Forbes Magazine has published a helpful and comprehensive article on key issues for SaaS startups that are looking for financing. The authors cover the vast importance of a great pitch deck, the feasibility of finding angel investors, and the importance of forcefully conveying the attractiveness of your market opportunity.
Here’s why it’s important:
SaaS (Software as a Service) companies are attracting some of the top talent and funding in technology today. The most notable SaaS companies occupied seven of the top 10 verticals by venture capital deal activity recently, and three of the top 10 by investments. Venture investment is running ahead of last year’s pace, which was more than double the volume of each of the prior three years.
PeakSpan co-founder Phil Dur is quoted:
“One of the more significant determinants of company value obviously is market opportunity. If you are performing well, and in a rationale competitive dynamic in a market that ‘matters’ to a lot of customers, you’re likely to see this reflected back in the valuation ascribed to your business. Don’t hide the ball! Be forceful and clear about the attractiveness of the market opportunity you are pursuing.”
Forbes also covers key SaaS business model issues. These are just some of the essential questions you’ll be expected to answer. If you don’t cover them adequately in your pitch deck, be prepared to discuss them at pitch meetings:
With so many SaaS offerings out there, how can you get noticed and be differentiated?
How long is the sales cycle?
How easy is the onboarding process for new customers?
Can the company find a scalable way to acquire users?
How can churn be mitigated?
Can the long-term value of the customer be increased over time, while decreasing the cost of acquisition of a customer?
Is the service user-friendly enough?
What level of customer support is necessary to ensure customers are satisfied?
What ongoing product improvement costs will the company face?
Can the company manage a significant growth in users from a technical standpoint with acceptable financial consequences?
Is the subscription management/fees process easy and efficient?
This article is essential reading if you run a SaaS startup and you’re exploring your options for venture capital, seed, or angel financing.