How to Raise Money for Your SaaS

About this video

Dan Martell outlines how to fund a SaaS business without giving up the business, stressing that equity is the most valuable thing a founder has. He says SaaS multiples range from about 2x ARR on the low end to 7-10x on the high end, citing a client who he says exited at 10x on $1.5 million in ARR for $15 million. He describes coaching client Mark at about $1 million in ARR who considered a line of credit or VC, then closed about $750K in non-dilutive funding after reviewing alternatives. Martell says there are 11 funding sources and six funding models, including revenue-based financing and SEALs (Shared Earnings Agreements). His five steps are: 1) examine your exit - acquired, public, or hire a CEO and keep it as an annuity; 2) map your growth engine - know CAC including commissions and office costs, payback period, LTV, churn and expansion; 3) evaluate options by talking to banks, RBF firms and VCs without committing to one path; 4) calculate total cost of capital, noting a client who raised $500,000 early and later paid investors back $15 million over 15 years; 5) lock it in by committing for three to six months and telling your team you will be at reduced capacity until money is in the bank. He offers a Funding Evaluation cheat sheet download.

Key takeaways

• Protect equity; SaaS exits can reach 7-10x ARR
• Consider 11 sources including revenue-based financing and SEALs
• Start by defining your perfect exit outcome
• Know true CAC, payback, churn and expansion before raising
• Commit fully for 3-6 months until money is in the bank

Episode details: published May 25, 2020 · 11:07 long. Summary written by Self Growth Videos from the episode itself. Business results and any income figures mentioned are Dan Martell’s own claims, shared for education — they are not typical or guaranteed.

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