in May and then announced in a surprise move on Monday its acquisition for $1.55B by enterprise SaaS company Workday for more than double (2.2X) the expected post […]
Will risk adverse investors in both the private (VC and PE) and public markets this year impact SaaS operating benchmarks like revenue growth, profitability, hiring and a host of other operating metrics in 2016? We’ve been getting calls from a number of saavy CFOs asking to see SaaS operating benchmarks from 2009 and 2010, just […]
In a recent forum dedicated to software and SaaS Finance leaders, organized by the SIIA and sponsored by OPEXEngine, Netsuite, Intacct and Grant Thornton, one of the best discussions dealt with preparing for and managing the optimal M&A exit for your company, with CFOs from acquired companies and M&A advisors from Grant Thornton. Key Takeaways: […]
Financial results for the Class of 9 B2B SaaS companies that IPO’ed in 2014
Good news for sales and marketing executives defending their budgets if they are planning on going public soon: The total amount of money in the sales and marketing budget probably isn’t going to be questioned too much. That doesn’t mean that how they spend their money isn’t going to be questioned, or the effectiveness of […]