How to Position Your Startup to Private Equity

The word is out: private equity has solidly emerged as the year’s best exit opportunity in SaaS. When I wrote about the trend last November, the top private equity firms had rapidly ramped up the pace of deals, raised record funds, and become much more comfortable with growth rather than just EBITDA. PE firms haven’t shown any signs of slowing down. Over the course of 2017, private equity buyers officially spent as much as large strategic acquirers on buying SaaS companies. What’s more is that they’ve been paying attractive prices (9.1x and 7.1x revenue for SolarWinds and Cvent, respectively) while continuing to offer best-in-class deal dynamics like a faster and more predictable closing. This inevitably begs the question, how should SaaS companies position themselves to be attractive to private equity buyers? To find out, I sat down with two experts. The first was Darren Abrahamson, Managing Director
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Exits: Bain Capital on the Right Time to Exit [Podcast]

As Season 2 of BUILD comes to a close, it’s only natural to examine the exit landscape. OpenView’s VP of Corporate Development, John McCullough, discusses the current exit landscape and the importance of creating relationships with strategic buyers well before a deal is done. Then Darren Abrahamson, Managing Director at Bain Capital, talks through the merits of private equity as an exit option and how a CEO can choose between several buyout offers. Prefer to listen on iTunes? Access the episode here.
The post Exits: Bain Capital on the Right Time to Exit [Podcast] appeared first on OpenView Labs.

5 Key SaaS Metrics Every Software Startup Should Track

There are plenty of activities where, at any point during the task, you can objectively know whether you’re failing or succeeding. Playing a sport? Glance at the scoreboard. Taking a class? Look at your grades. Unfortunately, determining how well (or poorly) you’re scaling a new software-as-a-service (SaaS) company is not so straightforward – unless you know what to measure. If you want to make the leap from startup to a full-fledged company, make sure you’re tracking these five SaaS metrics.

1. Customer Acquisition Cost (CAC)

What Is It? The average amount a business invests to acquire a customer. Traditionally, CAC is calculated by adding the total sales and marketing expenses for a given period and then dividing that amount by the number of customers gained during that same period. Why Does It Matter? Knowing the average CAC gives your company insight into the efficacy of each sales strategy and marketing
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CAC Payback: How Continuous Experimentation Can Drive Down Costs [Podcast]

OpenView’s Blake Bartlett discusses how a company’s go-to-market model can impact CAC Payback and if there is indeed a magic number to hit for this metric. Then we hear from Marc Morin, Founder & CEO of Auvik, about the importance of experimentation in efficiently acquiring new customers to drive down CAC. Prefer to listen on iTunes? Click here to listen.
The post CAC Payback: How Continuous Experimentation Can Drive Down Costs [Podcast] appeared first on OpenView Labs.

Burn: VTS’ Story on Driving Efficiency During a Merger [Podcast]

How much or how little should a company burn? Adam Marcus, Managing Partner at OpenView, discusses the role of burn in a startup and how to determine the right time to raise a next round. Then we’ll hear from Nick Romito, Founder & CEO of VTS, on the tactics he used to find efficiencies after merging with their closest competitor. Prefer to listen in iTunes? Access the episode here.
The post Burn: VTS’ Story on Driving Efficiency During a Merger [Podcast] appeared first on OpenView Labs.

How to Build a Relationship With the Right VC Partner while Focusing on Your Business

CEOs of expansion stage businesses are flooded with emails from VCs. On one hand, it feels convenient but short-sighted to ignore all of them, as there may come a day when VCs will serve as helpful resources. But if a CEO took a call with every VC who reached out, they’d be missing their (and, frankly, the VC’s) most important priority: the business. So what’s the right balance that results in relationship building that will be fruitful down the line while keeping both eyes on the ball?

Only talk to firms that are a good fit for the business you’re building and can deliver on your needs.

Not all VCs are created equal. As a baseline, you can cut out VCs that aren’t willing to invest at your stage (i.e. whatever round you’re looking to raise next) and sector (e.g. B2B software, consumer internet, hardware, biotech, etc). Then,
Continue reading "How to Build a Relationship With the Right VC Partner while Focusing on Your Business"

How to Build a Relationship With the Right VC Partner while Focusing on Your Business

CEOs of expansion stage businesses are flooded with emails from VCs. On one hand, it feels convenient but short-sighted to ignore all of them, as there may come a day when VCs will serve as helpful resources. But if a CEO took a call with every VC who reached out, they’d be missing their (and, frankly, the VC’s) most important priority: the business. So what’s the right balance that results in relationship building that will be fruitful down the line while keeping both eyes on the ball?

Only talk to firms that are a good fit for the business you’re building and can deliver on your needs.

Not all VCs are created equal. As a baseline, you can cut out VCs that aren’t willing to invest at your stage (i.e. whatever round you’re looking to raise next) and sector (e.g. B2B software, consumer internet, hardware, biotech, etc). Then,
Continue reading "How to Build a Relationship With the Right VC Partner while Focusing on Your Business"

(Almost) Everything You Need to Know When Your Convertible Notes are Approaching Maturity

Editor Note: This article was first published on the SaaStr blog here. Congratulations: You pounded the pavement, brought in outside capital, and spent the last 12 months putting it to work to get your business off the ground. Now, your convertible notes are due to mature in six months and you’re wondering, what’s next? At this point, there are two possible outcomes.
  1. Your notes convert to preferred equity
  2. Your notes do not convert
Multiple paths lead to these two outcomes with each path carrying its own implications for your business. Let’s take a look at each path and the various obstacles you may encounter along each. Disclaimer: I am not an attorney, and I’m not familiar with the specific structuring of your notes. While you and your counsel probably worked with your note holders to create simple, easy-to-understand note agreements, make sure your counsel helps you fully understand the underlying
Continue reading "(Almost) Everything You Need to Know When Your Convertible Notes are Approaching Maturity"

(Almost) Everything You Need to Know When Your Convertible Notes are Approaching Maturity

Editor Note: This article was first published on the SaaStr blog here. Congratulations: You pounded the pavement, brought in outside capital, and spent the last 12 months putting it to work to get your business off the ground. Now, your convertible notes are due to mature in six months and you’re wondering, what’s next? At this point, there are two possible outcomes.
  1. Your notes convert to preferred equity
  2. Your notes do not convert
Multiple paths lead to these two outcomes with each path carrying its own implications for your business. Let’s take a look at each path and the various obstacles you may encounter along each. Disclaimer: I am not an attorney, and I’m not familiar with the specific structuring of your notes. While you and your counsel probably worked with your note holders to create simple, easy-to-understand note agreements, make sure your counsel helps you fully understand the underlying
Continue reading "(Almost) Everything You Need to Know When Your Convertible Notes are Approaching Maturity"

How to Get the IRS to Fund Your R&D

Each year the US government provides billions of dollars to innovative businesses for developing new or improving existing technologies, products, materials, and processes, under the Research & Experimentation Tax Credit (R&D Tax Credit) program. The R&D Tax Credit is a general business tax credit under Internal Revenue Code section 41 for businesses that incur research and development (R&D) costs in the United States. The US R&D tax credit has been around since 1981. Previously, the program would periodically expire and be renewed by Congress. Businesses wishing to include this in their long-term budgeting plans couldn’t count on the credit being around for certain. But, in 2015, Congress made the R&D tax credit permanent as part of the Protecting Americans from Tax Hikes (PATH) Act of 2015 and also made key changes so that small businesses that are not profitable could benefit from the credit. The R&D tax program can be
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