You may not realise it, but your cloud platform plays a crucial part in scaling your business and attracting funding.
Here’s a typical scenario:
Your development team is missing deadlines for new product features or paid feature requests because they’re constantly getting pulled away from development to put out operational fires on your cloud platform.
Due to the impacts of not getting those key features in market, or the paid feature requests shipped soon enough, you as the founder or CEO spend more time fund-raising, instead of driving the business forward.
Due to the shorter time between rounds, the capital value of your business hasn’t grown as much as it could have, forcing you and your current investors to dilute more to get the funding required.
Does this sound familiar?
If so, you’re not alone, in-fact this is a regular scenario in fast growing startups. It’s an “operational maturity inflection point”, exacerbated by tech-debt whereby you create your software product on existing, sometimes limited, technology to get it to market, knowing those shortcuts will have impacts down the line.
Here’s how you can make your SaaS start-up more attractive to investors.
Reduce tech debt
“Tech debt is one of the enemies of growth,” says Symon Thurlow, co-founder of SaaS services specialist Parallo, which has worked exclusively with SaaS companies for the past seven years.
“The technology world moves so quickly. When you first built your application, you might have built it to serve 1,000 customers, and suddenly you realise you’re closer to 100,000 – and there is a rev-limiter on the horizon! So then there’s a massive sprint to unpack everything and rebuild to scale and then go through to the next plateau. It’s not unusual, especially if a SaaS company suddenly grows really quickly, that growth can outstrip the pace of innovation on the platform.”
The solution is, as you start scaling up, to invest tech-debt minimisation in your development cycles, thereby minimising tech debt and enabling you to keep growing.
Optimise your cloud management
Since applications nowadays run on public cloud systems such as Microsoft’s Azure, having solid cloud management in place frees up your development team to wow customers and allow founders and CEOs to focus on business growth.
Investors and those seeking to acquire SaaS companies are also looking for efficiencies, says Symon.
“Part of the equation that will make a SaaS company attractive to an acquirer is how efficient the use of the public cloud is because after people, cloud is the second biggest cost,” Symon shares. “So if you’re highly efficient with how you’re using cloud, and you’ve got that cost down, your margin will be greater, and showing healthy GP is obviously important to investors and acquirers.”
Parallo specialises in cloud management for SaaS companies. Over the past seven years, Symon and his team have worked with more than 50 SaaS companies at all stages, through all funding rounds. In the past 18 months alone, the company has worked with or supported SaaS companies that have had a total sale or exit value of over $1.8 billion.
“We started out as IT engineers, but have come to realise the key benefit we can bring to a SaaS company is extending the cash runway, and increasing capital value at the time of the next round,” says Symon.
Extending the cash runway and increasing capital value is not only important to founders but also existing investors, says Symon. “If they’ve bought in at X value and they own X per cent, if that SaaS business is really efficient with the way they’re using cash and they’re growing at a really good rate, then those investors will retain more of their investment as the next round comes and they won’t have to dilute as much.”
In some cases, effective cloud management will be a key factor in securing investment or purchase of your SaaS company. This was the case with one of Parallo’s clients where, during a due diligence process, the acquirer insisted the SaaS company make some changes to its public cloud configuration as a condition of purchase. “By doing this we contributed to getting the deal over the line,” says Symon.
Demonstrate top-class security
Security is another consideration that both customers and investors look for, especially in cloud-based applications which are increasingly the focus for online attacks.
“If you can demonstrate that you have a security management system in place and ideally certified to an ISO standard, that gives comfort to investors, and de-risks the opportunity” says Symon. “The great thing about public clouds, especially Microsoft, is that they have an enormous amount of world-class security features built in, which most small startups will never be able to afford. So for cents on the dollar, you get access to these features. There is no valid reason to not be fundamentally secure”.
“A lot of our customers are pretty early stage,” says Symon. “That’s a really great time to bring us in, before you hit major pain points.”
Register to win a SaaS Growth Workshop with Symon Thurlow
Parallo is offering a SaaS Workshop with Symon Thurlow. During these individual, one-on-one sessions with Symon, you’ll learn how to perfect your pitch to investors and understand how your platform management and performance can make you more attractive to funders. You get to ask the questions. Find out more here.
This article is brought to you by Startup Daily in partnership with Parallo.