Entry level Market Analysis 2.

Software as a Service (SaaS)

Market Outlook

As we progress into a more technological world, the SaaS market have been attracting increasing
attention as it has undergone rapid development. “Over the past 10 years, the global SaaS market
size grew significantly, registering a compound annual growth rate of 25%” (Deloitte, 2021).

The recent economic downturn has significantly impacted SaaS companies with many terming it a
tech market crash. With the value of public SaaS companies appreciating greatly during the COVID
peak, the past 6 months have seen the largest period of value depreciation I the history of public
SaaS. Although the general market trends for SaaS companies are on the downturn, venture capital
backed SaaS startups have resisted the slowdown better than general expectations. According
to Carta data, SaaS startups using the platform raised a total of $1.04 billion in Series A deals, only 38%
less than in Q4 2021 ($1.70 billion). For comparison, health tech Series A funding was down 64%,
falling from $1.03 billion to $370 million.

Market Size

A report published by Allied Market Research estimated the global SaaS market to be valued at
121.33 billion in 2020 and is projected to reach 702.19 billion in 2030 growing at a CAGR of 18.8%
from 2021 to 2030.

Customer Analysis

The current state of the SaaS industry is as follows:

• 73% of businesses plan to switch all systems to SaaS

• SaaS spending by all customers are projected to increase by 44%
• 70% of CIOs are attracted to cloud-based SaaS for its agility and scalability
• 94% of technical professionals use SaaS solutions
• 37% of companies adopt cloud-based systems for their flexibility
• 50% of US government organisations are now using the cloud

Customer Perceptions

Adopters of SaaS are generally in consensus that the technology plays a crucial role in their
businesses. Customer perceptions are generally quite favorable.

Key Trends in the Industry

SaaS Regulations

1. There has been a general increased demand for collaboration software. Owl Labs founds
that nearly 70% of all full-time employees in the USA are now working from home of which
has boosted the necessity for such collaboration software. A significant player in this space
has been Slack which boasts 10 million plus users. Another example is Codepen which has
been a collaborative code tool for programmers.
2. Anther trend has been in the emergence of vertical SaaS products which is software created
for a very specific niche. For instance, Brightwheel is designed specifically for people that
 work at day care centers. So, not only are there SaaS products that cater for abroad range of
needs but also very specific niches.
3. A large reason for the adoption of cloud and SaaS trending upwards is in part due to the
anticipated cost and labour savings of adopting these technologies. When the IT deployment
model in completely on-premise, IT is responsible for everything, including, planning,
architecting, deploying and protecting the physical contents. However, with SaaS, the service
provider manages all the hardware and the software, here the IT department only needs to
manage the administration of the application.
4. A significant trend within SaaS has been within AI technology becoming a fast standard
within the SaaS industry. Autonomous innovations empower businesses across industries
with the ability to drive greater product, service, or content personalization while gaining a
deeper data driven understanding of their audience.

SaaS Deal Activity

1. 2021 was a record year for ventures and private equity growth fundraising, closing $196
billion in funds which is a 41% increase over 2020.
2. A dealmaker, Tiger Global raised $11 billion for its fund in January 2022 as investors re-
evaluated investment opportunities
3. Late-stage valuations are primed for a pull-back evident from the steep sell-off in 2022
4. In 2021 855 SaaS startups were funded with a total valuation of 2.2billion
5. Pre-money valuations of series C SaaS startups grew from the 25th to the 75th percentile
Key Players Analysis:

Canva

Product/Service: canvas is an online design and publishing tool with a mission to empower
everyone in the world to design and publish creative designs. They target both businesses and
individuals.

Revenue between 2016-2020:

• 2016: $23.5million
• 2017: $60 million
• 2018: $84 million
• 2019: $105 million
• 2020: $656 million

Employee Count: ~2000

Recent Developments:

• Canva has blocked Russia from its operations after previous criticism

Salesforce

Product/Service: salesforce is a cloud computing services as a software company that specializes

in customer relationship management. Salesforce’s services allow businesses to use cloud
technology to better connect with customers, partners and potential customers. The software
has become the number one for customer success and helps businesses track customer activity,
market to customers and many more services.

Revenue between 2015-2020:

• 2015: $1.37 billion

• 2016: $6.66 billion
• 2017: $8.39 billion
• 2018: $10.54 billion
• 2019: $13.28 billion
• 2020: $17.09 billion

Employee Count: ~73,542

Recent Developments:

• May become involved with the NFT cloud pilot which has been a controversial decision

Xero

Product/Service: xero offers accounting software for small businesses, their banks and their
advisors making accounting much more efficient.

Revenue between 2015-2020:

• 2015: $120.9 million

• 2016: $137.2 million
• 2017: $295.4 million
• 2018: $375.7 million
• 2019: $516.11 million
• 2020: $682.5 million

Employee Count: ~4,500

Recent Developments:

• Airwallex launches direct payment link for Xero invoices

Ledger

Market: The current global blockchain distributed ledger market size was valued at 2.89 billion in
2019 and is projected to reach 137.29 in 2027 growing at a CAGR of 62.7%.

Product/Problem: Ledger has designed an acclaimed line of hardware security devices. For
enterprises and corporations, Ledger has a fully managed SaaS solution addressing the need to
safeguard a very large amount of multiple cryptocurrencies while mitigating both IT and physical
assault threats. The company is also active in the industrial IoT market, leveraging its secure
hardware technology to interface sensors and machines to smart contracts or blockchain-based
assets.

Team: Currently comprised of 20 employees with 13 board members and advisors. Its IoT Senior
Product manager is Arnaud Danree who is an experienced product manager with a history of
working in network security. Their current CEO is Pascal Gauthier who has extensive founding
experience and management expertise.

Unique Insight:
The team has had extensive insights into the space of blockchain which give them strong advantages
in this newly emerging market

Metrics:

ARR → 20.7M

MRR →1.7M

MoEngage

Market: The current global customer engagement solutions market size is expected to grow from
USD 19.3 billion to USD 32.2 billion in 2027 with CAGR of 10.8%.

Product/Problem: businesses have great difficulty in retaining customers for the long term as well as
increasing their customer life time value, of which MoEngage looks to improve as they engage in
customer analysis to delight them with personalise communications at every touchpoint across their
customer lifecycle.

Team: the leadership team is comprised of 16 individual of incredible technical background, all from
different locations around the world. Notably, the CEO Raviteja Dodda has an extensive experience
in leading global teams and product management which enabled the team for extreme growth.

Unique Insight: the CTO Yashwant Kumar is the founder and CTO of MoEngage, he has over 10 years
of experience in delivering technology solutions and winning products for global companies which
strong aligns with the mission statement of MoEngage.

Metrics:

ARR → 25M

MRR →2.08M
LinkTree

Market: linktree’s market is incredibly specific, as they operate within ‘link-in-bio’. However, they
have dominated the market share with 83.82% of the Instagram marketing market.

Product/Problem: users of linktree previously had great difficulty in making their online content
more discoverable & easy to manage, however, linktree addresses that issue by creating an
accessible page for customers to view a user’s necessary links.

Team: linktree has 6 key management personnel. This includes 3 cofounders, a head of growth, head
of strategy, and a CTO.

Unique Insight: The CEO and Cofounder Alex Zaccaria has 20+ years in directorial positions which
enables him to effectively lead his team. Moreso, the head of growth Jessica Box has great expertise
in strategy with previous growth positions at many other startups.

Metrics:

ARR → 3M

MRR → 250,000M
Pitch Deck #1
Problem: What is the problem they are solving? High international transfer fees
- How many people experience this problem? The slides fail to mention this number.
- What are their customers saying? There is no customer validation within their slides.

Market: What market is this company in?

- How large is the TAM (Total Addressable Market)? No mentioned within the pitch deck.
- What is the opportunity in this market? Banks take 3-6% of a hidden margin on an
exchange rate which an additional fee of 10-25 pounds sterling for foreign payment whereas
TrasferWise is looking to replace this high fee with a flat rate of 1 pound sterling, allowing
peers to exchange at mid-market rate.

Team: Who is in the team?

- Are they formidable? The team is comprised of 2 cofounder who have experience in
financial services consulting with large firms such at Deloitte and PwC, the second
cofounder being an angel investor and early skype employee.
- Are they the right team to tackle this problem? From just the slides, it is hard to judge their
qualities on whether they will be able to address this problem and need within the market.

Metrics: What are their metrics?

- Any notable metrics that stand out? They have had 1million pounds worth of money go
through their systems with 70% of repeat customers. All of this without having spent $1 on
marketing, they have organic growth of 20% monthly.
- How do these metrics compare to the size and stage of the company? These metrics are
quite strong seeing as how this company is incredibly young.

Pitch Deck #2
Problem: What is the problem they are solving? High maintenance for businesses to
implement perk systems/salary sacrifice systems.
- How many people experience this problem? A specific figure was not delivered.
- What are their customers saying? 8000/10000 customers are saying how they would prefer
a salary sacrifice plan given the correct perks.

Market: What market is this company in? Employee satisfaction.

- How large is the TAM (Total Addressable Market)? Was not stated in the pitch deck.
- What is the opportunity in this market? Employee’s who would preference an employee
sacrifice scheme are not offered one as the maintenance for their firm is too complex.

Team: Who is in the team? Mat Vogels, Malte Muenke, Max Richman
- Are they formidable? The team is indeed formidable having progressed through Y
combinator as well as having experience in the founding process and the entrepreneurial
startup space.
- Are they the right team to tackle this problem? Given the provided skill sets they are indeed
the right team to address such an issue.

Metrics: What are their metrics?

- Any notable metrics that stand out? Before launch they were ablet o generate 1000
employees on their beta list of which can be converted into customers from launch.
- How do these metrics compare to the size and stage of the company? The company is
expecting to double and triple their monthly MRR each quarter in 2019 which is a strong
indicator of success.

Further Questions: What further questions would you ask? What is the actual market size,
and what are your channels of engaging your users?

Pitch Deck #3
Problem: What is the problem they are solving? Artists are seeking new ways of earning
revenue as the music industry business model has become disrupted.
- How many people experience this problem? This is not explicitly stated within the slides.
- What are their customers saying? The press is comparing Fyre to the new Coachella, no
real customer validation.

Market: What market is this company in? Music and events marketspace
- How large is the TAM (Total Addressable Market)? Not stated in the pitch deck.
- What is the opportunity in this market? To provide a cultural experience in a industry where
much music is digitalised.
Team: Who is in the team? The team is comprised of many individuals within the music
industry as well as a founder who has some event managing experience
- Are they formidable? Not at all
- Are they the right team to tackle this problem? Not at all.

Metrics: What are their metrics?

- Any notable metrics that stand out? 300MM social media impressions
- How do these metrics compare to the size and stage of the company? These impressions
are very impressive with a viral marketing leading its coveage

Further Questions: What further questions would you ask? How will you ensure that all the
stated ‘Fyre Starters’ will be in attendance.
Deal Flow Action Plan:

Assuming we do not have the relationships within the industry or the reputation for referred deals
or for startups to approach us, we will require actively scouted deals from the internal team.

Deal Sourcing

1. Analyze the market choice

2. Ensure that the business model fits in with our investment philosophy such that our deals
are procured adequately
3. We must also be able to create a network and a reputation within the space such that deals
will actively come to us.

Deal Screening

1. Screen startups that we have either been referred or discovered and assess their alignment
with our investment philosophy.
2. Identify a dedicated lead within the startup that will allow us to organize meetings and other
logistics.

Partner Review

1. Present the sourced companies that have been adequate so far to the partners for a review

Due Diligence

1. Do a deep dive into the potential opportunity for the startup

Investment Committee

1. Firm partners will discuss with industry experts once again and engage in further due
diligence before capital is deployed.
Investment Memo: Airbase

Summary: Airbase provides a solution to managing non-payroll expenses spent by a company which
has been historically difficult to track. For instance, marketing expenses, software subscriptions, T&E
employee engagement, and the number of other areas in which a typical business spend money are
all quite different to track due to the siloed and fragmented nature of the tools used.

Product: Airbase provides a solution to using multiple categories of tools typically used by mid-
market businesses to manage non-payroll expenses. Airbase is a workflow-driven software product
with a deep understanding of finance and accounting related items. They look to track all request
and approval workflows e.g. email, slack, Jira expenses, and track other costs such as expense
reimbursement and corporate card spending all on one platform.

Traction: Airbase has delivered its product globally, namely in North & South America, Europe, and
Asia.

Reasons to invest: Airbase has a strong market opportunity in the space with a strong first movers
advantage as well as a strong market presence. Their product is innovative and well designed with
strong traction.

Market Opportunity: Strong market opportunity in the space presents itself to Airbase. Currently,
the difficulty in tracking payments has yet to be addressed as current tools have remained siloed
until recently due to a lack of maturity of the underlying payments infrastructure which made
tracking such non-payroll expenses incredibly difficult.

Competitive Landscape: The current landscape is established by ‘legacy players’ who have created a
status quo which is yet to be disrupted. For instance, Expensify is a current player in the market
specific for reimbursement expenses. There are also emerging players such as Brex, Divvy, Ramp and
Teampay.

Operation plan: Airbase has a strong operation plan in the unification of multiple siloed tools into a
single spend platform. By owning all non-payroll related workflow tools will allow Airbase to charge
subscription fees.

Deal History

2019 April → Series A ($7,000,000)

2020 March→ Series A ($23,500,000)

2021 June → Series B ($60,000,000)

Due Diligence: Airbase

Team + Management: The leadership team is comprised of 8 individuals with Thejo Kote founding
airbase in 2017 who comes from an engineering background. Sarah Lovelace is the VP of people at
Airbase and has a wealth of experience in fast-growing companies.

Market: Airbase operates within the business spend management market and provides solutions to
procurement analytics and access to structure workflows. In 2019 the spend management market
was 1.08 billion with an expected CAGR od 17.7% from 2020 to 2027 such that they will hit
3.97billion USD by 2027.

Product: What actually enables your company to link all the siloed services together and what would
give a competitor difficulty in replicating your processes?

Traction: With a relatively small market valuation, how will Airbase attempt to gain greater market
share?

Financials: What are the projected financial figures going into 2023 and beyond? What is the cost of
customer acquisition and what is there subsequent life time value?

Legal: What are the legal challenges required to bring this product to markets since there is a lot of
financial management. And if there are incorrect expenses reported, how will this result in legal
ramifications.