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 and 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 definitions of the Trackers, please refer to SaaS Meter Definitions at the end of this report.

Quick Meter Reading

SaaS Companies Prove Resilient

Revenue multiples for public and private SaaS companies increased year-over-year, despite the market dislocation

Public SaaS Company Prices Drop

Companies in the Golub Capital Public SaaS Tracker fell over 11%, compared to a decline of less than 9% for companies in the S&P 500

Investors Paid Up for Profitability

The public SaaS companies with the highest gross profit margins saw an increase in LTM revenue multiples, whereas companies with lower gross profit margins incurred a decrease

Source: CaplQ, PitchBook, Golub Capital

Q1 2020 Venture-Backed SaaS Transaction Breakdown and Average Fundraising Amount

States with Highest Percentage of Venture-Backed SaaS Deals in
Q1 2020

Weighted1 Average Revenue Multiple

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

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

Value Average LTM Revenue Multiple of LTM Gross Profit Margins (%)1

Weighted Average LTM Revenue Multiple

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

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

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

Q1 2020 GC 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 3.31.2020.

 

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”) 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.

A Conversation with Malwarebytes and Golub Capital

Marcin Kleczynski
Malwarebytes,
Founder and CEO
Marcin Kleczynski serves as the Founder and CEO of Malwarebytes, overseeing the phenomenal growth from a one-man band to a company of over 700 employees with offices located across the globe. He leads the strategic expansion of the business as well as the long-term vision for the research and development teams. Marcin has been recognized as a leader in cybersecurity, receiving the Ernst & Young Entrepreneur of the Year award and being named to the Forbes 30 Under 30 list. He also speaks frequently at prominent cybersecurity conferences.

Marcin Kleczynski serves as the Founder and CEO of Malwarebytes, overseeing the phenomenal growth from a one-man band to a company of over 700 employees with offices located across the globe. He leads the strategic expansion of the business as well as the long-term vision for the research and development teams. Marcin has been recognized as a leader in cybersecurity, receiving the Ernst & Young Entrepreneur of the Year award and being named to the Forbes 30 Under 30 list. He also speaks frequently at prominent cybersecurity conferences.

Malwarebytes was founded by Marcin Kleczynski, when he was only 14 years old, on the principle that everyone has the fundamental right to a malware-free existence. Malwarebytes has quickly become one of the most trusted names in cybersecurity, leveraging a team of over 850 malware hunters, software engineers and security industry veterans and has been awarded six patents for innovative technology.

In this edition of SaaS Talk, Golub Capital Managing Director Peter Fair speaks with Marcin Kleczynski, Founder and CEO of Malwarebytes, who shares his insights on growing a one-person business into a global leader in cybersecurity and discusses the cruciality of staying ahead of cybercriminals.

Peter: You started Malwarebytes when you were in your teens. What helped you be successful in garnering the trust of key stakeholders, such as investors, customers and employees at such a young age?

Marcin: It helped a lot that most meetings in the early days of Malwarebytes were virtual. We were a remote company through almost 100 Malwarenauts and so my age was less of a factor. When it came time to meet investors and customers, we were already a well-established brand with outstanding growth and profitability as well as products. I also had a lot of mentors as I grew the business. Some people describe me as a sponge, and I used every opportunity to learn.

Peter: What were some of the challenges you faced when initially seeking funding and what advice would you give other young entrepreneurs?

Marcin: When I started Malwarebytes, I didn’t create this business to require funding. I had a vision for a company that was self-funding, and we’ve been very fortunate to be able to build on that vision from the beginning.

Creating a sustainable business model from day one isn’t easy, but it gives you greater control over your entrepreneurial vision. Not being beholden to VCs also provides tremendous optionality and flexibility on best avenues of growth to pursue at every juncture.

Young entrepreneurs should make sure they have a clear path to sustainability and profitability as they think about raising capital. Particularly with an uncertain economy ahead, we can expect that companies will need a clear path to profitability in order to keep investors satisfied.

Peter: The cybersecurity solutions industry is an increasingly competitive space. How has Malwarebytes differentiated itself?

Marcin: We differentiate ourselves through continual technology improvements and exceptional service. Our remediation and ransomware rollback features were the first to be developed and are above and beyond anything that the competition offers. We have some of the best researchers around, and they are constantly uncovering—and protecting us from—new threats on a daily basis. Our ability to detect zero-day, and even zero-hour, threats is key in protecting our customers from the very latest threats. We also give a damn.

Peter: One of your company’s taglines is: “Malwarebytes crushes the latest threats before others even recognize they exist.” How much harder has it gotten to preempt these threats since 2008, and what are some of the more “novel” threats that you have seen recently?

Marcin: Malwarebytes has taken a more unique approach to solving this problem than the rest of the industry. A few important tenets: First, we believe in layers of defense, so we have many layers of detection and protection and believe those provide the most robust security; second, we have invested tremendously in behavioral detection and utilized machine learning, well before it was a conversation topic.

We try to think like the cybercriminals and “skate to where the puck is going to be.” Many other security companies just react to the threats and get caught with their pants down.

Peter: Malwarebytes provides security software protection for both consumers and businesses. What advice would you share for SaaS companies that play in both the B2C and B2B spaces?

Marcin: It is hard to play in both spaces successfully, particularly with limited resources. I would advise any company looking to be in both spaces to make sure you deeply understand why you want to pursue both consumers and businesses. In our case, we saw tremendous traction in the B2C space, and those consumers started taking our software to their work. This helped us naturally enter the B2B space with consumer advocates bringing us into their work environments. As this trend started to take hold, we realized there is a real gap in the B2B space. And we also saw the synergies and benefits for Malwarebytes to be in both spaces. Our telemetry, or cybersecurity intelligence, benefits from the vast deployments across B2C and B2B, and we are able to leverage much of our endpoint technology stack, making it more feasible to rapidly create solutions for both spaces.

Peter: Malwarebytes has grown tremendously over the past 10 years. What have been the biggest challenges, organizationally, that you’ve had to overcome? How can CEOs prepare to scale?

Marcin: One of the biggest challenges can be learning to delegate and trust your team. It took some time for me to be able to establish trust and to hand off decision-making. Once you pass this hurdle, growth is a lot easier.

You need different types of leaders and processes at each stage of a growing company. It’s really hard, as you almost have to keep reinventing yourself as a leader and as a company at different phases of growth. Hiring the appropriate leaders is one of the most important aspects. Clear communication and processes are essential, particularly as you grow rapidly. I’ve always had monthly all-hands communications, but I’ve added new processes for better financials, products and performance management to improve those that were in place just a few years ago. The people who take you to $50 million in revenue are different from the ones who can take you to $500 million.

Peter: What are the biggest challenges facing SaaS CEOs today? What keeps you up at night?

Marcin: Keeping talent is always a big one, we compete with a lot of the big giants in San Francisco that offer perks we simply can’t offer, however, we have a culture that can’t be replicated in those large bureaucratic environments and that’s a real selling point for us.

Of course, keeping up with new threats is always crucial for a cybersecurity company, but with our technology, we’re able to detect anomalous behavior before most of our competitors, enabling us to stop new threats on day zero. Seeing how innovative a lot of these cybercriminals are is what keeps me up at night.

Peter: Do you have any predictions for the SaaS industry in 2020?

Marcin: I think we’ll continue to see consolidation in the industry with increased integration and collaboration across SaaS companies. With the current skills and staffing shortage, any company that is making it easier to use their product and minimize the amount of hands-on training time required will be in high demand.

There is a continued pattern of consumerization of IT with SaaS. SaaS solutions make day-to-day tasks easier, and IT professionals appreciate elegant, simple and easy user experiences.

There will continue to be more reliance on remote work. Particularly in the context of today’s environment, SaaS and cybersecurity are critical in ensuring that remote work is as effective as work in the office. For young companies especially, this can be a great way to reduce costs and increase access to a wider array of talent in the workforce.

Golub Capital would like to thank Marcin Kleczynski and Malwarebytes for participating in this issue of SaaS Talk.

Golub Capital is not responsible for the information or views communicated by representatives of other companies. This material is not indicative of the past or future performance of any Golub Capital product and should not be considered as investment advice or a recommendation by Golub Capital of any particular security, strategy or investment product. Golub Capital has distributed this material for informational purposes only.

A conversation with SaaS Insiders

Golub Capital recently hosted the first episode of SaaS Talk Live. To view the highlights, watch the video above which includes SaaS insiders discussing the impact COVID-19 has had on the software and technology sector and the modifications they have made to operate in the current environment.

Andy: What kind of needs and functionality requests are you getting at CloudBees that are helping you enable people to really do the things that they needed to do, which is enable software development?

Sacha: If you depend on specific hardware that will just be in an office, on manual processes or on people who might get sick, then you simply can’t function anymore. And I think it was a big wake-up call to understand that software automation is not a nice-to-have. It’s really a must-have. Organizations need to be able to push new value and new ideas fast and do so in a very reliable fashion.

Andy: How are your healthcare customers reacting to this crisis, and what are you seeing and what are you doing to help your doctor clients?

Dan: I think it’s important to note is we’ve seen obviously an exponential growth in COVID-19 diagnoses on the Kareo platform, which of course is something you would expect in a pandemic. But I think it highlights the fact that EHRs and the digitization of healthcare finally makes it sort of real-time surveillance of what’s happening among patients actually possible. We’ve seen a rapidly changing set of reimbursement rules, really trying to promote the use of telehealth and digital health in general as a way to continue to provide access to care during the pandemic.

Andy: So, at Bessemer, what adjustments have you made in the view of COVID, both from maybe from startups to late-stage venture companies in your investment criteria and how you’re approaching business today?

Brian: The consumer side is going through a whirlwind of change. E-commerce has more than doubled year-over-year overnight, off a very large base. Some people are talking about 10 years of e-commerce penetration in the span of a month. Gaming is seeing an explosion, video game activity, up 93% year-over-year off a pretty large base.

We’re going to see new purpose-built applications for different functional areas like sales, like support, like commerce, events, webinars like the one that we’re having, social interactions. And these tools are going to come with an additional layer of workflow and analytics across a variety of communication channels including video, SMS chat. We haven’t yet seen those, but we expect those to emerge.

Andy: What changes have you made to your sales approach to enable you to keep some of the momentum that you’ve had prior to COVID and continue that trajectory, given that most people expect SaaS businesses to be growth businesses?

Sacha: So there is a bit of “nobody moves, nobody gets hurt” type of attitude going on. And even so, their growth might still move forward, they might be reluctant to increase buying new tools or expanding their deals and so on. But they have a business to run. They have time. And so we help them make those investments, knowing that good things will happen for us if good things happen for our customers.

Dan: Almost overnight, doctors have really needed to do certain things that they didn’t need to do before. I mean, overnight they really started to adopt telehealth solutions in a serious way in their practice.

And we’ve been really trying to lean into that with our go-to-market and really accelerate switching campaigns and really introducing them to the benefits of the modern integrated platform.

Andy: What are you talking to people about things like debt financing, equity financing, M&A or even IPO, where people may have been talking about capital raising and funding pre-COVID. What are you now talking post-COVID?

Brian: So, on the private equity capital markets, when it comes to capital raising for the CEOs in the audience, if you need to do it now you should be able to get it done. So we’re seeing deals get done. It may take a bit longer.

Andy: So do you see a future where many of your employees work from remote locations?

Dan: We’re trying not to sort of overreact and take things kind of one month at a time to learn and sort of evolve. But I see a future where it’s more of a hybrid model. So I think we’re all learning and we’re all experiencing, we’re all going to be evolving from this in ways that are right for our own companies.

Andy: I was taking notes myself while we were talking, so I’m learning. I’d like to thank all three of you for joining us at SaaS Talk Live. Dan, Sacha, Brian, thank you and have a great day.

Golub Capital would like to thank Brian Feinstein, Sacha Labourey and Dan Rodrigues for participating in SaaS Talk Live.

Golub Capital is not responsible for the information or views communicated by representatives of other companies. This material is not indicative of the past or future performance of any Golub Capital product and should not be considered as investment advice or a recommendation by Golub Capital of any particular security, strategy or investment product. Golub Capital has distributed this material for informational purposes only.

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.