Here Are the Top Funds Investing in SMB SaaS
As demand for SaaS products continues to rise, institutional investors are paying close attention to the growth opportunities. Over the course of 2020, public SaaS companies’ stocks reached near record highs, with the BVP Nasdaq Emerging Cloud Index reporting the basket of SaaS stocks rose by 80%. Strong performance in public SaaS companies often indicates high valuations and steady demand are in store for private small-and medium-sized SaaS businesses. This is giving prospective SaaS investors broad opportunities to invest in the digital space.
While SaaS businesses are no longer considered “alternative investments” by fund managers—indeed, institutional investors have been comfortable with online business investment since before 2013—investment funds specifically targeting this sector are in a relatively young space. Regardless, the strong demand from public markets means SaaS companies will have less trouble raising funding from VCs. Private sector demand has reinforced this idea, as a majority of online business investors are interested in SaaS due to the prevalence of recurring revenues and high margins (according to FE International, based on research into the investors whom they help acquire SaaS businesses.)
These are just some of the funds which SaaS founders, owners, and operators should keep an eye on if raising investment is part of their upcoming plans.
TinySeed
TinySeed was built specifically to work closely with SaaS bootstrappers to provide early-stage angel funding and mentoring. It is a year-long, remote accelerator that provides mentorship to SaaS founders, helps link other SaaS founders together, and provides startup founders enough funding to live for a year while they work on building the business.
Key Facts
- Announced in late 2018
- Aims to funds 10-15 companies at once
- Invests $120K for the first founder + $20K per additional founder, in exchange for 8-15% equity
- Money not devoted to living expenses is allotted to marketing, design, contractors and other expenses for growing the business
- Mentors for business strategy are a big part of the value they offer, all of whom can be found here: https://tinyseed.com/people
- Dividends split pro-rata based on ownership percentage
- Focuses on businesses with the potential to grow to 7-8 figures
Ways To Invest:
- Investment opportunities limited to those that can provide value on mentorship program
- Accredited investors only
Key Person(s)
Rob Walling, General Partner
Rob Walling founded and exited Drip (sole advisor: FE International), hosts Startups for the Rest of Us, and Zen Founder podcasts, has written 3 books, two of which became bestsellers and has published more than 400 essays. Rob runs MicroConf and is focusing on mentoring TinySeed investments for the foreseeable future.
Einar Vollset, General Partner
Einar is a YC-alum, former Cornell CS Professor, and the founder of Discretion Capital, a tech-focused M&A investment bank. He sold his first startup to Google in 2010 and exited his most recent in 2016.
LTV SaaS Fund
LTV Fund is “the world’s leading dedicated mid-cap SaaS investment fund”. LTV SaaS Fund specializes in mid- and long-term investments, boasting high triple-digit percent returns on investments of 3 years and above. They focus on SaaS businesses and recurring marketplace apps and their core projects are based in the US. However, they hold offices in Europe and Asia, meaning they are the most international of all of the funds featured here.
Uniquely, LTV Fund is an ‘open’ fund, meaning it has the ability to acquire/divest businesses throughout the lifetime of the fund, versus traditional ‘closed’ funds, which make investments at the outset and then cannot re-weight their holdings (for better or worse) without closing out the fund in its entirety. This unique feature allows LTV Fund to acquire other synergistic and strategic businesses along the way to maximize the fund’s yield through balance sheet appreciation as well as cash flow increases, and exit businesses at the optimal time.
This is possible through an intimate knowledge of the SaaS M&A industry, as well as an impeccable reputation with some of the largest M&A firms, entrepreneurs, and communities in the space.
LTV SaaS Fund is also responsible for LTV Conf, one of North Americas’ leading SaaS conferences for founders and investors.
Key Facts
- 100% founder buy-outs
- 10 years+ of operational history
- 40+ staff
- Track record of triple-digit percent return to investors
- Access to the world’s largest database of private acquisition data for SaaS businesses in the $1MM – $50MM range
- Over half a century of investment banking experience from bulk bracket banking to small and mid-cap acquisitions
- Offices in New York, London, and Hong Kong
- $10M – $100M under management
Ways To Invest:
- Accredited investors only in the 6-and 7-figure range
Key Person
Sean Hyatt, Chief Operations Officer
After successfully founding and operating several independent business ventures in multiple markets, Sean transitioned to the LTV SaaS Fund where he oversees the day-to-day operations of all internal and external teams, strategic product implementations, and technical product oversight efforts.
Indie.VC
Indie.VC is a 12-month program designed for founders who aim to build profitable companies. They help founders focus on revenue growth strategies without having to work on raising funding. They advertise a 100% revenue growth rate in the first 12 months, and 300% in the first 24 months, for the companies they back. Indie.VC sits under the investment firm O’Reilly AlphaTech Ventures, an early-stage investment firm founded by Mark Jacobsen, Tim O’Reilly, and Bryce Roberts. OATV has four funds with between 16-22 properties each in the digital space.
Key Facts
- Fund post-revenue tech or tech-enabled businesses
- 15 investments so far
- Targeting “overlooked demographics” claiming they thrive under their funding and training program
- Conversion trigger ranges from $500,000 to $5M, before conversion to equity is triggered
- Redemption amount typically between 3% to 7%
- Offer to connect founders with each other through quarterly events featuring panels with experts (past participants include the founder of Basecamp, founder of Swift, and founder of Pardot)
- Seek to be the last round of funding companies take
- Prefers to be lead investor
- Provides between $100K to $1M in funds, with an average investment around $285K
- Offers start-ups the option to buy back the firm’s shares as a portion of their total sales—which caps the firm’s return at three times its investment
- Publishes V3 investment documents on GitHub
Ways To Invest:
- Private
Key Person(s)
Bryce Roberts, Managing Director/Co-Founder of OATV and Indie.VC
Bryce focuses on consumer and enterprise software and service investments. Prior to OATV, he led many successful early-stage investments at Wasatch Venture Fund and began his career in technology doing large enterprise software deployments. Bryce works closely with the other MD, Mark Jacobsen, who has advised entrepreneurs for over 25 years, helping them build their companies.
SaaS.Group
Founded in 2017, SaaS.group invests in established SMBs to help them grow a pre-existing, profitable SaaS product once the founder wants to exit the business. With a focus on LTV, content marketing, and conversion chain optimization, SaaS.group partners with institutional investors in the software industry through a diversified SaaS portfolio. Recently, SaaS.Group acquired Juicer.io in a deal solely advised upon by leading mid-market SaaS M&A advisors FE International.
Key Facts
- Investments in the 7- and 8-figure range
- Privately funded
- Most recent acquisitions include Juicer.io and DeployBot.com
- Value investors
- Track record of 8-figure exits
Ways To Invest:
- Private
Key Person(s)
Ulrich Essmann, Partner
Ulrich is an Angel Investor with TechSeed Ventures GmbH, and the co-founder, president, and CPO of Sedo.com (exit 2013). Since his company exit in 2013, Ulrich has made angel investments in companies like Researchgate.net, Goodwall.org, Apptopia.com, SteadyHQ.com, Miomente.de, and supported reward-based German crowdfunding projects like original-unverpackt.de and krautreporter.de.
Tim Schumacher, Partner
Tim, the business partner of Ulrich, co-founded Sedo.com in 2001, the world’s largest domain market place. Since selling the company, Tim has remained an active Entrepreneur and/or Investor in various start-ups, for example, Eyeo (makers of Adblock Plus), Ecosia, Hitfox, Aklamio, Miomente, PiwikPro, BasicThinking, Home, Zolar, Joblift, SaaS.group, and others.
Calm Capital
Calm Capital provides early-stage funding, resources, and a network of experienced advisors to founders building profitable businesses. Investments are made via a shared earnings agreement, to develop hand-in-hand with founders who don’t want to have to sell their business. Earnest Capital offers mentorship and networking for founders.
Key Facts
- Investment via Shared Earnings Agreement
- Invest upfront capital at an early stage of businesses – typically the product has launched
- Agreement on a return cap which is typically 3x-5x the initial investment
- No equity control over the business
- No board seats
- Makes its money through a “founder earnings” model: net income + any amount of founders’ salaries over a certain threshold
- This leaves founders with the freedom to reinvest as much or as little into growth as they like, which means the businesses are in control of when EC gets a payout as they don’t get paid until founders pay themselves
- Non-perpetual model, meaning once the return cap is hit, payment to Earnest ends
- Collaboration between Tyler Tringas and SureSwift Capital
- If the businesses decide to raise funding or sell, then EC’s stake converts to equity
Ways To Invest:
- Accredited investors only
Key Person
Tyler Tringas, General Partner
Tyler is a web developer currently working on an e-book for building SaaS businesses. Tyler was head of Energy Economics for New Energy Finance, which was acquired by Bloomberg LP for an undisclosed amount in 2009. He is currently the founder and lead developer of Storemapper as well as CEO of Maptia, a collaboration project between writers, photographers, etc. from around the globe.
Kevin McArdle of SureSwift Capital, Investor
Kevin is the Co-Founder and CEO of SureSwift Capital. SureSwift creates optimal business exits for dynamic, transaction-based SaaS companies.
Constellation Software
Constellation Software acquires, manages and builds industry specific software businesses to provide essential software solutions to both public and private sector clients. The businesses have a combined 125,000 customers in over 100 countries, and Constellation is now working to establish a portfolio of software businesses in a fund.
Key Facts
- Acquisition criteria:
- Tier 1:
- Mid to large-sized vertical market software companies with a minimum of $1M earnings before interest and tax
- Consistent earnings and growth (generally EBITDA/revenue +revenue growth of 20% or more per year)
- Determined offer price
- Tier 2:
- Number 1 or number 2 market shareholder in a niche vertical market
- Revenues of at least $5M
- Hundreds-of-thousands of customers
- Determined offer price
- Prefer 100% ownership in their companies, but willing to buy less if founders want to remain involved (particularly for Tier 1 businesses)
- Tier 1:
Ways To Invest:
- Publicly traded company on the TSX (CSU.TO)
Key Person
Bernard Anza Routh, Chief Investment Officer
Bernard joined CSI in 1995 and works with VMS businesses to identify and pursue opportunities for platform and tuck-in acquisitions. Primarily works to establish licensing and distribution arrangements, as he has a background in AVP Business Development for the Swiss-based tech corporation Ascom Inc. Prior to Ascom, he held various positions within IBM.
Tiny.VC
Tiny.VC has 38 co-investors, including System.One, GGV Capital and Greycroft, and has to date made 8 investments and completed 1 exit. Tiny.VC was founded in 2017.
Ways To Invest:
- Private
Key Person
Andy Chung, Executive
Andy is a partner at the Nordic Web, a research and analysis company that specializes in covering data on tech companies emerging in the Nordic regions. The Nordic Web has started a new Angel fund to invest across Denmark, Finland, Iceland, Norway, and Sweden. Andy is a Co-Founder and serves as Board Member at Happyinc and is also an active Angel Investor.
Owl Mountain
Owl Mountain builds, grows, and acquires digital assets. They are aiming to be the “Berkshire Hathaway of Digital Assets”. Their partner is banking on cash flowing web assets being the real estate investment of this era.
Key Facts
- Team of specialists
- Outside capital
- Purchase sites which stack and monetize channels
- They either invest time upfront and in return receive a nominal fee, or participate capital in the deal
Ways To Invest:
- Private
Key Person
Ewen Finser, Partner/Content Strategy Operations
Ewen has experience in building websites from the ground up and got his inspiration for Owl Mountain from Wired Investors. He was a senior technical recruiting consultant for Precision Systems, a technical recruiter in the information technology space to recruit engineers, and the founder of Venture 4th Media, which specializes in developing and transacting digital media assets within high growth niche markets.
We will update this page as more interesting funds emerge in the online business space. For now, these are the funds leading the market in the SMB SaaS space and carving a new path for SaaS businesses seeking investment. Set up by individuals with hands-on experience in their chosen sectors, they represent a new shift in investment possibilities.
Maple Media
Maple Media is a Los Angeles-based mobile media, advertising, and technology firm that acquires and operates mobile applications and mobile-based games. Their current portfolio features more than 100 leading apps from the App and Google Play stores, with a reach of over 35 million users every month. The company is backed by private equity firm Shamrock Capital.
Key Facts
- Invest in individual apps as well as portfolios
- Operate apps in the productivity, lifestyle, financial, casual gaming and action sports spaces
- Apps must have 50,000+ daily active users
- Consider limited partnerships with published apps generating more than 10,000 daily active users
Ways To Invest:
- Private
Key Person(s)
Michael Ritter, CEO
Michael is an experienced veteran of the online gaming industry, having worked as SVP of Business and Corporate Development at Jam City. During his tenure at Jam City, Michael oversaw mergers and acquisitions activities in addition to publishing, licensing, distribution, sales, legal, and partnerships for games based on social platforms, as well as mobile devices.
Wasabi Ventures
Wasabi Ventureswas founded in 2003 by two proven entrepreneurs with the aim of taking a 360-degree approach to startup incubation. To this end, the fund provides full lifecycle support, from financing, co-founding and mentorship, to access to a wide network of investors.
Key Facts
- Experience growing over 200+ early-stage technology companies
- Outside capital
- More than 700 rounds of financing
- Educated more than 2,000 future entrepreneurs through Wasabi Ventures Academy
Ways To Invest:
- Private
Key Person
Tom Kuegler, Managing Partner
Tom co-founded Wasabi Ventures alongside General Partner Chris Yeh in 2003 to specialize in co-founding, investing in, incubating, and building and advising early-stage technology companies. Tom is an entrepreneur and New York Times Bestselling Author, and takes an active role in the operations of Wasabi Ventures.
SaaS Venture Capital
SaaS Venture Capitaloffers seed-stage VC funding to businesses in the enterprise tech space. The fund invests in companies across North America, taking the approach that they will not limit the pool of talent to the Bay Area or New York City. In order to prevent the headaches that founders often encounter when dealing with multiple lead investors, SaaS Ventures takes a collaborative approach to invest in rounds with a lead investor already selected. The leadership team is made up of five experienced individuals who are now leaders in the financial space, all former entrepreneurs. SaaS Ventures does not like to join the board of the company, but rather contribute where there may already be a lead investor.
Key Facts
- 35 deals made across 19 states
- Deals ranging in size from $750K to $3M
- More than $20 million under management
- First checks range in size from $75K to $200K
Ways To Invest:
- Private
Key Person
Collin Gutman, Managing Partner
Collin founded SaaS Ventures in 2017 to focus on enterprise technology at the seed stage. Before moving into the VC space, Collin co-foundedAcceleprise, which became the world’s first enterprise-only tech accelerator. Having been an entrepreneur himself, Collin is familiar with the difficulty in raising seed money, and so set out to fill this gap with SaaS Ventures.
