SaaS Capital Blog

Mar
01
Ok, well, “magical” might be a little strong, but there are circumstances where this structure does have specific benefits that are very valuable. In the short post below, we describe how to quantify those benefits to your stakeholders.
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Oct
05
We recently hosted a webinar on ASC 606 with SaaSOptics and CPA Steve Sehy. This blog post is meant to summarize some key points from the presentation relative to timing and magnitude.
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May
05
The Rule of 40 postulates that the growth-rate-plus-profitability-margin of a healthy growth stage SaaS company should be at least 40%. It captures both valuation drivers of a SaaS business: growth and profit, and trades them off dollar for dollar. While this is a compelling and fascinating ‘rule,’ it is by no means the cut-off line between healthy and unhealthy.
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May
01
Over the years, we have analyzed thousands of SaaS companies and we firmly believe the best metric for benchmarking churn is gross revenue retention which should be benchmarked against companies with similar annual contract values or revenue values per customer.
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Apr
05
The better a SaaS business is at keeping customers, the faster it will grow. This is not a surprise; however, it’s an assertion that is not typically backed up by real data. The graphs below are based on data obtained from our recently completed survey of over 700 private, B2B SaaS companies and give objective, real-world underpinnings to the relationship between retention and growth.
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Mar
15
We have encountered a recent spike of interest in junior debt for SaaS businesses, and since we provide both senior and junior loans (although mostly senior), we thought we would share our perspective on the types of scenarios where subordinated debt makes the most sense.
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Mar
09
Accounting rules are very specific on some things, and surprisingly unhelpful in other areas. There are no Generally Accepted Accounting Principles (GAAP) rules on the type of costs that are included in Cost of Goods Sold (COGS). This is unfortunate because the gross margins of SaaS businesses are very important to the overall performance, profitability, and valuation.
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Nov
21
We recently published an analysis of SaaS company departmental spending segmented by revenue level, growth rate and annual contract value (ACV). Among the interesting results, we found that high ACV products (annual contract value over $150,000) have higher cost of goods than lower priced products, and that medium ACV products ($5,000 to $150,000) appear to be the most expensive overall to deliver and support.
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Oct
25
It might be a good time for SaaS companies to start considering ways to recession-proof their business. Focusing on customer retention, always a good idea, is particularly critical when customers are looking to cut costs.
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Jun
30
We recently published our second research brief of 2016. This study, on how different contracting lengths impact SaaS operating metrics such as revenue growth and churn, is based on data from over 400 SaaS companies whom we surveyed at the beginning of the year.
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Jun
28
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is useful in valuing a company but it certainly does not equal “cash flow.” EBITDA was invented as a way to value companies on an ‘apples-to-applies’ basis; it eliminates the impact of balance sheet choices and different tax rates. That is all fine and good, but...
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Jun
02
While the Customer Acquisition Cost (CAC) Ratio has been around for years, and many best practices have been published around this critical SaaS metric, in recent conversations with SaaS-company CEOs about benchmarking, we found a lot of companies still aren’t tracking it.
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Sep
29
Another look at the SaaS business model and the potential for a bubble to be building in the venture and startup industries.
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Sep
02
How the SaaS business model itself compels CFO’s to play an expanded role in running the business.
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Aug
11
Understanding the benefits, as well as the risks, of leverage.
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May
22
Growth rate data from the SaaS Capital 2015 survey of private SaaS companies,
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Apr
20
SaaS Capital explores how to organize a SaaS Income Statement
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Apr
07
Why SaaS businesses should not capitalize software development expenses.
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Feb
20
SaaS Capital explores GAAP Accrual Accounting SaaS Companies
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Nov
07
Simply put, SaaS businesses are traded on a multiple of annualized recurring revenue (ARR). All the other drivers of valuation are tied back to this benchmark in order to support a higher or lower multiple.
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Our SaaS Capital funding is the fuel we need to capitalize on an explosive market opportunity.

Peter Yozzo

Founder & CEO, ThinkHR

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