9 ms·
Sneak peek at future of SaaS investing
- buf 7y agoI see more and more investors looking to do this especially as a solo-founder of a bootstrapped small SaaS business. As I march towards $1M ARR, the savvy investors are looking for ways to be valuable to my business as opposed to me begging investors for the next round of funding in traditional VC-backed ventures. I would be very happy to share 15-20% if the value-add is strong enough.
- toomuchtodo 7y agoWhat does that value add look like to you? I own a few SaaS sites that I bought (because I don’t have the patience and focus to build one myself) that I then work to increase the value of (based on lessons from a previous SaaS company I worked at), and I’m always interested in private equity arrangements.
- arthurcolle 7y agoWhat are some of the strategies that you use to increase value post-acquisition? Do you mostly try to twist the dials a bit to boost net margins, e.g. increasing automation for a product that is "already written" and can go on maintenance mode, or is it something more nuanced? I'm super interested in this topic as I've been building out 2 pretty neat SaaS products (basically web APIs that solve concrete problems for developers, similar to a Stripe or Twilio model, but for an industry that is not quite as open as telecommunications/payments) and I'd love to hear how investors look at this segment. Thanks in advance!
- toomuchtodo 7y agoI have a strong disdain for vulture private equity models, such as going into maintenance mode and ratcheting up the pricing. I have folks I’ve run across in my career for SEO, UX, frontend, and work with them to explore methodologies to improve the product so customers extract as much value as possible, while setting pricing to be fair for value delivered. Their success is our success.
- tehlike 7y agoHow do you go about buying one. How do you get the leads?
- buf 7y agoFor this particular business, it's about unlocking certain levers for future growth. My SaaS has 300k+ users, mostly automated, and grows itself, but the product is positioned in a spot that draws quality issues that prohibits more premium users. The next level would be about attracting premium users. Even that is achievable on my own if I put some effort into it, but I've been busy with another startup recently that's doing 20x my solo project. Also bootstrapped, but not entirely owned by me.
- tc313 7y agoAll of the unnecessary punctuation makes this article difficult to read.
- tomkubik 7y agoWelcome feedback - you took the time for careful read-through, thank you!
- tempsy 7y agoInvestment opportunities that provide 15% return exist in the public markets with easy liquidity options, so what is the benefit of trying to squeeze that out of a private company where you can’t sell unless the company goes public or you try to find a buyer on the secondary market? Unless the company pays out a dividend I don’t see the appeal - usually VCs trade liquidity for the hope of massive returns that aren’t typically found in public markets.
- Ancalagon 7y agoWhat public investment continuously returns 15% yearly?
- icedchai 7y agoAlmost any tech heavy ETF such as XLK or VGT will get you there. 10 year yearly returns are over 15%. For less risk, you could do a total stock market index like VTSAX (10 year returns around 13%.) Nothing is guaranteed or "continuous" though. This is less risky than investing in a single, private company that probably has little liquidity.
- fnord77 7y ago> VTSAX the past 10 years, yeah. but the prior 10 years were much worse.
- icedchai 7y agoTrue. But do you think they were better for private tech companies? Maybe if you lucked out with the next Google. More than likely, you got a dot-bomb that lost 90% of its valuation and was sold for pennies on the dollar...
- pavlov 7y agoPrivate tech companies growing at 15% were not the "dot-bombs".
- Havoc 7y agoLook at the return vs return std dev graph. The fact that fund of fund beats VC on both metrics suggest VCs add negative value
- falcolas 7y agoTiny capital is relative. EDIT: It's also the name of the VC firm. D'oh! Keeping the rest for posterity. Notice how there’s no actual values for what “tiny” means? If you have cash to invest on a VC company, you’re most likely already quite well off, with an equal amount invested in less risky ventures.
- TheRealPomax 7y agoRemember: Hacker News is not a financial service, and people upvoting articles about financial behaviour is not the same as financial advice. If it sounds too good to be true, it probably is, and was probably written by someone who mistook the luck of doing the right thing at the right time for a transferable skill.
- tomkubik 7y agoYes, big question if Buffer represents average return profile for "late-stage SaaS"... time will tell!
- zepearl 7y agoCreating a 20-years projection based only on data after the crisis of 2008/2009 might not be wise.
- tempsy 7y agoboasting about a 15% annual return with an illiquid stake in a early to mid stage private tech company is the opposite of “too good to be true”
- SkyMarshal 7y agoI'm a little slow this morning but am having trouble parsing what the opposite of "too good to be true" is. Too bad to be false?
- tyre 7y agoI think we'll need more examples then just Buffer. Everyone knows Buffer is a successfully bootstrapped company that grew kind of big but not massive. If the author gave five other examples, then there's a case, but pointing out the one known example doesn't provide enough evidence in my opinion. A separate point on style and punctuation: too many em dashes in the wrong places. > What would make Buffer — a good investment? No need for an em dash here. > And, if you want to start a get-rich-slow SaaS fund — what is your target maturity? Same. > What if, at end of the holding period — investor sells the Buffer stake at market valuation? Replace em dash with "the". > But wait… that perpetuity — is a “paper valuation”. Remove. The ellipsis could be an exclamation point, though it could be in the "personal style" bucket. I would suggest removing every single em dash and practicing writing without them. They can be useful—for providing inline examples or explanation, for example—but should be used sparingly. Commas, colons, parentheticals, and semicolons can cover most of your use-cases.
- philipodonnell 7y agoI think the author uses these to imply a dramatic pause... like I sometimes do with ellipses. :-)
- nkrisc 7y agoDramatic pauses don't work when the reader can clearly see what comes next.
- tyre 7y agoYes. It's an example of trying to write how you'd want it spoken. The written word is a different medium. It would be like writing: > She enters the room. Pan left and there's a photo on the wall. Cut back to her, she's brushing a strand of hair from her face. Now cut to the bartender. Zoom in on him. He's polishing a glass, staring at nothing. etc. It's a pastiche of a movie scene. It's not that you can't do it or that the reader won't know what you're trying to do. Unless there's a specific reason to do so, it's probably not the best option.
- tguedes 7y ago
- doh 7y agoOnly a little related to this, in recent months I've spoken to ~60 growth stage equity funds and found out that essentially all transformed to be SAAS focused investors. That means they abandoned 1/3 portfolio strategy they used to have (1/3 loses money, 1/3 returns exactly 1, 1/3 returns fund) but instead are focusing on steady returns by SAAS companies at 2-3x of the investment. There are a few major implications: - for the founders; if you don't fit their narrative, for example you have big chunk of revenue coming from services or you have only few enterprise clients, then you are out of luck - for the funds; the deals are overly competitive driving up the price and diminishing the returns - for the market; up until the economy is up to the right, things will be fine. Once things start changing, the first things to go will be a lot of these "nice to have" SAAS companies. In turn they will take down growth equity and freeze funding at the later stage (Series B, C, D, ...). The last point applies to also to the the article. You can build bootstrapped $1M ARR business, but can you defend it? I think that's the biggest question.
- deleted 7y ago[deleted]
- deyan 7y agoMind clarifying what funds you spoke to (VC or PE, which geographies)? Curious whether your sample size is Bay Area or elsewhere.
- doh 7y agoBoth VC (70%) and PE (30%). 90% in US, 17% in EU and 3% in Canada. 31% in the Bay Area (many growth stage funds are now in NYC).
- DenverR 7y agoFormer GE investor here - everything you've said is spot on. Our modus operandi was that a growth equity investment should _never_ go to zero. The new portfolio thinking has shifted to the right: 1/3 make 1-2x, 1/3 make 2-3x, 1/3 make 3x or more.
- 7y ago
- rb808 7y ago30% profit margin? I though most tech companies had a lot of trouble breaking even.
- deleted 7y ago[deleted]
- loanfirm 7y agoDear Sir/Madam, We give out loans to business people and individuals for just 3% interest rate. "BELIEVE IT OR NOT YOU CAN GET YOUR LOANS IN LESS THAN 24 HOURS". We can give out loans ranging from US$3,000 up to US$5,000,000. We give out local and international loans to any individual/company all over the world and your rate will not change during your loan repayment! Our Personal Loans can help make dreams possible especially with the present financial crunch in the world at large. We do not require much documents if you are interested in getting a loan.To apply contact us via the email address below Email:(prosperonlineloanfirm@gmail.com) with the information below: Please, do provide us with the Following information if interested. LOAN APPLICATION INFORMATION FORM First name: Date of birth (yyyy-mm-dd): Gender: Marital status: Total Amount Needed: Time Duration: Address: City: Country: Phone: MobileMonthly Income: Occupation: purpose of loan: Mr. Robert Opperman C.E.O…