Zorian Rotenberg

New Private SaaS M&A data available for Q1/24! 📊 Software Equity Group just released its latest quarterly report for 1Q/24 on the private SaaS M&A space.* It is packed with interesting insights into buyer types, valuations, preferred segments/verticals, etc. _____ 📄 Brief summary: ➡️ Software Industry M&A Trends The first quarter of 2024 (1Q24) saw steady M&A activity with 823 deals, consistent with last year and significantly higher than pre-pandemic levels. This trend reflects a sustained interest in the software sector. ➡️ SaaS Sector Dynamics SaaS M&A experienced a slight dip recently, influenced by economic factors and interest rate hikes. Nevertheless, activity remains robust, showing a 50% increase from early pre-2022 averages. ➡️ Valuation Insights M&A valuations have stabilized, with a median EV/TTM Revenue multiple of 3.8x and an average of 5.1x. As interest rates are expected to drop, we may see an impact on future valuations. ➡️ Vertical Market Focus Vertical SaaS made up nearly half of the Q1 deals, dominated by Healthcare and Financial Services. There’s growing interest in sectors like Hospitality, Retail, and Manufacturing, indicating a diversification in investment focus. ➡️ Private Equity Influence Private equity continues to drive SaaS M&A, involved in 59% of the deals this quarter. This is driven by PE-backed strategics (48%) that continue to leverage an ideal mix of product synergies and capital allocated to M&A _____ Doesn't look so bad after all. If you ask me, there is cause for slight optimism. What do you think, are we through the worst? *Link to the full report below! 🙂 #saas #startups #vc #venturecapital #funding #exit #valuation #mergersandacquisitions #privateequity

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💡Benchmarks in the investment industry serve as a standard for measuring the performance of securities, mutual funds, or investment managers. They provide a reference point for analyzing allocation, risk, and return of a portfolio, enabling investors to make informed decisions. Thanks Peter Walker for keeping us all informed!! Can’t wait for this!! Follow and get on the waitlist for this one! #benchmarks #fundraising #Capitalraise #founders #womenshealth #femhealth #medtech #wellness

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This is quite interesting advice and also quite a non-consensus view in the B2B software world. Cross-border founders who are considering the US vs International incorporation question should consider this as valuable input.

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We mapped out the biggest software PE investors of the last decade!🚀 📊Leading the pack are TA Associates, Vista Equity Partners, Thoma Bravo, Hg, and Battery Ventures. 👉They are not just backing companies but are helping founders scale their software business to new heights. 🌟 For founders in the software space looking for PE investment, we have covered detailed profiles of these PE funds that include their investment criteria such as investment size, geographical focus, revenue requirements, and board seat preferences. 👉The strategies of these funds range from growth equity to full buyouts, impacting software companies at various stages. 🔥Read the full article here: https://lnkd.in/dXzrEG2B #software #privateequity #softwareinvestor #mergersandacquisitions

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Another very interesting piece of Thought Leadership by our Polish Globalscope Partners Ltd partner, Aventis Advisors, regarding the biggest PE investors in the Global Software vertical in the last decade. Congratulations Marcin Majewski and the rest of the team for such an insightful research. 🔥Read the full article here: https://lnkd.in/dXzrEG2B #LiberdadeCapital #AventisAdvisors #GlobalscopePartners #GlobalTeam #ThoughtLeadership

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KNOW YOUR REAL BUSINESS ECONOMICS • GAAP Revenue • Cash Flow • Cash • Contribution Margin • CAC • CAC Payback FUNDRAISING: PRESENT & SUBSTANTIATE FINANCIALS • Investor needs to know what your forecasts are • They need to believe them David Weiden, Khosla Ventures

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NVDA Earnings Outlook – What’s the Real Catalyst? There’s a lot of debate heading into NVDA’s January quarter revenue guide. Some argue $38B is enough for the stock to hold, but I disagree. I believe this is just setting a low bar – $39-40B is the range that truly drives the stock higher. That said, even a pullback on an “in-line” guide is likely to be short-lived, as nearly everyone seems eager to buy NVDA on any dip. This quarter, frankly, isn’t the make-or-break moment for NVDA. The focus is shifting to CY25, specifically the April quarter guide when Blackwell reaches full production. The real positioning push will come ahead of Q1CY25, the February earnings call, and GTC in March. There’s debate about whether NVDA is “super max owned” across the buy-side. Some say it’s not as crowded as it seems, but one thing is clear – many want to own more on any weakness. As for tonight’s earnings, my caution is that we probably won’t see anything game-changing that moves the buyside’s CY25 EPS whisper above the current $5.50–6.00 range. The real risk? Gross margins below 73%. While this seems unlikely, it would weigh on the broader story. The market’s consensus seems to be that adding $2B to the January quarter guide gets you above $40B – and that’s more than enough for most to stay bullish. But the true story is still ahead in CY25. Source: Mizuho’s Jordan Klein

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Great analysis by the AGC team on SaaS public company comps. It's worth a look as we recalibrate mid-way through earnings season. The analysis aligns with the broader Nasdaq equity performance, where the Mag 7 (or fab 4 now :-)) have shown more resilience than the rest of the market. #AGC #SaaS #EarningsSeason #Nasdaq #EquityPerformance

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Conventional wisdom says bigger deals equal bigger returns. But does the math back it up? Our analysis shows Micro SaaS firms can outpace larger players re ARR/FTE and EBITDA/FTE, which translates directly to valuation. The key is high-leverage operating models and ruthless efficiency. What’s your take on return on effort in sub-scale SaaS firms?

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A quick summary of considerations / thoughts for LPs investing in VC today. *Not Investment Advice* - Smaller funds provide higher return potential, but come with much more volatility (as a whole).  - Emerging Managers typically have the best alignment (smaller funds, hungry-to-succeed GPs, fees) but many have to go through a steep learning curves regarding operational governance, culture building, portfolio management, and LP relations).  -Beware of overweighting performance benchmarks as they often don’t go granular enough across fund sizes/types and sample sizes can be limited.  -Understand a manager’s valuation methodology. Careful review of marks may reveal an overally aggresive or conservative valuation policy. Know the marks of the top companies when assessing track records.  -Track records offer headlines. What you are looking for is the repeatability of outperformance, which need to factor in fund size changes, team changes, competitive shifts, and details around the "how" of past winners as it relates to potential systems the GP has for sourcing, picking, and winning.  -Median performance will not be enough. PE buyout is better if you are generating median returns.  -VC cannot be characterized as a good or bad asset class but a “Depends” asset class. It depends on the LP's ability to find and gain access to managers with the highest probability of outperformance. This isn’t easy and takes time. It's why I've spoken about the 90/10 issue in VC. While VC for many investors is often only 10% of a portfolio, it can easily take 90% of your time to appropriately build relationships, diligence managers, and make sense of evolving dynamics. -For new LPs, starting with directs is usually not the way to go; Adverse selection runs rampant, and you do not want to be the last call to invest after everyone else has passed (yes, there are times this works, but history hasn’t been kind). Most emerging LPs should probably start with funds to learn / de-risk.  -While it was gone in 2021, The J-curve is back. Expect the first 2-3 years of a fund to show negative net returns as times between rounds increase (mark-ups), deployment has slowed, and graduation rates of companies for the next round have decreased. -Technology breakthroughs like AI follow patterns where investment activity and excitement outpaces infrastructure and adoption. The top AI companies will be some of the most valuable companies of the future, but the vast majority will underperform significantly. During the Internet hype, for every Amazon/Google, there was an eToys or Webvan. -Liquidity is a real problem, but two potential outlets are coming - 1) VC GP-led secondaries are rising in prominence, and 2) Rate environment should start to unlock organic IPO / M&A activity as multiples start expanding. - The market is definitely a Tale of Two Cities. Strong funds/companies are well oversubscribed, but VERY hard for everyone else. The oversubscribed camp is<10%

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Your sourcing game is the lifeblood of a syndicate Notably Zachary & I have very different sourcing models as do different funds. Funds like Summit are notorious cold calling machines to find great deals. Some funds like Proof built their model as a co-investment / pro-rata fund and work with VC funds directly to source the best opportunities. Another fund we’re close with leverages their deep technical network founders to get introductions into the companies on the bleeding edge of tech. Zachary's sourcing is almost entirely done through partners including other syndicates and VCs; while mine is similar, I do leverage a bunch of deals through direct relationships and VCs in the ecosystem. Point being there is not one size fits all for sourcing. Notably your sourcing may evolve over time. Zach hesitated initially on starting his own venture firm because candidly he didn’t understand how to source. At his prior fund he worked at, his sourcing was built primarily around a lot of cold emailing. When he started Calm that was his primary avenue for deal flow as well - unapologetically emailing any company that looked interesting and filtering/diligencing from there. It worked and he got some extremely strong access through cold and warm introductions. But the model evolved, quite organically, with now his sourcing done primarily through ongoing partners. How did it evolve to this? Well it turns out that there are a lot of network effects built into this ecosystem. The more you’re involved in finding and executing investments, the more people you meet, the large reputation you get, the more people that want to work with you and so on. And that’s more or less how Zach shifted to a network driven firm. In general I’d play to your strengths when it comes to sourcing deal flow. Do you have deep talent networks - if so leverage those. Are you a sales / hustling machine, then perhaps cold/warm introductions are your best bet. Do you have extreme value add - find the best companies that need your skills to win deals. Do you have a media presence and public brand - leverage it to build PR for founders you invest in. Whatever your strength and value adds are - play to them. -- Powered by Sydecar and Forge, Last Money In Media is the most actionable venture capital newsletter. Written by Zachary Ginsburg and Alex Pattis, the global syndicate leaders with 800+ SPVs invested.

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https://buff.ly/46dCF4M A Comprehensive Guide for Pitch Decks (Investor Deck) Versions provides valuable insights into crafting effective presentations for potential investors. This resource covers essential elements like market analysis, financial projections, and competitive landscape assessment. It emphasizes the importance of clear communication and compelling storytelling to engage investors. Additionally, it offers tips on structuring the deck for maximum impact, utilizing visuals effectively, and tailoring the content to the target audience. Understanding these principles can significantly increase the chances of securing funding for your business. #PitchDecks #InvestorRelations

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Envestnet shares climb after it drops 63-page bombshell disclosure about late $70 bid from competitor's board member More details out about Yodlee, and where investors/acquirers are pinning the valuation. Compared to Plaid or MX or the others in this space, it is much lower then potential upside opportunity! D&A business, with a valuation between $250 million to $325 million," the disclosure reads. But the perception of Yodlee's value deteriorated over time – not helped by “public litigation” against the unit, the document states. "On June 12, 2024, the Company received ‘round two’ proposals from potential buyers to acquire the D&A Business, which proposals valued the D&A Business from $100 million to $220 million and requested further information on the public litigation involving the D&A Business. https://lnkd.in/gP85N26K

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How Do Venture Capitalists Make Decisions A foundational 64-Page study that surveyed 850+ VCs at 681 firms to learn how they make decisions across eight key areas: • Deal Sourcing • Investment Selection • Valuation • Deal Structure • Post-Investment Value-Add • Exits • Internal Organization of Firms • Relationships with Limited Partners "In this paper, we seek to better understand what Venture Capitalists (VCs) do and, potentially, why they have been successful. We do so by surveying almost 900 VCs and asking how they make decisions about their investments and portfolios. We also explore cross-sectional variation in VC practices across industry, stage, geography and past success." Credit: Paul Gompers, Will Gornall, Steven Kaplan, Ilya Strebulaev, Brian Ortiz Join 80,000+ founders and VCs who receive these insights in my weekly newsletter: https://lnkd.in/dCpgAYjt

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Last week, we shared the first part (1/2) of our perspectives on vertical SaaS (vSaaS), more specifically on which metrics define the performance of vSaaS businesses and outlining the benchmarks for each of these metrics. If you have not yet read the piece, give it a read here - https://lnkd.in/d94n2bgN This week we published the second part (2/2) where we call out certain strategies deployed by successful vSaaS companies like Procore Technologies Toast ServiceNow Zenoti and others that can be used to improve the metrics that matter. Read on to layer the numbers with the strats- https://lnkd.in/dPkmWFax Do reach out if you are building in the space or want to exchange notes / feedback on the perspectives. #fintech #verticaSaaS #embeddedfinance #investments

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Private Equity Myth BUSTED:  The Myth:  Great PE buyers try to pay the least amount of money possible for good deals. THE TRUTH: Great buyers work incredibly hard to gain a competitive advantage over any other group that is analyzing the same deal.  They want to submit the BEST (and often highest) possible offer that will WIN them the deal. This sounds simple, but it's a common misconception. Novice buyers look at a company’s P&L and say “We can’t pay more than 5-6x EBITA for this company ever.”  Their offers reflect that mentality. Top buyers analyze everything about the business with incredible detail and ask themselves “How can we put in the best possible bid that will WIN us the deal?” If they think most offers will come in at 5-6x EBITA for a company, they will look for every reason possible to offer 7x and win in the most fiduciary way possible. This is because they plan to grow the company significantly post acquisition, so if they prove to themselves that significant growth is attainable, they do not mind paying top dollar today to afford themselves that opportunity.

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LP Tip #20 out of #50: To re-up or not to re-up A re-up refers to an LP making an additional investment in a fund where they previously invested. Before we dive in I want to share that there are reasons an LP may not to re-up which are not in your control. Here is a short list: ➡️ The LP may have evolved their strategy and needs to scale back the #️⃣ of funds they invested in.   ➡️ The LP was never set up to re-up in the first place. ➡️ The LP could be an individual that found themselves in a cash crunch and overly exposed to venture.  I'm assuming that when you got your investment that the LP explicitly told you they do re-ups. Please do not assume they do. My expectation is also that the LP dug in to properly underwrite the fund. 🏴 Re-ups are not automatic. An LP will have to re-underwrite each fund. The speed of the re-up also depends on how much work was done in the initial investment, who led the investment, level of confidence there existed when that investment was done, and current pipeline of funds. There are 4 flags that may cause an LP to walk away. 1️⃣ Partner Breakups/Changes and Team Turnover:  The biggest risk in Partnerships are whether the Partners will stay together. One LP gave me a framework on how to think through this issue that has stuck with me. Partnership is like a marriage. If one feels there is potential for a breakup, does one believe it will be an amicable breakup? Or, does one believe the spouses will never talk again? If it is an amicable split that is manageable. The Partners can find a way to support the fund. Then the question becomes whether the LP wants to back the Partner/s that remain.  If there is high team turnover. The LP will want to investigate because team stability is used as a proxy for firm sustainability and ability to scale. 2️⃣ Fund Does not Execute on what they Sold the LP:  The LP “bought” something specific and typically it is because they were missing this strategy or wanted exposure to a strategy for the portfolio they were constructing. An institutional LP will invest and write a detailed investment memo flagging all the things you said you were going to do and then go back and compare when you come back to ask for money. If for example you pitched a generalist seed stage fund and you show up asking for money sharing that you invested in deeptech at A that will cause alarm. The same can be said for the number of companies you promised to invest in or check sizes you wrote. If there are big differences LPs will want to know why. 3️⃣ Bad Actions  The fund manager/s does something that is unethical. This is a no go for an LP.  What if the situation is not clearcut? This is different for everyone and requires discussions b/w GP and LP, but most LPs don't want headline risk. 4️⃣ Continuous Underperformance  If it's early days an LP will look at some key indicators to see how you are progressing over time.

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