Fresh Insights

Analyses, Musings & Observations

SaaS valuations fall to 8x+, but are still high

Valuations for SaaS came down in July, but are still high: of the 76 SaaS companies we follow, the average public SaaS business is trading at 9.25x revenue while the median is 8.31x.  The data is below.     Negative EBITDA, positive cash flow.  The median SaaS business had trailing twelve month revenue of $314mm,…
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Life in an accelerator, continued

This post was originally published in June, but is updated in the section entitled “part 2”   A good friend of mine named Joe Shiraz is taking his company, ServiceBot, through an accelerator based in Memphis that is backed by Start Co and ServiceMaster, one of the largest home services companies in the nation.  The…
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VC invest $99bln, LA was #3, and other venture trends

Dow Jones just released their Q2 2018 venture capital funding report showing trends in venture investing.  Below are the trends we found most pertinent as well as our commentary.   VC invested $99bln.  VC are investing more than ever.  Over the past 12 months through Q2 2018, VC have invested $99bln in US startups, which…
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One of the best startup post-mortems I’ve ever read

At the link below is one of the best startup post-mortems I’ve ever read. It’s by a founder of a company called Moz. The business had fantastic growth out of the gate, took on major VC money, tried to scale too quickly letting hiring and costs got ahead of growth, and ultimately they had to…
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The SaaS M&A Report

We recently got Software Equity Group’s SaaS M&A Snapshot for Q2. SEG is a boutique investment bank focused on M&A for SaaS companies and they put out fantastic data every quarter on what they’re seeing in the market. They close 8 to 10 deals per year with transactions ranging in size from $15 million to…
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What Big Funds look for in a CEO

Recently, we got a hold of an investor letter from one of New York’s finest late stage venture funds. The letter shared insights into what the fund looks for in a management team, which resonated with us. Below we share these points, verbatim. We like CEOs that are patient with us and believe that all…
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Successful SaaS companies spend 23% of revenue on R&D

SaaS models are great due to the recurring revenue and high product margins, but one fixed cost excluded from the margin analysis is ongoing development expense. 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…
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Ready to be an investor? Do this.

This weekend I met someone that asked the following: “I have $5,000. How should I invest it?” He’s an electrician with a young family, some savings, and he’s new to investing. He probably expected me to steer him towards angel investing or venture capital, but those are completely wrong for a new investor. If you’ve…
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The typical venture model is wrong for you

A good friend of mine just exited the business he founded for $25mm. Since he built the business on so little outside investment, he owned 52% at exit and took home $13mm. This type of exit brings up an important point: too many founders take a typical venture approach which is to focus on the…
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