River Cities Announces 2014 SaaS Operating Metrics and Valuation Benchmarking Study
River Cities first encountered the SaaS model with its EVault investment in 2001. Since then, we’ve invested more than $65M in 13 portfolio companies and have had five successful liquidity events, including two IPOs. The focus of our SaaS investment strategy is backing progressive management teams in companies that offer business to business solutions architected on a single-instance, multi-tenant infrastructure with a critical mass of customers in a large market. Investment candidates demonstrate attractive gross margins, strong customer renewals and efficient customer acquisition models.
This study considers operating metrics from 66 public SaaS companies during their developmental period (pre- $50M in revenue). Key operating metrics for the subject companies were collected for the period ended 2001-2014. Data was collected from public companies’ S-1 filings in an effort to compare relative operating metrics at a comparable stage of development to that of our portfolio companies. For example, Salesforce.com, a $4B company, was analyzed in the 2001-2003 time frame when it had revenues between $5M and $96M. From that data, we identify target operating benchmarks for best of breed SaaS companies including capital efficiency, revenue growth, gross margins, sales and marketing efficiency, research and development expenditure, general and administrative expenditure, capital expenditures and EBITDA margins. This report is meant to offer entrepreneurs insight into River Cities’ perspective and experience gained from more than 13 years of supporting SaaS entrepreneurs.
As a firm, River Cities invests in world-class management teams − backing progressive, proven leaders in the markets of information technology and healthcare. A consistent, cohesive team has honed its strategy over four prior funds with compelling performance. River Cities seeks to be a business partner first and a capital provider second, investing significant human capital to leverage its domain expertise and a network of thought leaders assembled over the last 20 years. With more than $500M of capital raised and a consistent track record of success, River Cities has established itself as a preferred source of growth capital. We are actively seeking new investments for our $200M Fund V. With initial investments in the $5M – $15M range, River Cities offers entrepreneurs the flexibility to raise an appropriate amount of growth capital for the company’s stage of development.