• Patsy van Winden

'Art or science?' Looking through the lens of a SaaS investor

Making a company attractive for VC's to invest in is the aim for many start-ups alike. In order to really grow your business from the founding few to an exponential scale-up, it's important to look at your company through the eyes of a potential investor.

At SaaStock in Dublin this week, we went to an interesting talk by Jos White at Notion Capital, who goes through the decision-making process he typically follows as an investor.

SaaStock 2019 | Jos White | Notion Capital

In a nutshell, he divides this process into the 'Art' and the 'Science'. Art being the emotional reaction a company gives to a person or a business, also the intangible factors, and science being the more tangible metrics.

Let me explain this.

When it comes to art, there are four important metrics to keep in mind:

1. The qualities of the founder and team

2. The disruptive nature of their idea

3. Their obsession about customer pain

4. The touch and feel of the product

At One. we really resonate with this notion. The reason we love working with scale-ups is because it gives us energy. We ensure that we partner up with those awesome scale-ups that have a team with the top qualities that we look for, have potential and are disruptive enough to be backed by investors. The products that really solve a problem for the end-customer is extremely important for us, as we want to be true partners of those we believe will shake up the world.

The science, on the other hand, embodies those factors that go beyond the emotional reaction a product gives.

According to White, these are:

1. Patterns recognition from an ever-expanding data set

One of the patterns that White looks at within a business is whether founders have been through the pain of solving a problem before, in a high growth start-up and corporate environment. They will be able to draw on the learnings from this previous experiences. Besides that, companies with top quality investors are a good indication of whether they are ready to scale.

But most importantly for us, the companies that have the ability to hire high calibre people before the company has fully matured are attractive to invest our time and people in. We mainly help connect leaders and scale-ups, which is why hiring these high calibre people is indicative for us that the company is ready to scale.

2. SaaS metrics: ACV, CAC, payback, MRR, growth, GM, DRR & churn

SaaS metrics are the tangible and trackable indicators that help measure the impact a company is already making, with growth being one of the most important metrics. According to White, a growth of at least 100% a year at a series A stage is indicative of an interesting company to follow.

3. Applying science to team evaluation

At One. we are all about building all star teams teams for our scale-up partners. Applying the above science to team evaluation is crucial. According to a research conducted by Maddy Cross at Notion Capital, Unicorns tend to hire far more senior managers, and the teams are far more diverse in experience and education. This is exactly why we focus on these top level hires, to help scale businesses far quicker and far more efficiently.

4. Product-market fit

Finally, it's all well and good to build this team of all stars, but in the end if there is no product-market fit then a product probably does not have the longevity to scale. Therefore, rather than just aligning proposition, pricing and the target market, White bases the question around whether there's a product-market fit on the following:

''How disappointed would you be if the product no longer existed?''

Asking customers this crucial question, and getting an answer of at least 7 out of 10, is a metric as to whether there is demand for a product and as a result whether it's worth investing in.

Are you an investor looking for those scale-ups that have the product you really believe in, and you are willing to invest your money and time in?

Or are you a scale-up that is in that crucial time of growth, and looking for the leaders that help accelerate this growth? Get in touch and we may be able to work towards this together soon.

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