Xavier Fuya


20th May 2021

WEBINAR SERIES (Pt.1): “How to master an investment DD for your SaaS startup”  

This post is part of a three-part series summarising learnings from the webinar series on fundraising. You can find the notes from sessions 2 (here) and 3 (here).

You can find the presentation slides for this session here.

Session 1: “Before DD” 

On Wednesday May 12th, we kicked off our three-session webinar co-hosted by Nauta Capital and Metrix PartnersIn this webinar we will discuss “How to master the investment Due Diligence for your SaaS startup”, shedding light on this important topic by providing real-life examples on how top SaaS startups have managed their investment due diligence processes? 

This webinar series comprises three sessions 

  • Session 1 – Before DD: How to prepare for investment due diligence (May 12th, 6pm CET)  

At the end of this post you will find both the recording of the whole webinar and the slides presented during the session covering Before Due Diligence. We recommend watching the whole webinar, especially if you are planning to join us for our next sessions.    

  • Session 2 – During DD: How to run an investment due diligence (June 9th, 6pm CET) 

Success in DD is defined by: (a) your ability to negotiate and close a round, and (b) your ability to run a robust process, which by the way is contingent on having done a good preparation. Rememberdo your homework and check the previous session ?  

  • Session 3 – After DD: How to return to business (July 7th, 6pm CET) 

Extracting value-add from your DD workhow to manage stakeholders’ expectations and relationships; navigate towards the next round whilst building optionality. 

You can still sign up to the webinar series here. 

Further details on each session’s content can be found on the landbot. If you are fundraising or will be fundraising in the future, we would encourage you to join this webinar series and share it with whomever you think can take advantage of participating. 

For those of you strapped for time, we have prepared a summary with the most important points of the session 1. We hope you find it useful. Here it goes:  

Takeaways from the session 1, Before DD 

Objective: Why is preparing for DD important? Because planning and organisation will allow you to close the round successfully and fasterperhaps even raising your valuation. Always keep your house tidy! Prepare in advance and have the ground ready for investors. Holded, for instance, did amazingly well on this first step and were praised on how well organised everything was when closing their Series B round. ? 

Section 1: Charting your investment landscape 

  • Fundraising is a sales processFundraising is a numbers game, but sprayandpray tactics do not work. Contacting investors without understanding who or what type they are is a mistakeReach out to investors in a relevant way. Reputation is important, do not burn your image! 
  • Organise yourself in such a way that investors can have a better understanding of the company you are building. Buila great data room, we mean, best in reach and quality, not in volume of documents! 
  • Run a controlled process: Time management is key to get several interested parties at the same time. Always be responsive with information requests and run fundraising as a full-time job. As the CEO of the company, you MUST be on top.   
  • Maintain your investor CRMKeep records of every interaction. You can’t remember everything, and fundraising is a looong processrequiring lots of conversations with many different people. 
  • Fundraising is NOT a beauty contest! You only need one YES. But noes have value. Always request and record feedback after every rejection. It will help you iterate and improve your message.  

*Remember: the best way to get the best deal possible is have 2-3 Term Sheets on the table. This can only be achieved through a strong process.  

Section 2: Selecting key metrics that impact the valuation and reporting them well 

  • B2B SaaS company valuations are mainly driven by three metrics: Growth, Net Revenue Retention, Acquisition Efficiency (CAC, CLTV or CAC payback period) 
  • Don’t get us wrong, you can still get away without great metrics and the three mentioned above are not the only ones that matter. Hot industries and hyped markets can also impact positively (…or negatively! ?) 
  • SaaS-ify your company. Automating processes will save you time and inconsistencies. Don’t be cheap if you can afford it: some tools might be expensive, but they are worth every penny. They can save your DD. Processes like billing, accounting and gathering subscription metrics must be 100% accurate. Be professional with these processes from day 1! Do not compromise data quality, you need reliable information across the company to make appropriate decisions. 

Section 3: From accounting to the best management accounts 

  • Adapt your storytelling and be sensitive to context. The story you present must consider why you are fundraising and what for. A prerevenue or a seed round has nothing to do with a Series A and a Series B round from an investor analysis perspective. You must know exactly what the investor in your stage is looking for: team, product, processes, efficiency, go to market, etc. 
  • The risk a VC can take is related to the team, product, market, competition, even industry regulation. But VCs do not want to take many risks related to financial, tax or legal matters. Those matters need to be 100% correct and trustworthy. If that is not the casethe DD will bring those risks to the surface and at best you will get lots of representations & warranties in your investment agreement, or, at worst, the investor will walk away. 

Section 4: Business planning scenarios 

  • Start with the top line, but with a bottom-up approach. Run different scenarios and stresstest hypotheses. Be ready to have your business plan challenged. Indeed, a challenge is what you should be looking for: having a value-add investor means open discussion on strategic aspects of your company. 
  • Use benchmarks and be familiar with the metrics investors expect. If there is a specific KPI that you have not nailed yet, prepare answers, and try to have a good explanation on how you are going to fix it to bring it closer to industry standards. 

Q&A Section 

You can find the Q&A section in the recording, from minute 50 onwards. Feel free to check it out, it will be worth it ?. There were lots of interesting questions from the audience but unfortunately, we did not have time to cover them all during the Q&A.  

The most important takeaway is simple: People buy from people they trust. 

You can find the materials on Session 1 “Before DD” below:  

  • Webinar video here. 
  • Presentation slides here. 

Lastly, remember that you can still sign up for this webinar series here. The next session will be on 9th June 2021, at 6pm CET. See you there!!