Patrick Kuczynski, CFA’s Post

A financial teardown of Constellation Software Inc. Constellation Software is simply an incredible company. CSU has compounded C$25m in equity into a~C$89bn conglomerate in 29 years. That’s a 33% CAGR over 3 decades!!! 💚 Today, they do over $6 billion in revenue - an absolute juggernaut of a company, and own over 700 vertical market software businesses. How did they do it? Well, when the founder Mark Leonard started, ‘SaaS’ wasn’t even a thing. PE firms hadn’t worked out that software companies were incredible. They were still seen as ‘risky’ tech assets. So Mark went on an absolute spree - rolling these things up for peanuts. In this financial teardown I uncover: 👉Constellations acquisition multiples 👉Their deal velocity 👉How they practically operate ~700+ businesses 👉How they structure incentives Check out my financial teardown on the GOAT of SaaS roll ups. link in the comments.

After speaking with hundreds of SaaS and Tech Founders this year, I’ve noticed a distinct need for alternative financing options that avoid dilution and maximize valuations. This is especially true for companies who want to improve their valuation before seeking an equity raise. When trying to find a capital option that fits their needs, Founders often have a few questions: 1. When should I start raising capital? 2. What alternative financing options are right for me?  3. What’s the best way to increase my valuation? If you find yourself curious about the answers to these as well, please feel free to reach out! I’d be happy to talk you through it. #Capital #AlternativeFinancing #Founders #SaaS #Valuation #Growth

5 Lessons in Tech Investing from Constellation Software 1: Constellation’s “Investor Plus Operator” Structure Enables Endless Growth. It’s Similar to Berkshire. 2: Constellation Prioritizes Predictability and Competitive Advantage. Also, like Berkshire. 3: Constellation Does Focus More on Growth than Typical Value Investors 4: Acquiring Exceptional Private Businesses Is Hard. And Requires More than Capital. 5: Tech Investing Has Greater Uncertainties. Constellation Deals with this By Combining “Buy and Hold” in Exceptional Businesses with “Buy and Sell” in Good Businesses. #digitalstrategy #constellationsoftware https://lnkd.in/eQesvQ9b

𝐄𝐥𝐞𝐯𝐚𝐭𝐞 𝐘𝐨𝐮𝐫 𝐆𝐫𝐨𝐰𝐭𝐡 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐲 𝐰𝐢𝐭𝐡 𝐎𝐮𝐫 𝐄𝐧𝐡𝐚𝐧𝐜𝐞𝐝 𝐒𝐩𝐞𝐜𝐢𝐚𝐥𝐢𝐳𝐚𝐭𝐢𝐨𝐧 𝐢𝐧 𝐒𝐨𝐟𝐭𝐰𝐚𝐫𝐞 𝐚𝐧𝐝 𝐒𝐚𝐚𝐒 𝐆𝐫𝐨𝐰𝐭𝐡 𝐄𝐪𝐮𝐢𝐭𝐲 𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐂𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 Today, we double down on our mission to serve Growth Equity stage companies. No more "grow at all costs" – it's about efficient and profitable growth. Our initiatives go beyond just recruiting, we empower software and SaaS portfolio companies to scale and innovate with efficiency. Read more about our collaboration with Growth Equity partners to achieve investment thesis goals in our full press release here: https://lnkd.in/exnP3Eyv #LeadershipInTech #GrowthEquityStage #ExecutiveSearch #InnovationLeadership

The new fund by Kennet Partners focuses on bootstrapped SAAS businesses with high growth. They believe the scalability, highgrowth margins, and essential tools these companies offer, generates compelling riskadjusted returns. Could this be a valuable investment strategy? #BootstrappedBusinesses #VentureCapital #InvestmentStrategy

Why is it more than ever time for SaaS companies to focus on fundamentals and delay fundraising?   - Lack of capital availability: Supply and demand ratio is overweight towards demand (2x for late stage VC demand). This lack of competition suggests new fundraising could result in lower valuations. - Poor exit environment: Over the last decade, 2022 and 2023 have been among the toughest years for IPOs. This has led to a build-up of paper valuations that is 3x that of the public market capitalization of VC-backed companies listed in the last 5 years. The resulting liquidity crunch makes fundraising more challenging for VCs and therefore for the underlying VC-backed companies. - Emergence of a new darling AI/ML that is poised to take the lion share: AI/ML deal value have sharply increased in 2023 to reach 1/3rd of all VC deals. This new focus could lead to a decreasing interest for SaaS companies.   Credits to PitchBook for sharing insightful data.   #VC #PE #fundraising #SaaS

The SaaS M&A market is always evolving—here is a selection of last month's notable deals. Great for those tracking strategic market changes, exploring partnerships, or keeping a pulse on industry developments, these transactions highlight important shifts in the software space. 𝗙𝗲𝗮𝘁𝘂𝗿𝗲𝗱 𝗗𝗲𝗮𝗹𝘀: 1. The Riverside Company acquires Cloudpermit, Inc 2. Workday acquires Evisort 3. Vista Equity Partners and Warburg Pincus LLC acquire Redwood Software 4. Valsoft Corporation acquires Acom - Software & Kassensysteme 5. Progress acquires ShareFile 6. Kipu Health (TCV) acquires Hatch Compliance 7. HGCAPITAL LLP’s Ncontracts acquires Venminder 8. Latch acquires block.a 9. Blackstone and Vista Equity Partners acquire Smartsheet 10. BankID BankAxept AS acquires Criipto 𝗦𝘁𝗮𝘆 𝗨𝗽𝗱𝗮𝘁𝗲𝗱: Don't miss out on the latest insights—sign up to receive our research: https://lnkd.in/dcsZMGWB #SoftwareDeal #MarketInsight #SaaS

Funding Strategies for SaaS Growth: Beyond Traditional VC In today's evolving financial landscape, European B2B SaaS companies are facing new funding challenges: 1. VC Funding Tightening: With fewer lead investors and longer raise times, traditional VC is becoming more challenging. Are you exploring alternatives? 2. Non-Dilutive Growth Options: Have you considered private debt solutions like venture debt or specialist acquisition facilities? These can fuel growth without equity dilution. 3. Acquisition Financing: In a market with fluctuating valuations, strategic acquisitions can be a powerful growth lever. But how do you fund them without compromising your capital structure? At Fuse Capital, we're experts in providing innovative funding solutions for SaaS companies. Our range of non-dilutive options can help extend your runway, fund strategic acquisitions, or invest in growth initiatives – all while preserving your equity. I'm excited to be attending SaaStock from October 14 to 16, and would welcome the opportunity to meet in person. Let's discuss how we can tailor a funding strategy that aligns with your specific growth objectives.  What funding challenges are you facing in your SaaS journey? Share your experiences in the comments! #SaaSFunding #GrowthStrategy #PrivateDebt #FuseCapital #SaaStock2024

Geographic location can play a significant role in SaaS valuations.   US-based companies often enjoy higher multiples compared to their European counterparts.   The key factors driving this valuation gap are:   1.      Abundant capital in the US enables SaaS companies to prioritise growth more aggressively   2.      European SaaS companies often face capital constraints, leading to a stronger focus on profitability   However, during economic downturns, the valuation gap narrows as investors and buyers prioritise profitability over growth, making European SaaS companies relatively more attractive.   SaaS companies must adapt their strategies based on specific circumstances to optimise value in any market condition, striking the right balance between growth and profitability - the Rule of 40. Click on the link in the comments section to access our White Paper where we cover this topic in more detail.   As an investment banker executing SaaS transactions, I help companies navigate these challenges in order to maximise shareholder value.   If you are looking to sell your business, raise capital or you'd like personalised advice on how to position your business optimally for a transaction, don't hesitate to email me at hugo@optimacf.com or Philip Ellis at philip@optimacf.com to schedule a conversation.   #FutureOfWork #SaaS #HRTech #EdTech #WorkTech #Technology #MergersAndAcquisitions #Fundraising #InvestmentBanking

💰Private Equity's Cash Onslaught: The Battle for High Returns and Cloud Industry Impact☁️ Summary: Private-equity firms, including venture capital, are holding a record $1.45 trillion in cash, according to Preqin data. The influx of cash is attributed to investors expecting lower returns from public markets. However, the growing competition for deals is raising entry prices, potentially leading to lower future returns. Impact on the Clouding Industry: The surplus of cash in private equity may lead to increased investment in technology and cloud-related industries. As private-equity firms seek opportunities to deploy their capital, clouding/storage companies could benefit from funding for expansion, innovation, and acquisitions. How Clouding/Storage Companies Can Benefit: Clouding/storage companies can position themselves to attract private-equity investment by showcasing their growth potential, technological innovation, and strategic value. Companies offering solutions to address the increasing demand for cloud services may find themselves in a favorable position to secure funding and accelerate their market presence. #OrbitalDynamic #PrivateEquity #CashOnslaught #InvestmentTrends #FinancialMarkets #InvestorSentiment #VentureCapital #HedgeFunds #AssetManagement #MarketOutlook #CapitalInflows #FinancialStrategies #MarketWatch #ValuationRisks #GlobalInvesting #Fundraising #InvestmentDecisions #IndustryInsights #ReturnExpectations #CapitalDeployment #MarketOpportunities #StrategicInvesting #BainResearch #FinancialPerformance #InvestmentLifecycle #CashFlowStrategies