Three Perspectives on SaaS Companies
Presented at Cooley Godward Kronish
October 28, 2009
Three Perspectives on SaaS Companies
CFO Perspectives
Skip Smith & Mary Korn – FLG Partners
SaaS CEO/Board Issues – CFO Perspective
„
What makes a SaaS company?
„
SaaS Revenue recognition primer
„
Multiple elements in sale
„
New accounting next year
„
Capitalization of software
„
State sales and use tax
„
Systems for SaaS companies
Three Perspectives on SaaS Companies
What makes a SaaS Company?
„
Key attributes:
„ Recurring revenue streams
„ Hosted application software often accessed via a browser
„ Standalone or integrated applications
„ Core systems – Accounting or CRM
„ Ancillary systems – Travel management or payments
„ Media, gaming, analytics, etc.
„ Fragmented, rapidly growing companies
„ Hard to build from a financial perspective
„ Valuable when turn profitable (begin generating cash)
Three Perspectives on SaaS Companies
SaaS Revenue Recognition
„
Multiple revenue elements:
„ Subscription – monthly, per seat or per transaction booked
„ Implementation/professional service fees –
„ If bundled, determine standalone value (“VSOE”) and
recognize over expected life of relationship
„ If separately charged, then recognize when deployment is
effective (if VSOE for subscription renewal exists)
„ EITF 08-01 will somewhat liberalize VSOE requirements for
new fiscal years (required for years beginning after 6/15/10)
„ Hardware/software combinations:
„ Now driven by software treatment thus recognition spread
over useful life of device (SOP 97-2)
„ More up front recognition for mixed hardware (iPhone, etc.)
coming in 2010 (EITF 09-3)
Three Perspectives on SaaS Companies
Rev Rec Takeaways
„
Get it right from the start –
„ Lock down pricing schemes
„ Develop a standard contract to maintain consistent T’s and C’s
„ Get auditor buy in early for recognition policy
„ Especially for implementation revenue treatment
„ Restatements are very costly in time and opportunity
„
Adoption of EITF 08-1 treatment will improve pricing flexibility and
may accelerate revenue recognition
„ Calendar year companies should consider adoption of EITF 08-1
and 09-3 treatment starting in January 2010
Three Perspectives on SaaS Companies
Capitalization of Software
„
Capitalization of internal use software governed by EITF 98-1
„ Essentially capitalize software costs after demonstration of
technical feasibility, then amortize over useful life (3-5 years)
„ Write off all maintenance and updates other than major rewrites
„ Track R&D costs carefully for GAAP, management and tax
purposes (including possible R&D tax credits)
„
Key Takeaways:
„ Wide ranging practice but be conservative
„ Costs capitalized now are a drag on earnings later
„ Establish a simple timekeeping and “project” system early
Three Perspectives on SaaS Companies
State Sales and Use Tax
„
Not an income tax so “nexus” is much easier to achieve
„
States are looking for revenue – a very dynamic area
„ Expanding tax base to include much of digital commerce
„ Active states include Washington, NC, Texas, NY, Wisc, etc.
„ Taxation dependent upon local statues and tax “nexus”
„ Nexus can be achieved by having employees in state or visits by
sales or training personnel or simply having customers in state
„ Tax rates applied at the zip code level
„ Monthly filing and deposit requirements
Three Perspectives on SaaS Companies
Sales & Use Tax Takeaways
„
„
„
„
„
SaaS company is responsible for assessment and collection of
these taxes regardless of contractual provisions otherwise
Get compliant early to avoid expensive penalties and interest
„ Begin with focus on larger transactions
Tax issues can delay strategic transactions (FAS 5 issues)
Build compliance into systems early
Review state level changes a couple of times per year
Three Perspectives on SaaS Companies
Systems Needs for SaaS
ƒ
Financial reporting system (QuickBooks, MS Dynamics, etc)
„ Simple project capability
„ Database for revenue and contract management
„ Salesforce or homebuilt that scales
„ Manage pending implementations
„ Feed revenue to financial system
„ Feed management dashboards and metrics
„
Key Takeaways
„ Spreadsheets break
„ Build links from operational systems to feed financials
„ Establish firm audit trails
Three Perspectives on SaaS Companies
Three Perspectives on SaaS Companies
CFO Perspectives
Operational
Operational considerations
Three Perspectives on SaaS Companies
Right from the Start
„
Sales
„
Build inside sales first
„ Sales comp plans tied to
acquisition of MRR
„ Separate hunters and
farmers
„ Avoid costly enterprise
sales techniques
„
Engineering
„
Marketing
„
„
„
„
„
Embrace developers
Online marketing skills
Constantly measure the
effectiveness of marketing
spend
Deploy guerilla marketing
techniques
Analytics
„
Architecture
„ Always on
„ QA
Three Perspectives on SaaS Companies
Invest in Lead Generation
ƒ
ƒ
ƒ
ƒ
Marketing = lead generation
Measure lead generation conversion
Use tools to generate leads & accelerate sales cycles
inexpensively
Practice guerilla marketing tactics
ƒ
Offer demo accounts and start up kits
ƒ Frequent e-marketing initiatives
ƒ
ƒ
Explore segmented marketing
Evangelize customer references
Three Perspectives on SaaS Companies
Sales Learning Curve
„
Set goal of MRR/Sales HC before hiring
„ Use MRR to determine when to hire
„
Restrict sales hiring
„
Use MRR vs fully burdened cost of sales to assess
„ Accelerate sales hiring only MRR justifies
„
Commission plans direct behavior
„
„
Inside sales
„
„
Require $60K-75K MRR
Field sales
„
„
$1 of commission for $1 of MRR = 8.3% rate Inside sales
Require $80K-100K MRR
Stay local
Three Perspectives on SaaS Companies
Develop an API Strategy Early
„
„
„
„
„
„
Adopt an open API strategy from Day One
Use APIs to drive integration strategy
APIs can drive adoption
Right API strategy can lead to new channels
Entice developers to create extensions to enhance your
product line
View developers as a channel
Three Perspectives on SaaS Companies
How to Measure and Monitor Performance
Three Perspectives on SaaS Companies
Critical Internal Systems & Processes
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Allocate funds for internal investment
Have nimble & smart internal systems
Billing system that supports recurring billing
Be flexible & able to process secure payments
Be aware of changing regulatory environment
Reporting database
Partner/developer tracking database
Campaign manager tool set
Standard contracts
ƒ
Customize only for large accounts
Three Perspectives on SaaS Companies
Build Programs to Encourage & Track Usage
„
Analytics rule!
„ Know exactly how customers are using your product
„ Measure user adoption
„ Test new features
„ Spot potential problem areas
„ Customize your marketing programs
„ Focus product feature roadmap
Three Perspectives on SaaS Companies
How to Measure
„
„
„
Product design & architecture
Reporting system
Databases
„
Code & customer account / usage
„ Reporting and metrics
„ Billing
„
BI tools
„
„
To report, track & measure
Analyst resources
„
To assess & compare
„ Internal compass
Three Perspectives on SaaS Companies
What to Measure – Part I
„
„
„
„
„
„
„
„
MRR: monthly recurring revenue *
CLTV: lifetime value of a customer
Churn Rate: the % of customers who end their
relationship in a given period
Retention rate: 1- churn rate
Renewal rate
Upsell
Selling costs
Value by year acquired
„
What does this tell you about the customer?
Three Perspectives on SaaS Companies
What to Measure – Part II
„
„
„
Deferred revenue: revenue that cannot yet be
recognized on the I/S
Life cycle of deferred revenue: how long DR hangs out
on the B/S
Backlog: off balance sheet tracking of undelivered
elements
„
„
„
Professional services, training, customization
GPM: gross profit margin
CPNC: cost per new customer
„
Go ahead if CPNC < CLTV
Three Perspectives on SaaS Companies
What to Measure – Part III
„
CAC: customer acquisition cost
„
Many ways to measure
„ Change in revenue/S&M spend
„ Change in GM/S&M spend
„ Bessemer & Hummer Winblad have published their formulas
„ Programs should permit you to track
„ By marketing activity
„ Even by individual customer
Three Perspectives on SaaS Companies
The Ideal Dashboard
Three Perspectives on SaaS Companies
What Matters
„
„
„
„
„
„
„
„
MRR *
CLTV
Churn Rate
Retention rate
CAC
Cash
Value of installed base
Value of plan to come
from new business
„
„
„
„
„
„
„
Deferred revenue
Live cycle of deferred
revenue
Backlog
Avg seats/customer
Avg price/seat
Customer growth
…Other marketing costs
„
SEO, PPC, CPA, CPM
Three Perspectives on SaaS Companies
Projecting and Conserving Cash
Three Perspectives on SaaS Companies
Vulnerability of Fixed Costs
ƒ
Major spend areas
ƒ
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ƒ
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Headcount
Facilities
Marketing
Delivery costs
ƒ
Fixed costs of operations providing response, reliability, security are
hard to cut
ƒ Know your data center costs
ƒ
ƒ
Colo, rack space, power, bandwidth, maintenance, hands-on admin
Public SaaS companies have long climb to profitability
ƒ
ƒ
Major cause of losses was high S&M expense
Watch marketing effectiveness & manage sales team costs
Three Perspectives on SaaS Companies
Cash Management 101
„
13 week rolling forecast
„
Inflows
„ Outflows
„ Cash flows from operating activities
„
Annual budget
„
Forecast cash flow through end of fiscal year
„ SaaS may consume $30M before CFBE occurs
„
Runway
„
Know when it ends at current spend
„ Know what to do about it
Three Perspectives on SaaS Companies
CFO Perspectives
Thank you
Three Perspectives on SaaS Companies
Three Perspectives on SaaS Companies
The Legal Perspective:
Key Issues in
Software-as-a-Service Contracts
Robin J. Lee & Diane Savage
Technology Transactions Group
Cooley Godward Kronish LLP
October 28, 2009
What we’ll talk about today…
„
Software license agreements and SaaS contracts have some
similarities, but differ in some fundamental ways
„ Consequently, due diligence intuitions developed in a world of
software contracts are applicable to some issues, but for other
issues need to be “retooled” for a SaaS world
„ VCs and other investors performing due diligence on SaaS
companies need to be aware of the differences that matter
Three Perspectives on SaaS Companies
What we’ll talk about today…
„
We will cover ten common topics in SaaS contracts that
are of unique legal concern:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Type and enforceability of subscription agreement
Third-party components
Upstream hosted/managed service providers
Confidentiality & security
Service level agreements
“Constant improvement model”
Warranties and limitations of liability
Financial and accounting issues
Insurance
Term and termination rights
Three Perspectives on SaaS Companies
What we’ll talk about today…
„
To put the problem in context, we’ll take distinct roles:
Diane (the SaaS company trying to run a
business): “How should a SaaS company
proactively address these issues to
maximize value?”
Robin (the grumpy but practical
investor): “How should an investor view
these issues from a due diligence and
valuation perspective?”
Three Perspectives on SaaS Companies
1.
„
„
The Subscription Agreement
Two basic forms of subscription agreement
„ Online “click-to-accept” agreement
„ Negotiated “brick-and-mortar” agreement
Due diligence tips:
„ Enforceability problems
„ Clickwrap vs. browsewrap
„ Geographic scope
„ Privacy
„ Is there a privacy policy
on the website?
„ Data privacy in the EU
Three Perspectives on SaaS Companies
2.
„
„
„
„
„
Third-Party Issues: Software Components
SaaS companies (like most) are likely to make
use of software licensed from third parties
Many software license agreements contain
contractual prohibitions on “remote”, “ASP”,
or “service bureau” use
May also require pass-through restrictions
Special open-source software issues
Due diligence tips:
„ Understand what third-party software is
used in the SaaS offering
„ Review for compliance all third-party
software license agreements
Three Perspectives on SaaS Companies
3.
Third-Party Issues: Hosted Services
„
SaaS companies frequently contract with a third-party
service provider to host the service
„
This creates a critical upstream third-party dependency
„
Ideally: hosted services agreement and SaaS’s own
contracts with customers should contain “back-to-back”
terms
„
Due diligence tips:
„
Perform comparative analysis of
hosted services agreement and
Subscription Agreement
„
Identify gaps
„
Identify pass-throughs
Three Perspectives on SaaS Companies
4.
Confidentiality & Security Issues
„
The SaaS model involves much more sharing of the
customer’s sensitive/proprietary information
As a result, SaaS agreements often include robust
contractual provisions regarding information security
„ Security audits/inspections
„ SOX compliance/SAS-70 reports
Due diligence tips:
„ Look for:
„ Unlimited liability for security breaches
„ Standardized reporting and remediation for
breaches
„ Retention policy
„ Security breach notification liability
„
„
Three Perspectives on SaaS Companies
5.
Service Level Agreements
„
Appropriate performance measurements
(uptime guarantees, throughput, mean-time-torestore)
„ Exclusions!
„ Due diligence tips:
„ Does company have a baseline SLA?
„ Remedies for breach
„ Customer duties and responsibilities
„ Beware of customer-supplied SLAs
„ Redundant systems/disaster recovery
„ Historically, has the company been in
compliance with its contract commitments?
Three Perspectives on SaaS Companies
6.
Constant Improvement Model
„
In a service model, maintenance is often “built in”
The SaaS company wants all customers on the same version
„ Customers often object to “forced upgrades”
„ Configuration vs. customization
Due diligence tip:
„ Watch for burdensome one-off agreements that require
specific versions for specific customers, which can erode
the economics of the SaaS model
„
„
Three Perspectives on SaaS Companies
7.
Warranties and Limitations of Liability
„
In principle, similar to software license agreements, but:
„ Watch for general limitations of liability at “fees paid under
the Agreement,” as these will increase over time
„ Additional exceptions to consequentials waiver/direct cap
„ Warranties: can argue that the SLA should be sufficient, but
customers will often insist on some kind of performance
warranty
„ Due diligence tips:
„ As usual, understand the worst-case exposure
for breach of agreement
„ What if there’s a security breach?
„ What if the service goes down?
Three Perspectives on SaaS Companies
8.
Financial and Accounting Issues
„
Financial strength of the SaaS company is obviously a
key concern of its customers
Therefore, SaaS contracts may contain assurances related
to the financial condition of the SaaS company
„ Access to private financial records
„ Termination for insolvency
„ Access to backups
„ Source code release on bankruptcy
Due diligence tip:
„ Disclosure provisions in customer
contracts are generally okay,
but watch for provisions that
create revenue recognition issues
„
„
Three Perspectives on SaaS Companies
9.
Insurance
„
“No problem, we have insurance for all of that!”
„ Beware: many insurance policies do not cover all of the
risks that SaaS companies face
„ Cyber-insurance policies can be pretty limited
„ In the end, need to carefully review the applicable policies
„ Due diligence tips:
„ Review the actual policies
„ Consider inquiring into insurance held by
third-party hosted services provider
Three Perspectives on SaaS Companies
10.
Termination Issues
„
Many may assume that the customer is “locked in” for the term
of the SaaS contract
But virtually all SaaS contracts have early termination rights
„ Can the customer terminate for convenience?
„ What constitutes “cause” for termination purposes?
„ Are there burdensome termination assistance obligations
on the SaaS company?
Due diligence tips:
„ Review all termination rights
„ Inquire into historical experience
with respect to customer terminations
and renewals
„
„
Three Perspectives on SaaS Companies
Summary
„
In some ways, SaaS contracts look like software license agreements
„ In other ways, the SaaS model creates unique business and legal
liability exposure that often prompt very different contract provisions
„ Both SaaS companies and their investors need to understand these
contract provisions and their purposes, in order to make an
intelligent assessment of:
„ …what it makes sense to accept (the SaaS company)
„ …how it impacts the value of the business (the investor)
Three Perspectives on SaaS Companies
Questions?
Three Perspectives on SaaS Companies
Three Perspectives on SaaS Companies
A Capital Markets Perspective
October 28, 2009
SaaS In The Capital Markets
„
How are SaaS companies valued relative to traditional
perpetual license software companies?
„
How have they fared in this turbulent market?
„
Is there an active M&A market for SaaS companies? At
what prices?
„
What do we see on the horizon?
Three Perspectives on SaaS Companies
Performance: Perpetual v. SaaS Software
SaaS Much More Levered To The Market
(Indexed)
300%
190.4%
250
200
58.2%
150
100
(0.9%)
50
0
01/01/05
01/01/06
Perpetual License Vendors
01/01/07
01/01/08
SaaS Vendors
01/01/09
NASDAQ
Source: Per FactSet Research Systems as of October 16, 2009.
Note: Perpetual License Vendors include: EPIC, INTU, JDAS, LWSN, MANH, MSFT, MSTR, ORCL, QADI, SAP, SPSS and SY.
Note: SaaS Vendors include: ARBA, BLKB, BBBB, CNQR, CTCT, TRAK, KNXA, N, OMTR, RHT, RNOW, CRM, SDBT, SFSF and TLEO.
Three Perspectives on SaaS Companies
Multiples: Perpetual v. SaaS Software
SaaS Companies Enjoy Consistently Higher P/E
(Price / NTM Earnings Multiple)
50x
40
33x
32x
30
30x
23x
20
26x
30x
21x
33x
33x
30x
28x
26x
20x
20x
18x
34x
32x
31x
28x
35x
19x
20x
20x
20x
19x
20x
19x
27x
27x
21x
24x
24x
18x
15x
11x
15x
15x
10
16x
14x
14x
0
Jan 2005
Jul 2005
Jan 2006
Jul 2006
Jan 2007
Jul 2007
Jan 2008
Perpetual License Vendors
Jul 2008
Jan 2009
Jul 2009
SaaS Vendors
Source: Per FactSet Research Systems as of October 16, 2009.
Note: Perpetual License Vendors include: EPIC, INTU, JDAS, LWSN, MANH, MSFT, MSTR, ORCL, QADI, SAP, SPSS and SY.
Note: SaaS Vendors include: ARBA, BLKB, BBBB, CNQR, CTCT, TRAK, KNXA, N, OMTR, RHT, RNOW, CRM, SDBT, SFSF and TLEO.
Three Perspectives on SaaS Companies
The SaaS Premium
It’s Real And Expanding
(SaaS Premium)
(Price / NTM Earnings Multiple)
100%
40x
35x
35
30x
30x
30
26x
25
23x
28x
32x
33x
34x
33x
90
33x
80
30x
28x
26x
21x
20
31x
32x
18x
19x
20x
20x
20x
19x
20x
20x
20x
19x
27x
27x
24x
24x
60
21x
18x
15x
15
15x
16x
15x
14x
70
14x
11x
50
40
30
10
20
SaaS Vendors
Perpetual License Vendors
/0
9
10
/0
1
/0
9
/0
9
/0
1
07
/0
1
/0
9
04
01
/0
1
/0
8
/0
8
/0
1
10
07
/0
1
/0
8
/0
8
04
/0
1
/0
7
/0
1
01
10
/0
1
/0
7
/0
7
/0
1
07
04
/0
1
/0
7
/0
6
01
/0
1
/0
6
/0
1
10
07
/0
1
/0
6
/0
6
/0
1
04
/0
1
01
/0
1
10
/0
1
07
/0
1
04
/0
1
01
/0
5
0
/0
5
0
/0
5
10
/0
5
5
SaaS Premium
Source: Per FactSet Research Systems as of October 16, 2009.
Note: Perpetual License Vendors include: EPIC, INTU, JDAS, LWSN, MANH, MSFT, MSTR, ORCL, QADI, SAP, SPSS and SY.
Note: SaaS Vendors include: ARBA, BLKB, BBBB, CNQR, CTCT, TRAK, KNXA, N, OMTR, RHT, RNOW, CRM, SDBT, SFSF and TLEO.
Three Perspectives on SaaS Companies
SaaS IPO Activity
Only Two Offerings Since 2008
(US$ in millions)
Pricing
Date
07/01/09
06/25/09
Amount
Company
Raised
LogMeIn
Medidata Solutions
$106.7
88.2
Average
12/20/07
11/20/07
11/01/07
10/03/07
08/09/07
02/15/07
NetSuite
SuccessFactors
SoundBite Communications
Constant Contact
DemandTec
Salary.com
Omniture
Synchronoss Technologies
$161.2
107.9
41.6
107.2
66.0
59.9
DealerTrack Holdings
Vocus
Taleo
Kenexa
$69.6
56.5
WebSideStory
RightNow Technologies
Phase Forward
Motive
Salesforce.com
Blackboard
Average
(a)
(35.9)%
55.2
(61.3)
11.7
(25.1)
(69.5)
229.7 %
58.9
144.3 %
$170.0
45.0
93.8
69.0
9.1 %
129.1
78.6
15.4
58.1 %
Average
09/28/04
08/05/04
07/14/04
06/25/04
06/23/04
06/18/04
20.1 %
14.6
(20.8)%
Average
12/13/05
12/07/05
09/29/05
06/24/05
(a)
17.4 %
Average
06/27/06
06/15/06
Offer Price
to Current
$42.5
44.1
39.4
50.0
110.0
77.0
NA
107.1 %
84.5
NA
466.9
174.8
208.3 %
Per FactSet Research Systems as of October 16, 2009.
Three Perspectives on SaaS Companies
SaaS M&A Transactions ― Multiples
Consistently High Exit Values
„
Average Revenue Multiples by Quarter
(TV / LTM Revenue Multiple)
8.0 x
7.3 x
7.3 x
7.0
6.1 x
6.1 x
6.0 x
6.0
5.0
5.9 x
5.8 x
5.6 x
4.5 x
3.7 x
4.0
3.6 x
3.0
3.6 x
3.8 x
2.5 x
2.0 x
2.0
1.0
NA
0.0
Q1
Q2
Q3
2006
Q4
Q1
Q2
Q3
2007
Q4
Q1
Q2
Q3
Q4
2008
Q1
Q2
Q3
Q4
2009
Source: Per The 451 Group, FactSet Research Systems, SDC and Thomson One Banker as of October 16, 2009. Excludes transaction values below $20 million.
Three Perspectives on SaaS Companies
SaaS M&A Transactions ― Volume
Still Relatively Low In Terms Of Absolute Totals
„
Transaction Volume and Aggregate Value by Quarter
(US$ in millions)
$4,868
$2,500
20
$2,243
2,000
16
$1,746
$1,611
$1,458
1,500
$1,446
12
$1,037
1,000
8
$822
$599
$549
500
$396
$310
$88
$64
Q1
Q2
$345
4
$33
0
0
Q3
Q4
Q1
2006
Aggregate Transaction Value
Q2
Q3
2007
Q4
Q1
Q2
Q3
2008
Q4
Q1
Q2
Q3
Q4
2009
Total Number of Transactions
Source: Per The 451 Group, FactSet Research Systems, SDC and Thomson One Banker as of October 16, 2009. Excludes transaction values below $20 million.
Note: Target company logos represent announced deals with transaction values greater than $400 million.
Three Perspectives on SaaS Companies
SaaS M&A Transactions
Top Transactions Last 5 Years
(US$ in millions)
Announced
Date
03/15/07
09/15/09
03/14/07
10/08/08
07/09/07
02/11/08
01/23/04
10/25/07
07/03/07
04/08/08
Estimated
Transaction
TV / LTM
Value
Revenue
Acquirer
Target
Cisco Systems Inc.
Adobe Systems Inc.
Microsoft Corp.
Symantec Corp.
Google Inc.
Microsoft Corp.
Ariba Inc.
Omniture Inc.
Autonomy Corp.
Nuance Communications Inc.
WebEx Communications
Omniture Inc.
Tellme Networks Inc.
MessageLabs Ltd.
Postini Inc.
Danger Inc.
Freemarkets Inc.
Visual Sciences Inc.
Zantaz Inc.
eScription Inc.
$3,200.0
1,800.0
750.0
695.0
625.0
500.0
459.3
394.0
375.0
363.0
8.4 x
5.4
NA
4.8
8.9
8.9
3.3
5.2
NA
8.3
Source: Per The 451 Group, FactSet Research Systems, SDC and Thomson One Banker as of October 16, 2009. Excludes transaction values below $20 million.
Three Perspectives on SaaS Companies
SaaS M&A Transactions
Top Acquirers Last 5 Years
(US$ in millions)
Announced
Date
05/29/08
08/06/07
01/16/07
01/23/09
06/06/07
01/18/07
07/09/07
07/02/07
05/24/07
09/14/09
06/02/09
11/26/07
07/30/09
10/30/07
10/08/07
04/08/08
10/02/07
02/22/07
10/25/07
09/07/07
02/14/07
Estimated
Transaction
TV / LTM
Value
Revenue
Acquirer / Target
Blackbaud Inc.
Kintera Inc.
eTapestry.com
Target Software / Target Analysis
DealerTrack Holdings Inc.
JM Dealer Services Inc. (Inv. Management Solutions)
Arkona Inc.
Curomax Corp.
Google Inc.
Postini Inc.
GrandCentral Communications
FeedBurner Inc.
Intuit Inc.
Mint Software Inc.
PayCycle Inc.
Homestead Technologies Inc.
McAfee Inc.
MX Logic
ScanAlert Inc.
SafeBoot BV
Nuance Communications Inc.
eScription Inc.
Commissure Inc.
BeVocal Inc.
Omniture Inc.
Visual Sciences Inc.
Offermatica Corp.
Touch Clarity Ltd.
$46.0
24.8
60.0
1.1 x
NA
NA
$32.5
48.7
39.4
NA
3.8 x
3.9
$625.0
50.0
100.0
8.9 x
NA
NA
$170.0
170.0
170.0
NA
5.7 x
12.1
$140.0
51.0
350.0
4.0 x
3.4
5.8
$363.0
26.6
140.0
8.3 x
13.3
NA
$394.0
65.0
48.5
5.2 x
7.2
8.1
Source: Per The 451 Group, FactSet Research Systems, SDC and Thomson One Banker as of October 16, 2009. Excludes transaction values below $20 million.
Three Perspectives on SaaS Companies
Conclusions
„
Investors clearly place premium value on the growth and
predictability of SaaS
„
High beta works both directions
„
Relatively few public market plays
„
M&A market still developing ― including buyers
Three Perspectives on SaaS Companies