Once you go #SaaS, you don't go back. Visualizing my SaaS journey over the yrs.
Holdings : $CRM $VEEV $PAYC $SHOP $TWLO $ZS $OKTA $NOW $DOCU $ZM $MDB $CRWD $NET $DDOG $PLTR $SNOW $WIX
Other favs : $ADBE $HUBS $TEAM $ZI $COUP $AVLR
(Yes, I know. I should just buy a cloud ETF)
Holdings : $CRM $VEEV $PAYC $SHOP $TWLO $ZS $OKTA $NOW $DOCU $ZM $MDB $CRWD $NET $DDOG $PLTR $SNOW $WIX
Other favs : $ADBE $HUBS $TEAM $ZI $COUP $AVLR
(Yes, I know. I should just buy a cloud ETF)
More than most other sectors I invest in, SaaS taught me the most about investing.
It made me peel the layers of Valuation, Financial Statements , Operational metrics and start analyzing each Company from the core and then move outwards.
It made me peel the layers of Valuation, Financial Statements , Operational metrics and start analyzing each Company from the core and then move outwards.
It also made me understand how important it is to
✔️Understand the operating landscape, overall Tech/Business trends
✔️Importance of Mgmt, People & Culture
✔️Importance of offering value to customers (by leveraging the latest Tech)
✔️The hustle for innovation & growth.
✔️Understand the operating landscape, overall Tech/Business trends
✔️Importance of Mgmt, People & Culture
✔️Importance of offering value to customers (by leveraging the latest Tech)
✔️The hustle for innovation & growth.
✅It made me start asking basic Qs like
✔️Why does this Company exist?
✔️What are its products/services?
✔️Who is the CEO, and upper Management? Qualifications, Experience/track record, Vision and strategy?
✔️Why does this Company exist?
✔️What are its products/services?
✔️Who is the CEO, and upper Management? Qualifications, Experience/track record, Vision and strategy?
✔️Who are its Customers?
✔️How are they acquiring their Customers (Traditional Sales driven, Developer led, Viral...)
✔️What problem is it solving for their Customers (moved a core functionality to the cloud, improving efficiency or collaboration, Big Data/Analytics....?)
✔️How are they acquiring their Customers (Traditional Sales driven, Developer led, Viral...)
✔️What problem is it solving for their Customers (moved a core functionality to the cloud, improving efficiency or collaboration, Big Data/Analytics....?)
✔️Revenue method : By # Seats, Volume based, other or mixed?
✔️Is this Company better than the competition and why?
✔️How is the current growth? How sustainable is it?
✔️Where are they in their growth/expansion/saturation cycle?
✔️Is this Company better than the competition and why?
✔️How is the current growth? How sustainable is it?
✔️Where are they in their growth/expansion/saturation cycle?
✔️What other products are they adding to their core?
✔️Upsells & Cross Sells momentum
✔️Are they maturing into a Platform or remaining at the application layer?
✔️Do they already have a moat or is one emerging? Switching costs? Any Data/Network effects? Brand value?
✔️Upsells & Cross Sells momentum
✔️Are they maturing into a Platform or remaining at the application layer?
✔️Do they already have a moat or is one emerging? Switching costs? Any Data/Network effects? Brand value?
✅Then you move onto SaaS specific metrics
✔️ Number of Customers and growth, # Big Accounts, ACV
✔️ARR and growth
✔️DBNER & Churn
✔️Sales cycle & Efficiency
✔️LTE to CAC, Payback period
✔️ Number of Customers and growth, # Big Accounts, ACV
✔️ARR and growth
✔️DBNER & Churn
✔️Sales cycle & Efficiency
✔️LTE to CAC, Payback period
✅Good Link to learn more about many SaaS metrics
✔️Marketing Metrics
✔️Sales Metrics
✔️Customer Success Metrics
✔️Growth Metrics
stratigia.com
✔️Marketing Metrics
✔️Sales Metrics
✔️Customer Success Metrics
✔️Growth Metrics
stratigia.com
✅Then you move onto the Financial statements to see how the SaaS metrics are translating into actual Financials.
Are they truly leveraging the best features of Cloud/SaaS?
✔️Recurring Revenues
✔️High Gross Margins (not having to pay any tolls helps)
Are they truly leveraging the best features of Cloud/SaaS?
✔️Recurring Revenues
✔️High Gross Margins (not having to pay any tolls helps)
✔️Improving Sales efficiency to gradually reduce the S&M % spend?
✔️Improving Scale and operational efficiency to gradually reduce the G&A% ?
✔️Improving Scale and operational efficiency to gradually reduce the G&A% ?
✔️Using the Operating Cash flow to grow Business?
✔️Balance sheet with good cash position and less debt, reasonable shareholder dilution (more than compensated by the growth in Business)?
✔️Balance sheet with good cash position and less debt, reasonable shareholder dilution (more than compensated by the growth in Business)?
Once you start from the core and move out, putting the operational metrics and Financial statements into context becomes easier, also adding more context around growth and sustainability & optionality, and you'll also not be as stuck at the Valuation stage.
With everything you know and reasonably expect from the Company, you can either decide to pay up for quality/growth, discard, or put it in Watchlist and move on (instead of arguing on Twitter about Valuation).
With SaaS, initial research & buying is the easier part. What is more difficult is
-Monitoring for competitive & alternative solutions.
-Holding thru the overvaluation phases & Earning season -ve reactions (when LT thesis being in tact).
Hope this was useful.
/END
-Monitoring for competitive & alternative solutions.
-Holding thru the overvaluation phases & Earning season -ve reactions (when LT thesis being in tact).
Hope this was useful.
/END
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