Jeff Stevens & A.J. Wasserstein on The Future of Entrepreneurship Through Acquisition
In The Trenches
Challenges and Realities of Investing in SaaS Businesses
Investors are buying SaaS businesses at mid single digit multiples of revenue without utilizing leverage, requiring aggressive annual revenue growth to hit their targets. This trend raises the question of whether it is a natural consequence of software's expanding share of GDP or if the community is at risk of losing sight of the factors that made the model successful. Despite some successful outcomes with software businesses, there is skepticism about whether software businesses will outperform the broader market. In fact, the realized outcomes on software investments have underperformed the aggregate realized outcomes across the entire portfolio so far.
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