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With more than 80% of venture capital investments occurring in enterprise and with the public markets disproportionately rewarding SaaS corporations with huge enterprise worth-to-revenue multiples (median is 7.6), it’s no surprise that interest Software-as-a-Service is booming. After meeting quite a number of SaaS companies, I’ve compiled a list of my ideal characteristics for a SaaS enterprise below.

Attribute 1: Product Is Core to the Operation of the Enterprise The product is essential to the operation of a buyer’s business. For example, Zuora enables subscription billing; Expensify manages worker expenses; ZenDesk builds buyer help systems. Prospects can’t perform without it.

Attribute 2: Price/Worth Proposition is Straightforward The product is either cheaper than the choice: hiring an engineering staff to build and preserve a custom implementation of the product;

Or provides network impact benefits otherwise inconceivable to search out: LinkedIn’s network effects drive the adoption of LinkedIn’s applicant tracking system;

Or gives sophisticated technology that's tough to replicate: Infer builds machine learning models on top of sales data to improve firm performance. Not every firm has ML expertise.

Characteristic 3: Finances Its Own Growth

The company benefits from negative working capital and shorter time-to-market.

Negative working capital means prospects pay at first of a month or quarter or year to make use of the product. These prospects pay to improve the software over time by providing cash up entrance, reducing the cash needs of the business. Because customers are paying to improve the product, relatively than buying a "production-ready" enterprise product, the company can go to market much earlier in their development.

At the outset, the company targets the less sophisticated SMB segment which doesn’t demand the compliance, heavy security and integration features needed by enterprise customers. This additionally decreasing time to market and provides revenues and product feedback in the quick term.

Attribute four: Efficient Sales Model

The company is able to recoup its cost of customer acquisition, be it on-line marketing or inside/outside sales, in less than a year. Ideally, the company gives 12 month contracts and the company might be profitable on a customer before the shopper has an option to churn. Hand-in-hand with this thought is powerful customer retention.

Characteristic 5: Market Leadership The corporate is already a market leader, is on the path to becoming the market leader, or is working in a segment with little viable competition. In SaaS, sales and marketing execution are critical to the success of the business. Competition will increase buyer acquisition costs and increases sales advancedity.

SaaS companies could be vastly valuable and for good reason: their products are core to their customers’ companies, provide something which is exclusive within the market (cheaper, higher), finance their own growth through efficient sales models and ideally establish market leadership.