High growth SaaS buyers

by a searcher from The University of Michigan - Stephen M. Ross School of Business

1 year ago

How are ETA searchers evaluating SaaS businesses? SaaS is high growth but profitably takes time to reach and scaling up requires significant investment and R&D to keep up with competition. The recurring revenues and high margins help but can be quite capital intensive.

As sexy as it sounds to acquire SaaS business, how do you see that fitting into the ETA model where predictability of future cash flows in boring industries is more preferred over high growth and significant capital investment in future?

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investor from University of California, Berkeley - Haas School of Business

As Paul said, you can find very small SaaS businesses or broken SaaS businesses, but you won't be able to compete for anything that is growing fast and > ~$1M ARR because there is a LOT of competition from growth equity funds who are willing to pay far more than SF investors.

1 year ago | like reply | 0 likes

searcher

As a first time, self-funded searcher, but experienced in SaaS businesses, I feel like SaaS is out of reach. The interesting SaaS businesses that have achieved reasonable cash flow and product fit have also been prime targets for PE. At the lower end of the market, I see many incomplete businesses - flailing startups or side projects - but still trying to command SaaS multiples. They are not "fixer uppers" but "finish the start" it seems.

Having said all that - I still keep an eye out for that mythical sweet sweet SaaS deal.

1 year ago | like reply | 0 likes

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