Since July, Clare Capital has been producing a weekly, two-page Tech Update incorporating different charts and listed company analysis for our distribution list. The Updates have included:
- SaaS Revenue per Employee;
- Remuneration vs Performance;
- Capital Used vs Recurring Revenue;
- Cash Burn & Runway; and
- The 40% Rule (which was highlighted by Michael O’Donnell in an October Stuff article).
On the back of the first FounderCon, which Clare Capital sponsored, we have released the Complete Series of Tech Updates #1-17 [this link takes you to the full report] on our Blog and on the ShowGizmo app.
Please feel free to download and share around with anyone who you think would find it useful.
Contact us if you would like to be on the distribution list.
Not all revenue multiples are equal.
99%> of the time EV/ARR multiples should be greater than EV/Forward Revenue multiples, it is therefore very important to understand the difference between the two.
In both of these multiples, the Enterprise Value (EV) remains constant, it is the measure of revenue that is changing. Annualised Recurring Revenue (ARR) is the current Monthly Recurring Revenue multiplied by 12, whereas the Forward Revenue is the total forecasted revenue for the next financial year. Assuming the company is growing, then Forward Revenue will always be higher than ARR and therefore, EV/Forward Revenue will always be lower than EV/ARR.
The relationship between EV/Forward Revenue and EV/ARR is explained by growth. The faster a company is growing the bigger the difference between EV/ARR and EV/Forward Revenue multiples.
Is profitability, or, at least, a path to profitability, becoming more of a factor in valuation multiples for SaaS companies?
Recently there has been considerable coverage of how median valuation multiples have fallen for publicly listed SaaS companies and the impact that this is having on multiples employed by private companies. To add to this debate Clare Capital has analysed the annual change in Forward Revenue Multiple for 73 public SaaS companies.
From this dataset, more than 80% of the companies (60) have experienced a reduction in valuation multiple and as a group the median valuation multiple has fallen by more than a quarter for the annual period (other SaaS commentators have been highlighting even larger declines, for example, see Tomasz Tunguz‘s blog post on the decline in SaaS Valuations).
Following a few twitter conversations between our own Mark Clare, technology commentator & investor Ben Kepes, corporate finance associate Sam Stewart and Mindscape CEO JD Trask, Clare Capital charted key EV and Revenue metrics for 50 listed SaaS companies with the results below:
Congratulations to one of our clients Mindscape for winning the Hi-Tech Start-up Company of the Year award at the 2015 NZ Hi-Tech Awards. This tops off another fantastic year for Mindscape, winning their second award at the NZ Hi-Tech Awards in as many years after taking out the Innovative Hi-Tech Software Product in 2014.
Mindscape were also nominated for the Innovative Hi-Tech Software Product award at the 2015 NZ Hi-Tech Awards.
Clare Capital is very proud of your achievements so far and look forward to where the business is heading.
Below is a series of Equity Research pieces that Clare Capital has released on Pushpay as part of its mandate to produce reports on a periodic basis.
Pushpay provides mobile commerce tools that facilitate fast, secure and easy non-point of sale payments between consumers and merchants. Pushpay services three target markets: the Faith Sector; Non-Profit Organisations and Enterprises.
February 19, 2015: Clare Capital – Pushpay Holdings Limited – A SaaS play which makes donating and paying easy
April 28, 2015: Clare Capital – Pushpay Holdings Limited – Research Update
June 10, 2015: Clare Capital – Pushpay Holdings Limited – More than a pure SaaS play
July 16, 2015: Clare Capital – Pushpay Holdings Limited – $1m to $10m ACMR in less than 5 quarters
On the 31st March, MYOB lodged its initial public offering (IPO) prospectus with the Australian Securities and Investments Commission (ASIC) for a listing on the Australian Securities Exchange (ASX).
As MYOB operates in the technology space and given Clare Capital’s past and current work with one of its competitors, Xero (NZX:XRO), the firm sent out a series of tweets regarding some brief analysis on MYOB’s Prospectus.
Pushpay Holdings Limited (NZX:PAY) – A SaaS play which makes donating and paying easy
Pushpay Holdings Limited (PAY) provides mobile commerce tools facilitating easy payments between consumers and merchants. PAY services three target markets: The Faith Sector; Non-Profit Organisations and Enterprises. Currently, there is considerable focus on the US Faith Sector, with plans to further expand into other jurisdictions.
PAY operates under a Software as a Service (SaaS) business model where the customers/merchants pay a monthly recurring revenue for access and use of the centrally hosted software. This SaaS business model is beneficial to both: The Company; and the customers/merchants. The Company benefits from strong monthly recurring revenue streams and the relative ease of scalability, the customer/merchant benefits from lower up-front costs and by subscribing to a product whose up-keep remains the responsibility of those who developed it.
Clare Capital was the financial adviser to Heyday on their majority sale to WPP / JWT a global advertising and branding company based in the UK.
Heyday (formerly Doubleclique) is a Wellington-based digital design agency. Heyday’s full range of digital design services includes:
- Insight – marketing and audience research, digital strategy, proposition design, content strategy and technical architecture.
- Ideas – conceptual & prototyping, digital content and communications, social media marketing.
- Design – visual design, UX and interaction design, rich media.
- Delivery – website development, web application development, search engine optimisation, search engine marketing, mobile application development, project management, copywriting, digital video production.
- Improvement – analytics and measurement, support, training, performance optimisation.