Fresh Insights

Analyses, Musings & Observations

Revenue per head in SaaS

Two metrics we use to compare software businesses are revenue per employee and operating expense (opex) per employee. In our view it’s a great measure of operational efficiency. What is a reasonable amount of rev/head and opex/head in SaaS? The data from the last 19 SaaS IPOs is below.   Headcount. The median headcount of…
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Tech CEO salaries at IPO

We’ve seen a wide range of CEO salaries in our portfolio, from as low as $35k annually to as much as $325k (plus bonus). While there is no dataset explicitly outlining salary levels at early stage companies, we can use the salaries from tech companies at their IPO to get a sense for what the…
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Selling code from a dead investment

Selling code from a dead investment In 2017, we had a death in the portfolio. Once all the employees left, the only remaining assets were some patents, servers, domains, and a lot of code. Eventually we managed to sell that intellectual property (“IP”). Here is what we learned. Set expectations. The value of IP is…
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The new rule of thumb in SaaS margins

The general rule of thumb for spending in SaaS is 40/40/20. In other words, 40% of operating expense should be on R&D, 40% should be on sales and marketing, and 20% should be on G&A. 19 SaaS companies have gone public in 2018 and 2019, so we wanted to see what their ratios are. Perhaps…
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Nonrecurring revenue is valuable

VC love recurring revenue and many VC won’t ascribe any value to non-recurring revenue streams. That said, do not forsake non-recurring revenue streams. If you do, you’re ignoring free financing and a way to make the product stickier. Non-recurring revenue streams like onboarding fees and installation fees are a fantastic source of cash, which means…
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How SaaS does in a recession

SaaS Capital, a lender to software businesses, put out an excellent research piece which examined the performance of publicly traded SaaS businesses during the recession.  The 3 page research report is well worth the read, and we decided to summarize some of the findings. Below is the data and under that are observations.    …
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2019 observations from 100+ SaaS companies

If you haven’t subscribed to SaaS Capital’s emails, you should.  They put out fantastic data on the SaaS market.  The latest release came from Managing Director Rob Belcher.  In it, he shares some observations from the past year.  The below is verbatim from Rob.   “SaaS is about to enter its third decade, and technical…
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Product & Dev Spend at 86 SaaS co’s

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 for a successful SaaS business? We looked at 86 publicly traded SaaS businesses at the time of IPO and 2 years prior to get a sense for how…
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Negotiate with Investors – part 2

Below is a continuation of a recent blog post about a book called Never Split the Difference by Chris Voss. Chris was one of the premiere FBI Hostage Negotiators in the world, and his tactics could be useful for negotiating with customers, vendors, and of course your VC. The original blog we wrote highlighted some…
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‘Perfect is the enemy of good’ and other startup advice

Over the Thanksgiving holiday, I read “Chaos Monkeys, Obscene Fortune and Random Failure in Silicon Valley.” The book is a 2015 vintage, but a lot of the lessons and take-aways are relevant today. It’s a great read that I would highly recommend; key excerpts are below.   FB’s data isn’t that valuable. “The miserable conclusion…
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