Driven Insights

What do investors look for in a strategic budget? KPIs and monthly updates are two things that bridge the divide between the Minimum Viable Budget and a full blown strategic budget. Listen to Brian of Bigfoot Capital and Ben Robinson discuss the various features of a budget, and how important they are relatively - both for a company and for investors - in the video clip below. https://hubs.li/Q02FzfvZ0

Does your business need to be profitable to get funded in 2024? Can you be burning cash, or do you need to be breaking even? In the right set of circumstances, it’s still ok to be burning cash. However, that has to come from a place where the underlying business is healthy. To learn more about how investors think about burning cash in the current environment, check out the video with Brian Parks of Bigfoot Capital below. https://hubs.li/Q02Fzt2R0

Should you use your budget to calculate your cash runway? In growth businesses, there’s no doubt that a budget and maintaining forecasts is the best way to project cash. However, there are a couple of other tools you might want to consider when it comes to thinking about cash burn. To learn what those are, check out the video below. https://hubs.li/Q02G172j0

In Pursuit of Liquidity - Debt v Equity Join us Thursday 11th July @ 1pm Eastern Time Sign up here to reserve your place: https://hubs.ly/Q02DyfXr0 Driven Insights’ Managing Partners Ben & Dave Robinson and Bigfoot Capital’s Managing Partner Brian Parks will be discussing the different capital sources available to founders. We’ll be covering the assessment process founders should go through to identify the appropriate funding type for their circumstances. We’ll also discuss how the different types of funders assess applicants, how to pass due diligence smoothly for each. If you’ll be fundraising in the next 12-18 months, then you won’t want to miss this comprehensive discussion of debt, equity and their implications. Make sure you reserve your seat using this link: https://hubs.ly/Q02DyfXr0

Talking about churn Churn is one of those subjects that none of us like to talk about. We’d rather pretend it doesn’t happen. Acquiring customers is hard. For early and mid-staged companies, it’s often still quite personal for founders. And churn is one of those jargon words that tries to make the personal impersonal. Because what it really means is that we’ve lost a customer. Someone tried working with us, took a look at what we had to offer, and decided we weren’t providing value for money. As personal as that is, it’s important to be able to detach ourselves from the sting of losing customers, and assess the implications of ‘churn’ for the business. Churn has a huge impact on ARR Growth and Customer Lifetime Value, two key SaaS KPIs. Trying to maximize ARR growth with high levels of churn is like trying to fill the proverbial leaky bucket. Likewise, high levels of churn reduce the lifetime value of a customer, impacting what you can afford to pay for customer acquisition. When churn is high, everything is affected. There are three ways to calculate churn: Customer churn Gross Dollar churn Net Dollar churn Each of these should then be benchmarked against industry figures, to understand how you’re performing. For more on churn, check out our article here: https://hubs.li/Q02BDZND0

Using Maxio for subscription billing What’s the best software for subscription-based billing? This is a question we get asked all the time. For early and mid-staged B2B SaaS companies, our recommendation is usually the same: choose Maxio. Maxio is focused on business-to-business products, and is the only purpose-built SaaS B2B subscription management platform. While you will still need software to handle General Ledger, most SaaS businesses we come across are already using Quickbooks for their accounting needs. Maxio itself has a very smooth integration with Quickbooks (as well as Xero, Intacct & NetSuite), allowing you to easily pull data for all of your reporting needs. Maxio also supports GAAP-compliant revenue recognition, the key to sailing through due diligence at a capital raise or exit. The other great advantage of Maxio as a tool is the visibility it provides into SaaS KPIs. You can track, analyze, and report on SaaS metrics with ease, so your team always has the right data at their fingertips. When working with early and mid-staged SaaS clients, we’ve found Maxio to be a powerful addition to their software stack. We wrote an article on Maxio, and why we choose it over Netsuite in many situations, here: https://hubs.li/Q02BDZNy0 We also recommend checking out Randy Wootton's page for more on Maxio.

Measuring Enterprise Value: ARR v EBITDA Enterprise value is our North Star metric here at Driven Insights. Helping our clients to maximize it is the underlying objective of everything we do. So when it comes to our SaaS clients in particular, understanding value drivers to optimize is essential. As a quick reminder, these are the core characteristics of the SaaS business model: Recurring revenue, rather than one-off purchases Lower cost to serve, with higher gross margins per customer Renewal rates and retention, a key driver of long-term success Expansion revenue generated from an installed base Ultimately, any SaaS business derives its value from the present value of its future cash flows. One can calculate value in a variety of ways, such as a discounted cash flow or a multiple of ARR or EBITDA. For companies that aren’t yet profitable, an ARR-multiple based valuation is the preferred method—and will typically result in a higher value. For established SaaS companies with earning power above $5 million ARR, or early-stage firms with a slow growth curve, EBITDA may be used as the primary basis for valuation. While there are distinct criteria for valuation with ARR and EBITDA methods, both can work together to build a more complete picture. It's common to apply an ARR multiple to ARR for subscription revenue AND to apply an EBITDA multiple to the EBITDA of professional services P&L. For a deep dive on this, check out our blog article on the topic here: https://hubs.li/Q02BDXJL0

The Founder's Dilemma - Debt v Equity For founders, the question of whether to raise debt or equity can be hard to answer. Many founders default to equity. They give up a little control, for the security of not having to deal with debt service. As rounds go on, some portion of debt is often included even in a predominantly equity round. Getting the right balance between the two is essential. This recent article from SaaStr, by Jason Lemkin highlights some of the advantages and disadvantages of convertible debt v equity. It’s a useful read for any founder, as it blends the perspectives of angels and VCs, while fundamentally being written by someone who’s a founder first and these other things second. We recommend you check it out: https://hubs.li/Q02BrVH_0

In Pursuit of Liquidity - Debt v Equity Join us Thursday 27th June @ 1pm Eastern Time Sign up here to reserve your place: https://hubs.li/Q02zwFxd0 Driven Insights’ Managing Partners Ben & Dave Robinson and Bigfoot Capital’s Managing Partner Brian Parks will be discussing the different capital sources available to founders. We’ll be covering the assessment process founders should go through to identify the appropriate funding type for their circumstances. We’ll also discuss how the different types of funders assess applicants, how to pass due diligence smoothly for each. If you’ll be fundraising in the next 12-18 months, then you won’t want to miss this comprehensive discussion of debt, equity and their implications. Make sure you reserve your seat using this link: https://hubs.li/Q02zwFxd0

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