HOW CAN GOLUB CAPITAL LATE STAGE LENDING HELP YOUR SAAS BUSINESS GROW?

Golub Capital’s Late Stage Lending offers flexible debt to venture-backed, growth equity and other technology companies. Our solutions are customized to meet the growth thesis of your company without extensive equity dilution.

Check out our brief educational videos and email us if you’d like to learn how we can partner together: lsl@golubcapital.com.

LSL Educational Videos:

Are you seeking debt financing to help grow your business? Watch the video below to learn how a single lender, versus two, can simplify your life.

Ready to learn more about the nuances of loans, especially loan covenants? Watch the video below to learn more about how they work and why “no covenant” deals often come with “hidden covenants” that can take you by surprise and slow down your growth. Bonus: Download our whitepaper at the end of the video for further insights:

How does our LSL product work to help meet your growth goals? It only takes a minute to find out by clicking on the video below:

 

Email us at lsl@golubcapital.com for more information.

Golub capital’s late stage lending offers flexible debt to venture-backed, growth equity and other technology companies.

Golub Capital’s Late Stage Lending business provides financing solutions to venture-backed, growth equity and other technology companies. Our solutions are customized to meet the growth thesis without extensive equity dilution. We provide senior debt, subordinated debt and equity investments to companies undergoing rapid growth due to new services, increased adoption and/or entry into new markets. Our firm usually underwrites and holds the entire credit facility.

TARGET COMPANY CHARACTERISTICS

  • Expanding revenues with minimum recurring or durable revenue of $10 million
  • Current earnings may be reduced or negative due to continued reinvestment in growth
  • Backed by growth equity or venture capital firms
  • Strong customer revenue retention rates
  • Diversified customer base

TERMS OF FINANCING

  • Facilities from $10 million to $200 million
  • Customized and flexible covenant packages
  • Golub Capital will typically hold 100% of the credit facility

TECHNOLOGY LENDING LANDSCAPE

lsl-technology-lending-landscape_footnotes
ENLARGE IMAGE FOR IMPORTANT DISCLAIMERS

TYPICAL USE OF CAPITAL

  • Accelerated growth
  • Strategic acquisitions
  • Product expansion
  • Investor liquidity
  • Conversion to SaaS

SECTOR EXPERIENCE

  • Enterprise software
  • Application software
  • FinTech
  • Healthcare IT
  • Data analytics
  • Security
  • Mobile
  • Cloud

contact us

For more information on Golub Capital Late Stage Lending please contact Andrew Steuerman or Peter Fair.

Golub Capital’s Late Stage Lending group provided a compelling debt financing that allowed the company to accelerate its growth without meaningful dilution to current stakeholders. The Golub Capital team has significant expertise working with the needs of rapidly growing and expanding SaaS companies, making them excellent partners. Their debt solution is unique as it has a long-term horizon, allows us the flexibility to invest in the business and has greater scale than any other debt product in the market.
Ian Charles, CFO
Host Analytics

Golub Capital Quarterly SaaS Valuation & Investment Trends Report

Welcome to Golub Capital’s SaaS Meter, a report that analyzes valuation and investment trends for SaaS companies. The SaaS Meter leverages data from:

–The Golub Capital Public SaaS Tracker (“GC Public SaaS Tracker”), which comprises publicly traded SaaS companies that are listed on the NYSE and Nasdaq

–The Golub Capital Private SaaS Tracker (“GC Private SaaS Tracker”), which comprises private SaaS companies that are included in the “Golub Capital Altman Index”

For full definition of the Trackers, please refer to SaaS Meter Definitions at the end of this report.

Quick Meter Reading

SaaS Multiples Soar
The fastest growing public SaaS companies reached revenue multiples of over 25x

Massachusetts in Top 3
Massachusetts surpassed Texas in venture-backed SaaS deals, rising to third place among U.S. states

Shifts in Series C
Fewer series C rounds were funded in Q2 2019 than in Q1 2019, dropping over 7%; however, average C round fundings grew from $32.5 million to over $46 million

Source: CaplQ, PitchBook, Golub Capital

Q2 2019 Venture-Backed SaaS Transaction Breakdown & Average Fundraising Amount

States with Highest Percentage of Venture-Backed SaaS Deals in Q2 2019

Weighted1 Average Revenue Multiple

GC Public SaaS Tracker Price Movement vs. S&P 500 Price Movement

Average LTM Revenue Multiple of LTM Growth Rates (%)1

Average LTM Revenue Multiple of LTM Gross Profit1

Weighted Average LTM Revenue Multiple

GC Public SaaS Tracker Weighted Average Revenue Multiple – LTM vs. FWD1

GC Public SaaS Tracker Average Sales & Marketing Expenditure (%) vs. LTM Revenue Multiple1

GC Public SaaS Tracker Average R&D Expenditure (%) vs. LTM Revenue Multiple1

Q2 2019 Public SaaS Tracker Companies1 Sorted by Market Cap

1. The SaaS Trackers described or illustrated herein are not actively managed or available for investment. The Public and Private SaaS Trackers are for illustrative and discussion purposes only and any information pertaining to these trackers should not be construed as investment advice. Companies are added to the tracker in the quarter of their initial public offering and are removed when they are no longer publicly traded, when subscription based software is no longer their primary product or primary source of YTD revenue or when information on their revenue sourcing is not available or reliable due to extraneous circumstances (inability of company to file, etc.).

Please refer to Important Disclosures at the end of this report for more information on methodology.

All data as of 6.30.19.

 

SaaS Meter Definitions

The Golub Capital Public SaaS Tracker (“GC Public SaaS Tracker”) comprises publicly traded SaaS companies that are listed on the NYSE and Nasdaq. Golub Capital defines Software as a Service (SaaS) companies as software companies that show a year-to-date (YTD) share of revenue above 51% being sourced from subscriptions and subscription related services. Such companies are added to the tracker in the quarter of their initial public offering and are removed when they are no longer publicly traded, when subscription based software is no longer their primary product or primary source of YTD revenue or when information on their revenue sourcing is not available or reliable due to extraneous circumstances (inability of company to file, etc.). The GC Public SaaS Tracker is updated on a quarterly basis and is not actively managed or available for direct investment. The GC Public SaaS Tracker and companies therein are provided for informational purposes only and are not intended as investment advice or recommendations of any kind. The GC Public SaaS Tracker should not be relied upon in making any investment or business decisions. All data included is public information.

The Golub Capital Private SaaS Tracker (“GC Private SaaS Tracker”) comprises private SaaS companies that are included in the “Golub Capital Altman Index.” Golub Capital defines Software as a Service (SaaS) companies based on their revenue model and product/service. These companies are typically subscription-based software companies, used by enterprises for functions such as analytics, workflow and data collection.

PitchBook defines Software as a Service (SaaS) as “Information technology companies which provide their software using client-server architectures that host the application in a centralized, off-site location.”

The GC SaaS Trackers described or illustrated herein are not actively managed or available for investment. The Public and Private Saas Trackers are for illustrative and discussion purposes only, and therefore, any information pertaining to these trackers should not be misconstrued as investment advice. Trackers are shown for illustrative purposes only and are intended to provide general market data as a demonstration of current trends. Trackers should not be construed as investment advice and are not available for direct investment. No representation is made that any tracker is an appropriate measure for comparison or predictive of market trends. Golub Capital does not verify the accuracy or completeness of third party data used in this report and Golub Capital is not responsible or liable for any such content that may be inaccurate or incomplete. Third party data is provided for informational purposes only.


Important Disclosures

Golub Capital (including its various affiliates) creates and manages multiple investment funds. GC Advisors LLC (“GC Advisors”) and GC OPAL Advisors (“GC OPAL Advisors”, and together with GC Advisors, the “Registered Advisers”) are investment advisers registered with the United States Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940. A number of other investment advisers, such as GC Investment Management LLC (“GC Investment Management”), GC Synexus Advisors, LLC and OPAL BSL LLC (Management Series) (collectively, the “Relying Advisers”) are registered in reliance upon GC OPAL Advisors’ registration. The Registered Advisers and the Relying Advisers (collectively, the “Advisers”) manage certain of Golub Capital’s affiliated funds and accounts. For a detailed description of the Advisers and each of their investment advisory fees, please see the Registered Advisers’ Form ADV Part 1 and 2A on file with the SEC. The beneficial owners of Golub Capital are also the beneficial owners of the Advisers. Certain references to Golub Capital relating to its private fund business may include activities other than the activities of the Advisers, or may include the activities of other Golub Capital affiliates in addition to the activities of the Advisers.

No equity, debt or capital is being offered by means of these materials. These materials are for informational purposes only and are not an offer or solicitation to buy or sell any securities, make an investment, or participate in any loans. You should not rely on these materials in making any business decisions and these materials are not intended and should not be construed as investment advice. The information contained herein is preliminary and subject to change. While information herein has been obtained from sources believed to be reliable, no representation is made as to its completeness and accuracy.

Past performance does not guarantee future results. Certain statements herein constitute forward-looking statements, which relate to future events, future performance or financial condition, and are subject to change for any reason.

Golub Capital investments are valued at each quarter-end at their fair value consistent with ASC Topic 820 and Golub Capital’s valuation policies and procedures. The current fair value of outstanding portfolio loans or other investments that are not actively traded is determined by the valuation policies and procedures the Advisers, which are summarized in the Registered Advisers’ Form ADV Part 2A.

This material contains proprietary information, and the distribution of any of the contents herein to any other person without the prior written consent of Golub Capital is strictly prohibited.


About Golub Capital Late Stage Lending

Golub Capital is a market-leading, award-winning direct lender and credit asset manager, with over $30 billion of capital under management. Our Late Stage Lending group offers growth debt opportunities to venture-backed, late stage SaaS companies. The firm’s flexible credit solutions offer entrepreneurs and executives the opportunity to finance their future without diluting their ownership. The firm structures offerings to foster long-term partnerships, encouraging portfolio companies to take control of their growth, make strategic acquisitions and expand their product offerings.

Across our activities, Golub Capital nurtures long-term, win-win partnerships that inspire repeat business from our private equity sponsor clients and investors. Founded 25 years ago, Golub Capital today has over 425 employees and lending offices in Chicago, New York and San Francisco. For more information, please visit golubcapital.com.

A Conversation with MetricStream and Golub Capital

Gunjan Sinha
MetricStream, Executive Chairman
Gunjan Sinha serves as the Executive Chairman of MetricStream. Prior in his career, he was the founder of WhoWhere?, an internet search engine, and also the co-founder of eGain, a customer engagement software company. Gunjan is an active investor and board member for numerous Silicon Valley start-ups and venture funds, and serves on the board of directors for eGain. Gunjan also helped to establish Child Family Health International, a United Nations-recognized public non-profit organization, and is a founding board member of the U.S. India Endowment Board set forth by the U.S. State Department in 2010 to promote commercialization of science and technology between the U.S. and India.

Gunjan Sinha serves as the Executive Chairman of MetricStream. Prior in his career, he was the founder of WhoWhere?, an internet search engine, and also the co-founder of eGain, a customer engagement software company. Gunjan is an active investor and board member for numerous Silicon Valley start-ups and venture funds, and serves on the board of directors for eGain. Gunjan also helped to establish Child Family Health International, a United Nations-recognized public non-profit organization, and is a founding board member of the U.S. India Endowment Board set forth by the U.S. State Department in 2010 to promote commercialization of science and technology between the U.S. and India.

MetricStream is an independent global provider of governance, risk and compliance (GRC) apps and solutions. MetricStream provides GRC solutions to hundreds of thousands of users across numerous industries, including financial services, healthcare, health insurance, manufacturing, life sciences and energy and utilities. Their cloud-based solutions enable companies in these sectors to drive performance and growth, while remaining grounded in a foundation of good governance, trust and integrity.

In this edition of SaaS Talk, Golub Capital Senior Director Rob Sverbilov speaks with MetricStream Executive Chairman Gunjan Sinha to discuss the value of GRC in every organization, and how companies in the SaaS space can leverage GRC to get ahead.

Rob: At a high level, why is GRC so important, and why is it becoming even more important for enterprises in all verticals?

Gunjan: GRC has become important in the last 30 years due to technology and software adoption with the advent of SaaS. Technology is permeating every facet of global enterprises, and there is a real acceleration in every direction of the digital transformation. This acceleration is all very good, but with it comes a challenge.

When you’re trying to build, let’s say, a high-performance car, you need the accelerator, but you also need the brakes. You need the controls. You need the ability to regulate. In the GRC industry, you need to look at the reverse side of the growth equation and ask, “How do I think about risk management, regulators, compliance and governance?” Ask about your policies, both the written and unwritten social contract that your company has to adhere to.

But GRC is not just about complying with regulations. It is the reason a firm will ultimately win the race in a sustainable manner, because you know when to tap the breaks while accelerating, and it means you’re able to make the turns without crashing into walls, so to speak. You need both the brakes and the accelerators to succeed. You can’t simply operate on accelerators.

Rob: Financial services firms focus a lot on risk, and understandably so. Are there other industries that should place a higher emphasis on risk, too?

Gunjan: In addition to financial services, healthcare, energy and utilities are highly regulated industries, so there’s an automatic driver for firms in these industries to focus more on risk.

GRC is not just about the fines or penalties; the reputational damage of making a mistake can be significant. That’s why in the next 10 years, this is going to be an area where we will have to exercise a greater degree of self-regulation, if not government regulation, and better risk management, governance and compliance.

When I look at industries now, especially where there’s a high technology quotient, where people have access to digital transformation and digital data, there’s a rise in the volume, velocity and variety of data. Therein lies the ability to do and think about the opportunity around GRC, because it allows you to now leverage all the data to get into different markets, especially regulated markets.

Rob: How do you think GRC is going to affect the technology landscape, on both the B2B and B2C sides?

Gunjan: Technology companies are amassing unprecedented amounts of data. Data is the new oil. It is the currency that’s going to drive profits and market competitiveness. With data comes a tremendous amount of responsibility. You have to make sure that you’re treating it with the right controls, so that the owners of the data are actually benefiting from their own data. You have to understand where not to use data in a way that compromises data privacy. This is particularly important in the technology sector because we are swimming in data. Our sector is harnessing data to the fullest, but we need to become more responsible about how we manage our own data.

Rob: You need to be mindful of where you have access to data, and ensure that data is kept private. Correct?

Gunjan: You want the balance of privacy. You want to make sure that the data is readily accessible, yet private. Governance, risk management and compliance have to be thought of as the core in your strategy. You have to create the balance of how you may give people access in a way that doesn’t compromise the policies, regulations, risk profile and risk appetite of your customers.

Rob: For a growing enterprise SaaS company, when do you think is a good starting point to think about GRC?

Gunjan: You need to start thinking about the elements of GRC from day one, because this is what allows you to stay in business. It allows you to build trust with your customers, to prove that you know how to handle their data with the highest level of security, privacy and care. GRC allows you to build your business in a sustainable manner where you stay within the boundaries of corporate governance, risk management and compliance that are represented to your stakeholders. Long before you become a Ferrari, even if you had a bicycle, you still need the brakes on your bicycle.

I would urge the enterprise SaaS companies, including management and board members, to make sure that the GRC journey is a part of the blueprint and not an afterthought. It is not something that you do after you go public or after you become a certain size. You’re responsible for your customers’ data and applications, starting at day one.

Rob: Especially within the enterprise, what advice do you have on the right way to scale a business? What advice would you share with companies that are taking off and growing now?

Gunjan: My biggest piece of advice is to find a problem that’s worth solving with a real need in the marketplace. Then, you need to surround yourself with high-quality people. I don’t mean people with certain experience levels or certain degrees. You have to really think through, in your universe, what does high-quality mean? Entrepreneurship is a game of high performance, and it starts with people. When I look at everything that I’ve done, I see that it’s because I had a really good set of people around me. I urge people, entrepreneurs and founders, to be more open-minded when curating their ecosystem and environment. You maximize your chances of success by including the right set of people.

Rob: We’ve been in a bull market now for almost 10 years. What do you think the impact of a recession will be on the tech sector, and specifically on enterprise SaaS companies? Would you share your perspective from a public market and private company standpoint on what would happen in a downturn?

Gunjan: Today, more companies are going public later and later in their lifecycle. With the amount of capital that is sitting in the private markets, and if you assume a downturn to be a couple of years, there’s ample private capital you can deploy to help build your business. So, you don’t need the public markets to build your business.

The fundamental change that happens is how your customers perceive their ability to invest in a recession. When it comes down to that, the things that matter, when the markets are buoyant versus when markets are down, are going to be things which “have deeper value proposition.” Some of the best businesses have actually been built in recessionary times. For example, Google came out of the dotcom crash. Companies that have deep value propositions are going to thrive when the recession puts pressure on all the software companies.

Rob: Often GRC companies perform just as well in a downturn as they would when markets are performing well, but compliance and regulatory issues are more likely to surface once growth slows.
Would you agree that there’s a focus on protecting the downside and eliminating any potential risk when the market is unstable?

Gunjan: In a downturn, people are going to be more operationally focused on their risk tolerance and risk appetite, and turn their attention toward executing risk management more soundly within higher margins. Your value proposition has to go deeper to make the cut, to get the funding needed to be able to help you continue to stand up and grow.

The second thing I would highlight is that, by definition, the SaaS business is about a recurring business model, which is very powerful. That’s what investors and entrepreneurs like about them. That’s the positive part of it, that you actually are building a business that you can rely on, even if your growth has slowed down. The only counter thing would be to make sure that customer engagement and customer success go deeper. You need to be able to count on your revenues and not see a spike in customer churn or other metrics that take away from your base of recurring business.

Rob: How has GRC evolved over the last decade, and how is it going to continue to evolve in the future?

Gunjan: First, you’re going to see more and more applications of artificial intelligence (AI) in the world of GRC. You’re going to see more intelligence flowing in, so that GRC can be more of a preventative tool, instead of a reactive tool. It won’t be quite like autopilot where the car runs on its own, but it will be like keeping your hands on the wheel while the car knows how to make turns and navigate through traffic. GRC will become more AI-driven and semi-autonomous in many places. It will avoid failures, risk, catastrophic fines and brand damage for companies, with little intervention from people.

The other trend I see is people coming together as hubs to build a GRC ecosystem not just for one company, but a set of companies. This way, they can come together to create things that help a segment of the industry, or vertical, over time.

Golub Capital would like to thank Gunjan Sinha and MetricStream for participating in this issue of SaaS Talk.

UNDISCLOSED

Late Stage Lending Facility
April 2019 Administrative Agent
Sole Lead Arranger & Sole Bookrunner

UNDISCLOSED

Late Stage Lending Facility
May 2019 Administrative Agent
Joint Lead Arranger & Joint Bookrunner

UNDISCLOSED

Late Stage Lending Facility
January 2019 Administrative Agent
Sole Lead Arranger & Sole Bookrunner

UNDISCLOSED

Late Stage Lending Facility
September 2018 Joint Lead Arranger
Joint Bookrunner

UNDISCLOSED

Late Stage Lending Facility
August 2018 Administrative Agent
Joint Lead Arranger & Joint Bookrunner

UNDISCLOSED

Late Stage Lending Facility
July 2018 Administrative Agent
Sole Lead Arranger & Sole Bookrunner
* GOLD facilities are Golub Capital One-Loan Debt
(one-stop) facilities.