How successful have people been with purchasing SaaS businesses?
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by a searcher
from Clemson University
in Indianapolis, IN, USA
in Indianapolis, IN, USA
5yrs ago
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by a searcher
2yrs ago
from Georgia Institute of Technology in Charleston, SC, USA
from Georgia Institute of Technology in Charleston, SC, USA
I am searching in SaaS, and deal flow has been pretty easy for me. However, most SaaS businesses seem to expect a multiple that requires a significant amount of equity for the cap table. This can be fine if the growth is there, but in every deal I have analyzed, the valuation difference has been large. The economics and future cash flow models are very different than most other ETA opportunities that allow an SBA loan to cover most of the deal value.
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by a searcher
2yrs ago
from University of Dublin, Trinity College in Dublin, Ireland
from University of Dublin, Trinity College in Dublin, Ireland
A lot of SaaS are vc style funded so this can make a "micro PE" searchfund style deal a non runner for the SaaS Co, who are hyped by their vc investors to have a "to the moon or die trying" type culture and mindset. 10-100x in 3-5 years or 0. Vs 2-3x return in 3-5 years.
I do think there are deals to be done in SaaS if you can provide a good succession plan for owner/operators, return 1-3x invested capital to investors/LPs and ensure continuity for the staff/management team. These will only happen if you are dealing with owner operators who have already decided that exit is the best option for them now, this will likely be for human reasons (ie one of the 4 D's - death, disability, divorce, disagreement), owner operators will only exit when there is an external force making sale/exit manditory for them.
Nathan latka has some intersting content on this topic and breaks down a couple of his own acquisitions step by step in his blog.
The tricky thing about SaaS and owner operators who want to sell is that from once they make that decision to exit they inevitably neglect their SaaS and take foot off the growth / customer retention effort pedal. Ideal Saas M&A target should be default modest growth without much / any intervention from you - these are rare finds.
I do think there are deals to be done in SaaS if you can provide a good succession plan for owner/operators, return 1-3x invested capital to investors/LPs and ensure continuity for the staff/management team. These will only happen if you are dealing with owner operators who have already decided that exit is the best option for them now, this will likely be for human reasons (ie one of the 4 D's - death, disability, divorce, disagreement), owner operators will only exit when there is an external force making sale/exit manditory for them.
Nathan latka has some intersting content on this topic and breaks down a couple of his own acquisitions step by step in his blog.
The tricky thing about SaaS and owner operators who want to sell is that from once they make that decision to exit they inevitably neglect their SaaS and take foot off the growth / customer retention effort pedal. Ideal Saas M&A target should be default modest growth without much / any intervention from you - these are rare finds.
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