What do VCs look for in a SaaS organisation?

If you’re running a SaaS startup looking for VC investment, what do you need to have? 2 London VCs tell us what they search for.

In June we staged our first Sales Confidence conference at HereEast, in London’s Olympic Park. We called it SaaSGrowth2018. We had over 200 SaaS professionals in the audience, watching more than 30 of London’s foremost SaaS experts share their knowledge. Even if you couldn’t make it, we want to share the inspiration and education with you through our SaaSGrowth2018 articles.

VCs and founders panel

Our first panel discussion of the afternoon session was titled:

‘Investors and founders on raising capital, managing and accelerating SaaS businesses, and what future SaaS opportunities exist in the UK and Europe’

Quite a wide remit there, but I think we managed to cover it!

We were thrilled to welcome 3 expert VCs and 2 cutting-edge tech founders to the SaaSGrowth stage. Flavia Richardson from Funding London led our panel and asked the first question.

‘It’s the most important question that everyone wants to know the answer to! This is for the VCs. What do you look for in a SaaS company?’

Steve Collins

Our first answer came from Steve Collins, Partner at Frontline VC. Steve is primarily a seed investor, so investment very much depends on the stage of the company. However, once you’re over that hurdle, Steve has a long list of things he’s looking for.

‘I’m looking for:

· A team that’s capable of getting a product to repeatability

· A product that can be sold with very little friction…

· where the onboarding is straightforward…

· where the time to value for the customer is really short

· A team that can build a ‘sales machine’, ramp up SDRs, AEs, marketing etc

· Awareness of the customer acquisition costs

· A core economic model of the incremental revenue added by each customer’

So not too much then!

Food for thought for all the founders in the room, I’m sure.

Barnaby Terry

Our next answer came from Barnaby Terry, Partner at Sussex Place Ventures. Barnaby’s fund focuses primarily on enterprise software. How would he follow Steve’s exhaustive list of criteria?

‘The team is probably the most important. We have a lot more success when we invest in groups of people rather than individuals.’

‘Market size. It’s always great when a market gets big on you, so when you start in a reasonable market but then it gets very big as you go through it.’

‘We model everything we do on businesses getting to at least £10 million of revenue between seed and Series A rounds. We always ask, ‘Can this business get to £10 million? Then, how cash consumptive is that journey going to be?’’

Now you know the numbers you have to be able to hit to secure investment, are you ready?

One shot

Thanks to our 2 VCs for letting us know what they look for in SaaS companies before they invest. If you’re a founder, you usually only have one opportunity with a VC to impress them. You need to make sure your house is in order before you start pitching. Don’t go too early. Don’t waste your one shot.

Over to you now. Are you a VC or investor? What do you look for when assessing a SaaS company’s case for investment? Or, if you’re a founder, how do you articulate your pitch to meet these criteria? Let us know down in the comments.

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