Non-recurring revenue matters
Everyone loves recurring revenue and rightly so: it’s far more valuable than one-time revenue to VC and acquirers. But don’t forsake one-time revenue. Some of the best SaaS businesses in the world generate a lot of services/one-time revenue as it’s a valuable source of cash and makes the product stickier. The list below shows the last 73 SaaS companies to go public (going back to 2019) on median generated 11% of their revenue from non-SaaS sources and 24% on average. It’s material.
A few things to know:
It’s a Source of Cash. The most obvious reason one-time revenue is valuable is that it’s a source of cash to fund overhead. While a VC or acquirer may not ascribe a multiple to that revenue stream, they’ll look at it as “financing” for the core business. While the business is still burning money, one-time revenue is as important as recurring revenue as a source of cash.
It Can Make You Sticky. The customer wants customer service, especially when ACV is $24k+. It’s about not just being a product, but a solution which encompasses a significant level of touch with the client. Companies that touch their clients often with support, consulting, services, repeat onboarding, customer success initiatives, ideas on new use cases, etc tend to have way less churn.
Even though it’s not as attractive as recurring revenue, don’t forsake onetime revenue. For the reasons above, it can be every bit as important as recurring revenue.
Visit us at blossomstreetventures.com and email me directly at sammy@blossomstreetventures.com. All founders and funds welcome! We invest in companies with ARR of $1mm to $30mm, with year over year growth of 20% to 100%+ depending on revenue. We lead or follow in growth rounds and special situations like inside rounds, small rounds, rushed rounds, corralling investors with our term sheet, inbetweeners, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $3mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.
