5 Takeaways From ’17 Reasons Your Company is Not Investment Grade’

By Sage Duvall

Feb 22 2019

This past Wednesday, SaaSOptics hosted a fantastic conversational webinar with SaaSOptics’ Tim McCormick and Founders Advisors Managing Director and recurring Silicon Y’all mentor Zane Tarence. This 1-hour webinar focused on the 17 top reasons SaaS companies are not investment grade, and consisted of Tarence and McCormick swapping sage advice on overcoming each of the pitfalls mentioned.
It can be hard to summarize a presentation this jam-packed full of information with just a few sentences – but we’re going to try our best!

So without further ado, here are our 5 takeaways from last Wednesday’s webinar:

1. Having a strong company culture is paramount.

If your culture doesn’t attract and retain the best talent, you’re never going to get an investor to invest in you. During the webinar, Tim McCormick noted the importance of taking an active role in shaping and reshaping your culture on a daily basis, warning that if you don’t actively work on shaping your culture, you might not like the culture that develops organically. Creating a culture that gets stronger and stronger over time takes constant effort, and is one of the single most important things you can do to improve your company’s growth, your customer and employee retention, and to become more attractive to investors. A company with a strong culture is a company with a strong team − and a strong team builds a strong, successful company.
Once again, Tarence sums it up best: “The real competitive advantage in any business is one word only, which is ‘people.’”

2. If your company lacks scale and a healthy growth rate, you won’t get an investment.

This might seem like a no-brainer, but it’s really not. A lot of companies either don’t know what a healthy growth rate looks like, don’t know how to determine it, or they don’t know how to improve upon it. Sometimes companies face all three of these issues, and sometimes they choose to ignore it even when they know. Your company has to be able to achieve a certain amount of success on its own before you will gain any interest from investors, and as Tarence says: “If your organic growth is less than 30%, investors will just walk.”

3. Innovation is key.

Another facet of a strong culture is innovation. Are your people innovative? Is your product innovative? Is your company built on innovation? If there isn’t a consistent thread of innovation running through your design, your culture, your marketing and more − investors won’t take a second look at you. Tarence points out that if just anyone can set up shop and compete with you, you don’t have any real value to an investor.
As SaaS companies, a big part of what we sell is creativity and innovation. Creative solutions, unique, consistent, effective and innovative. The importance of innovation often gets overlooked, but with the increase of products crowding the SaaS platform − innovation has never been more important. Innovation goes beyond design. It touches every aspect of a company’s messaging, branding, adaptability, differentiation and more.
Simply put: “You have to be an innovative company, because if you’re not – you’re not going to survive.”

4. Having a meaningful market share is important.

As mentioned in the webinar, investors want to acquire the #1 solution in a space, and they will pay premium for it. The only reason investors move to #2 or #3 is if #1 has already been acquired. This is an extremely important thing to consider when seeking investors at any stage, and if you’re a small company, your primary focus should be on targeting market share in a sub-segment of the market to demonstrate that you are capturing meaningful share of a niche market.
In Tarence’s words, “You’re never going to get investment in your SaaS business if you don’t have a visible market share.”

5. It’s always the right time to track SaaS metrics.

This one is important because it applies to everything mentioned above. We’re all familiar with the famous Peter Drucker quote “What gets measured gets improved.”, but how many of us incorporate that way of thinking into the way our companies operate on a daily basis? According to a poll taken during the webinar, not enough of us do. While 100% of participants said they track MRR/ARR and as much as 88% track retention and churn, a startlingly low 43% track LTV with only 34% tracking customer cohort analysis. Regardless of your numbers, improvements can always be made. As mentioned above, what gets measured gets improved, and every improvement not only increases our chances of success, but brings us closer to being investment-ready.
Tim McCormick added a great perspective on this: “A lot of clients ask us “when’s the greatest time to start tracking SaaS metrics?”. Our philosophy is, it’s always a great idea to begin collecting as many metrics as possible, as early as possible. Not tracking them is a little like flying without instruments.”

What are some of your takeaways?

As always, Zane Tarence and Tim McCormick offered some fantastic points, shared some truly valuable insights and left us with some great takeaways.
Did you attend this webinar? Let us know if you have any takeaways of your own, or if you have any questions or comments about the ones we listed above.
Thanks for reading!

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