There’s a pre-IPO stage SaaS company I have been tracking …
… for years.
I’ve always wanted to invest, purely based on the quality of their product.
And I eventually got my chance.
A shareholder wanted to sell some common.
But now that the opportunity was in front of me.
Did I actually want to follow through?
Here’s how I thought about it.
And the homework I did to get to an answer.
First, I looked at public market revenue comps for SaaS companies.
At that time, IPO’d peers were trading at a ~10-12X forward multiple. My research indicated the company was probably doing $10-$15MM in ARR. Based on the price per share offered, that all checked out. I wouldn’t be getting a steal of a deal…but it was definitely “market”.
I looked at their ‘Jobs’ page. Here’s what I was happy to see:
- They were hiring a bunch of Partner Managers. Later stage software and SaaS companies need to scale the channel to get to the next level. Seeing investment there was a good sign.
- They were hiring in Revenue Accounting, with a job description said…
“…implement best practices to help the Company prepare to be an SEC registrant”
I checked out their hiring trends.
LinkedIn Premium let me scope this out. Not a surprise to see a big drop off at the end of the year, but I was glad to see things hadn’t ground to a complete halt:
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And I found it encouraging that there was modest headcount growth in Engineering over the last 6 months.
i.e. They were still investing in product innovation, even in a softer market…
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I asked the intermediary for ‘Assure’-ance.
Since this opportunity came to me through an intermediary, my investment would be made into an SPV. Which can get blown up if the host of said SPV vaporizes. So I wanted to know how this situation would be handled, if it came to be.
And I wanted to know what the preferences looked like for existing preferred stock holders.
Like, did the last money in have a multiple liquidation preference?
Fortunately, this was not the case here.
Could I have gone deeper than this?
Sure.
But for an angel sized investment, this felt like (for me) the right level of time investment.
For you? YMMV, so of course you should consult your legal, financial, spousal, and spiritual advisors before making any investments!
