We looked at the equity raised of 99 SaaS companies that have gone public; according to that data, it takes $133mm of equity to get to a big exit (IPO). All data was pulled from s-1’s, which is a securities filing made before going public. The data as well as a few observations are below.
Series D is the final round. The $133mm was raised across 4 rounds on median, through the Series D. The most number of rounds required went all the way to Series H (8 rounds) and some companies got to IPO with only a Series A (1 round; note however SurveyMonkey took on a lot of debt).
It can be done without much cash. Some companies raised very little equity. Impressively, Veeva Systems which filed their S1 in 2013 raised only $9mm of equity. Obviously the less equity you can raise, the better. Cash efficiency to minimize dilution is critical.
Debt is uncommon. SaaS companies have very little debt prior to going public. The median amount of debt was only $2mm. In our view this is more a function of VC wanting to invest more capital in strong performers versus banks unwilling to lend. Lenders are open to investing in SaaS businesses, but if a VC sees an opportunity to put more money to work and earn a return, they’ll do so. SurveyMonkey and DynaTrace stand out as a SaaS business that used a lot of debt and leases to finance growth ($412mm and $1bln).
Revenue was growing 55%+. On median, revenue at the time of exit was $105mm and growing 55% YOY. In the prior year, it was growing 52% on median.
Everything is getting bigger. There are 19 companies that have filed their S1 in 2018 or 2019. Those companies are far larger than the median figures above. The subset of these companies had median revenue of $180mm, took 11 years to exit, and raised $272mm of equity on median. They also didn’t exit until their Series E on median.
Overall, the data tells us building a large SaaS business that goes public is capital and time intensive. This path isn’t for everyone so if it makes more sense to take on less investment, limit your dilution, and exit sooner but perhaps have a smaller exit, Blossom Street Ventures may be a great fit (shameless plug).
Visit us at blossomstreetventures.com and email us directly with Series A or B opportunities at firstname.lastname@example.org. Connect on LI as well. We invest $1mm in growth rounds, inside rounds, small rounds, cap table restructurings, note clean outs, and other ‘special situations’ all over the US & Canada.