2017 smb cloud summit: investment climate for small business saas – temperatures rising? (surepath...

T h e C l i m a t e f o r S m a l l B u s i n e s s

S a a s

Private & Confidential | 2

Introduction010203 Lessons and Takeaways

2017 SMB SaaS Deal Landscape

A g e n d a

M A R K M A C L E O D

Founder & PresidentSurepath capital partners

Mark has over 18 years of industry experience with 14 years as CFO for leading companies such as FreshBooks, Shopify, Tungle and more. He spent 3 years at Real Ventures, Canada’s most active seed stage venture fund, where he was a

founding Partner.

Mark has raised hundreds of millions in capital from investors in Canada, the US and Asia and has sold companies to Airbnb, Blackberry, Rackable Systems, Return Path and others.

I n t r o d u c t i o n

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To help fund, grow, and exit SMB software companies

SurePath maximizes your optionality: We make sure you know what it takes to build a market leader and capitalize you towards that

goal.

We ensure you are always in the minds of strategic buyers so that if they decide to make a move in your space, you are in the conversation. You can then decide; Keep going or exit?

The process of raising growth capital is very different from raising early stage capital

It is cheaper than ever to start companies, but more expensive than ever to build market leaders. If that’s youraspiration, you need growth capital

We help you prepare for growth stage and help you raise the capital needed to become a market leader

Growth Funding

We have sat on both sides of the table. We have funded, grown and exited many companies

We remain in touch with our clients between transactions to provide ongoing advice and intros.

A low touch, high impact way to help you grow

StrategicGuidance

There are few credible choices for advisors to facilitate sub $100M exits. We fill that gap

We work with you to facilitate the BD and Corp Dev intros that pave the way to an eventual exit

No other investment banking firm has the depth of our relationships in the SMB world

Exits

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S u r e P a t h : O u r P u r p o s e

We have been part of some the most successful SMB SaaS companies

We have deep relationships with SMB investors and buyers

SurePath is committed to becoming the leading strategic financial advisor to the global SMB software market

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S u r e P a t h a n d S M B

The SurePath SMB SaaS index is the only index that is exclusively focused on SaaS companies with SMB offerings.

It is a basket of 35 public companies is actively tracked by the SurePath team. We know executives at almost every company on our index.

Extending our SMB SaaS thought leadership to the public markets

T h e S u r e P a t h S M B S a a S I n d e x

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served as advisor to

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R e c e n t D e a l s

SMB SaaS Deal Landscape

M e t h o d o l o g y

9

Since Jan. 1, 2017, there were over 3,000 deals in the B2B software space, globally

Of those, there were a total of 1,934 deals in North America

Of those, a total of 309 deals (291 raises and 18 exits)

involved companies with a clear SMB SaaS offering

2 0 1 7 D e a l L a n d s c a p e

1. Source: Pitchbook2. Deal count excludes deals involving accelerators, incubators, and crowdfunding and deals with undisclosed values

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$2M $2M$11M

$26M

$95M

$79M$85M

43

85

108

54

2

11

5

$0M

$10M

$20M

$30M

$40M

$50M

$60M

$70M

$80M

$90M

$100M

Angel Seed Early Stage VC Late Stage VC IPO M&A Private Equity

Ave

rage

Dea

l Size

(in

$USD

)

Average Financing Size Deal Count

Applications27%

Platforms27%

HR and Training11%

Productivity8%

Other7%

Design6%

Database 4%

Automation and Workflow3%

Information Services2%

Vertical Specific2%

Communications2% Finance

1%

D e a l b y C a t e g o r y

Q u a r t e r l y F u n d i n g i n 2 0 1 7

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$24M $27M $10M $5M$54M $50M $48M $12M

$346M $350M

$302M

$137M

$200M

$394M

$504M

$342M

$0M

$50M

$100M

$150M

$200M

$250M

$300M

$350M

$400M

$450M

$500M

$550M

Q1 Q2 Q3 Q4

Cum

ula

tive

Am

ount

Ra

ised

(in

$USD

)

Angel Seed Early Stage VC Late Stage VC

14 1112 6

28 31 215

31 34

34

9

14

16

17

8

1. Source: Pitchbook2. Deal count excludes deals involving accelerators, incubators, and crowdfunding and deals with undisclosed values

The pace of venture deals has slowed over the year though amount raised per deal has picked up

$77M CoVenture

$60M Greylock Partners

$53M Norwest Venture Partners

$53M Accel Partners

$50M New Enterprise Associates

$250M Softbank

$166M CDPQ

$101M Generation Investment Management

$100M JP Morgan Chase, Temasek

$80M Iconiq Capital

2 0 1 7 ’ s T o p R a i s e s

Source: Pitchbook

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Q u a r t e r l y E x i t s i n 2 0 1 7

14

$191M

$40M

$213M

$474M

$142M

$299M

$125M

$0M

$100M

$200M

$300M

$400M

$500M

Q1 Q2 Q3 Q4

Cum

ula

tive

Exit

Size

(in

$USD

)

IPO M&A PE

1

4

2

6

1

2

2

1. Source: Pitchbook2. Deal count excludes deals involving accelerators, incubators, and crowdfunding and deals with undisclosed values

The pace of exits has slowed over the year. Though strategic buyers were more active, PE firms spent more on average. PE firms were involved in ~30% of non-IPO exits but accounted for ~33% of capital spent.

T h e P a t h t o E x i t i s L o n g

1. Source: Pitchbook

15

10 12 41

151

59

330

727

2.3 2.8

3.4

8.3

9.1

14.8 14.5

-

2

4

6

8

10

12

14

16

-

100

200

300

400

500

600

700

800

Angel Seed Early Stage VC Late Stage VC M&A Private Equity IPO

Ave

rage

Com

pa

ny A

ge a

t Tim

e of

Dea

l

Ave

rage

Num

ber o

f Em

ploy

ees a

t Tim

e of

Dea

l

Average # of Employees Years Since Founding

$116M IPO (Nasdaq)

$75M IPO (Nasdaq)

$40M Yelp

$35M Welsh, Carson, Anderson, and Stowe

$32M Gannett Company

$470M Paysafe Group

$230M Clearlake Capital

$135M Snap Inc.

$128M Ellie Mae

$125M K1 Investment Management

2 0 1 7 ’ s T o p E x i t s

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Source: Pitchbook

Lessons & Takeaways

L e s s o n s & T a k e a w a y s

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Funding• Still lots of early stage activity• Every category is growing, even Martech• ~ ½ of funded startups go on to raise additional capital (at every stage)

Funding Challenges• Growth Rates in SMB• ChurnExits• No natural consolidator in SMB• 6 exits > $100M• Private Equity interest

T h e C a s e f o r P r i v a t e E q u i t y

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Better alignment (PEs expect to make money on every deal)

Opportunity to reset clock on cap table

Exit, but stay in charge

Two bites at the apple!

Shubham DattaDirector

shubham@surepathcapital.com 647.972.6834

Danial ShaikhSenior Analyst

danial@surepathcapital.com 647.876.5453

Mark MacLeodFounder & President

mark@surepathcapital.com416.843.6004

Josh SchermanVice-President

josh@surepathcapital.com646.420.0074

Toronto • San Francisco