Why are SaaS companies so hot right now?

My Post (3).jpgIt just took Wall Street a while to fall in love with recurring revenue for business software.

You can see Aaron Levie, CEO of Box, sharing how Wall Street viewed SaaS in 2015 at SaaStr Annual right after they IPO’d in this quick video: “Did institutional buyers understand SaaS?” “A: They’re working on it”

Box was early to IPO of the next generation of B2B leaders, though.

The power of high customer revenue retention for 10+ years COMBINED with the fact that SaaS actually allowed companies like Adobe and Microsoft to dramatically increase the lifetime value of the customers (by getting more money in years 3–10+ while trading off less in years 1 and 2) … just took a while for everyone to get their arms around.

It’s Years 3–10+ of the customer lifetime where the power of SaaS recurring revenue business models starts to show up in the top line, and often Year 10+ in the cash flows.

It was harder to see all this in 2015 if you weren’t deep in the trenches yourself.

I wrote this in 2014 and the world laughed: Box Will Hit $1 Billion In Revenues Before You Know It

But now they all get it.

SaaS is a 20+ annuity. If you do it right.

Wall Street loves this now. – read more

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