On Wednesday, October 20, Capchase Co-founder and CEO, Miguel Fernandez, Capchase GM of Europe, Henrik Grim, and Capchase Partnerships Lead, Maria Pereda, sat down for three 30-minute webinars hosted by SaaStock with serial founders & investors in the SaaS space: Nicolas Colin, Co-founder, The Family; Avi Meir, CEO, TravelPerk; Godard Abel, CEO, G2; Christian Owen, CEO, Paddle; and Josh Bell, GP, Dawn Capital.
The European SaaS Market continues to go from strength to strength with a record number of new Unicorns and IPOs in 2021. A key part to ensure SaaS achieves the required growth rates to win is around how leaders fund and manage the finances of their business. In these three 30-minute webinars, Capchase sat down with serial founders & investors in the SaaS space to distill learnings on three topics:
- The key differences between funding in US vs Europe and what that means for CEOs/CFOs
- The strategies serial founders have used to raise multiple rounds
- Cash management strategies and tools to optimize growth
SaaS financing in Europe - key differences vs the US and why
Featuring: Capchase, Dawn Capital, and The Family
Henrik Grim from Capchase opened up the conversation by asking about the key differences between the US and EU SaaS markets. Josh Bell of Dawn Capital mentioned that in the last 2-3 years, he's seen alignment between the SaaS market and the European tech landscape. Now, there is no distinction between EU and US companies.
He also talked about how there's so much more capital and alternative capital entering the EU SaaS space, which makes the market even more competitive and interesting to analyze. Bell said, "it's terrific to be able to give companies capital based on their ARR and minimize equity dilution," as more companies look to alternative capital and revenue financing.
On the other hand, Nicolas Colin from The Family stated that the EU is very fragmented- it has many different markets with cultures, legislations, etc., and companies are confronted early on about focusing on a specific market with local culture in mind.
This makes it harder to design products that address more global needs since there's a greater need for localization throughout Europe just based on the way the market is set up. This is why he thinks EU companies have struggled more to access alternative capital. If companies decide to go global, they need to access more global capital, but that means they’ll need to compete with US companies, which is tougher.
Key takeaways
- The gap is closing between US & Europe in terms of SaaS financing dynamics. However, the US is still ahead on using non-dilutive financing, with 4-5x more non-dilutive financing deployed per VC dollar invested
- This is partly driven by a more fragmented market & ecosystem, but also less history & maturity: serial founders are typically 2x more positive to using non-dilutive financing vs first-time founders
- European founders are however catching up quickly on using new non-dilutive options, as new players and options emerge, and we can expect the non-dilutive financing market in Europe to grow quickly
Serial founders and their fundraising strategies - what are the learnings from having done multiple journeys?
Featuring: Capchase, G2, Travelperk
Miguel Fernandez from Capchase opened up the conversation by noting that both guests of the webinar have started multiple companies before. Avi Meir, CEO of Travelperk mentioned he's currently on his second startup. Previously he bootstrapped a business that couldn't raise VC but was ultimately sold to Booking.com. He has two philosophies towards fundraising: 1) Raise when there's a specific project in mind and then use the capital for that- for a specific need like a product build, expansion, etc.; 2) fundraise when the timing or dynamics of the market is right. Meir mentioned founders should choose the method that works well for their risk appetite and personality. "I like to build and develop stuff, so I want to minimize the time invested in fundraising," he said.
Similarly, Godard Abel, CEO of G2 mentioned his method mirrored Meir's. "As an Angel Investor, I see it's still hard for companies that are raising money. I was able to raise during the .com crash. I couldn't raise money for a few years after the market crash- I had to bootstrap and it made us build a better business, but it was hard. I also prefer to spend 95% of my time building, but I understand that it is hard for first timers- I don’t have the secret to making fundraising easier."
Key takeaways:
- Serial founders have experienced the journey of fundraising before, and therefore navigate financing options in a more balanced fashion during their next ventures, considering the pros/cons of the different financing alternatives
- For first time founders, it can be very beneficial to have experienced partners like Angels early on so they can help navigate the fundraising journey more efficiently and focus on building
Cash management to optimize for growth - strategies, tools, and do's/don'ts for founders
Featuring: Capchase and Paddle
Miguel Fernandez from Capchase opened up the conversation by asking Christian Owen, CEO of Paddle more about himself and his journey as an entrepreneur. Owen mentioned he started a company that sold software worldwide, and experienced the pain of figuring out the legal aspects and taxes of his business, which made it very frustrating to sell the product.
As he was doing all this, he noticed that that there were no tools that could help with what he needed, which is how Paddle came to be. When asked about how his company has been growing recently, Owen mentioned, “We’ve been very aggressive with growth but been very capital efficient. Being very measured and considerate on how efficient we are with our capital spending has allowed us to grow further."
When asked about what things he considered for revenue and cash management, Owen mentioned scalability. He said focusing on fixing problems today without thinking about the problems that might come up a few months down the line is a main reason for why companies may burn through their runway quicker.
Even investors want to know how a company will optimize before they agree to invest because they want to make sure that their money will be well-spent, regardless of the the type of financing a company is getting (VC or expense financing). Owen ended by saying, “The bigger a business becomes, the harder it becomes to optimize the revenue management. If founders solve for these problems early, the solutions last for a long time. It pays in the long run to invest in the infrastructure early on.”
Key takeaways:
- New tools can help founders to navigate revenue and cash management much more efficiently, allowing them to grow faster
- Tracking & planning is key for successful cash management
- Use ROI on cash spend as a main KPI for growth
- Invest in revenue management systems and processes early on in the business lifecycle
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