Institutional Capital Readiness
By: Zane Tarence
For SaaS businesses seeking institutional capital, operational sophistication and data integrity are critical. Running a business day-to-day while maintaining a focus on operational sophistication can be a daunting task. For SaaS business owners looking for guidance from experienced entrepreneurs, Justin and Anna Talerico at Married2Growth have compiled an Institutional Capital Readiness Report Card to help SaaS business owners quantify and evaluate their operational sophistication. This report card is based on Justin and Anna’s personal experience pursuing institutional capital.
- Independently Audited Financials – Financial audit preparation mitigates risk in the eyes of investors
- Documented Revenue Processes – Revenue is a key value driver for SaaS businesses, and verifiable revenue processes help to solidify this value
- Documented Churn Processes – Reducing uncertainty risk with proper tracking of both customer and revenue churn can increase an investor’s confidence in the data
- Lack of Customer Concentration – Revenue distribution diversifies risk across customers, lowering uncertainty and increasing stability
- Referenceable Customers – Customers’ willingness to speak positively about your SaaS product helps to prove product stickiness to investors
- Orderly, Accessible Contracts – Digital copies of all executed, current contracts are critical to investors’ diligence processes
- Secure Intellectual Property – Documented and verifiable policies around access, ownership, and security are important to preserving and extending the value of your digital assets
- Verifiable SaaS Product Usage – Usage data is viewed as unbiased customer data, and having it available will produce great value to investors
- Orderly, Accessible Employment Documents – Thorough employee processes and documentation de-risk your human assets and the overall investment risk of your business
- Legal, Compliance, and Regulatory Items in Order – Legal and regulatory items are essential in due diligence and can easily cause a deal to fall through at the last minute
- Tied-Out Financial and Operational Data – SaaS companies typically report a lot of data, often from disparate systems, and having these various data points tie back to one another, and ultimately back to the P&L and Balance Sheet provides investors with confidence in the accuracy of your data
For many SaaS businesses, institutional capital is necessary to achieve growth potential, and sophistication and orderliness are critical to driving high valuations. If you’d like an expert opinion on your SaaS business’ institutional capital readiness, complete Married2Growth’s SaaS Institutional Readiness Report Card.
About Founders Advisors
Founders Advisors (Founders) is a merger, acquisition, & strategic advisory firm serving middle-market companies. Founders’ focus is on oil and gas, SaaS/software, industrials, internet, healthcare, digital media and industrial technology companies located nationwide, as well as companies based in the Southeast across a variety of industries. Founders’ skilled professionals, proven expertise and process-based solutions help companies access growth capital, make acquisitions, and/or prepare for and execute liquidity events to achieve specific financial goals. In order to provide securities-related services discussed herein, certain principals of Founders are licensed with M & A Securities Group, Inc. or Founders M&A Advisory, LLC, both members of member FINRA & SiPC. M&A Securities Group and Founders are unaffiliated entities. Founders M&A Advisory is a wholly-owned subsidiary of Founders.