SaaS Fundraising Handbook
SaaS companies are characterized as having the perfect business model because of both the recurring and compounding nature of their revenue streams. Relative to other businesses, they are capital-light and often generate significant cash flows at scale. Investors have become increasingly sophisticated at evaluating SaaS companies and the metrics to measure these businesses are becoming more and more well-known. However, the evaluation process still remains a mystery to many founders and we continue to hear that KPI benchmarks are tough to come by. IVP has had the privilege of evaluating thousands of SaaS companies and backing many of the top SaaS companies of the last decade, including AppDynamics, CrowdStrike, Datadog, Dropbox, GitHub, and UiPath, among others. While there is no magic formula for success, we created this handbook based on our experience to demystify the process and share some pro-tips.
Our process of getting to conviction has both quantitative and qualitative elements. Our quantitative analysis is primarily centered around exploring a company’s growth rate and sales efficiency as key drivers of product-market fit and go-to-market fit. In this handbook, we highlight key formulas and share proprietary benchmarks, while also providing handy templates to illustrate how best to structure and present data. On the qualitative side, we’ll spend time with management, as it is critical that we believe we are backing leaders who can clearly articulate and execute against a compelling vision. We’ll also speak to customers to understand satisfaction levels and size a company’s addressable opportunity. Part of our overall assessment centers around believing whether a company can be 3x, 5x, 10x, or 25x larger on its key fundamental metrics and ultimately whether it can return one-third, half, or potentially the entire fund.
