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

Surge in Series D
Series D average fundraising size rose to $82MM in Q3 from $57MM in Q2

Movement in SaaS Multiples
Revenue multiples for companies with growth rates over 50% dipped below 20x, while steadily increasing for those with a 40%–50% growth rate

First Decrease of 2019
Public SaaS companies LTM Revenue Multiple declined for the first time since Q4 2018

Source: CaplQ, PitchBook, Golub Capital

Q3 2019 Venture-Backed SaaS Transaction Breakdown & Average Fundraising Amount

States with Highest Percentage of Venture-Backed SaaS Deals
in Q3 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 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 & Marketing Expenditure (%) vs. LTM Revenue Multiple1

Q3 2019 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 9.30.19.

 

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 Disconnect and Golub Capital

Casey Oppenheim
Disconnect,
Co-Founder and CEO
Casey Oppenheim is the Co-Founder and CEO of Disconnect. Prior to founding Disconnect, Casey established Oppenheim Law, where he worked with large firms and top attorneys to represent internet-based entities and individuals. Before that, he served as General Counsel for the Organic Consumers Association (OCA), where he helped bring the OCA online and established it as a leading nonprofit organization. Casey earned a bachelor’s degree from the University of Minnesota and a J.D., cum laude, from the University of Minnesota Law School.

Casey Oppenheim is the Co-Founder and CEO of Disconnect. Prior to founding Disconnect, Casey established Oppenheim Law, where he worked with large firms and top attorneys to represent internet-based entities and individuals. Before that, he served as General Counsel for the Organic Consumers Association (OCA), where he helped bring the OCA online and established it as a leading nonprofit organization. Casey earned a bachelor’s degree from the University of Minnesota and a J.D., cum laude, from the University of Minnesota Law School.

Disconnect develops privacy and security software to help people better manage the data they share online. Disconnect is founded on a basic principle: that people should have the freedom to move about the internet, and their lives, without anyone else looking over their shoulder. Over 350 million people currently use Disconnect to exercise their right to privacy and stop unwanted tracking and sharing of personal information.

In this edition of SaaS Talk, Golub Capital Managing Director Peter Fair speaks with Casey Oppenheim, Co-Founder and CEO of Disconnect, to discuss the importance of data privacy, protection and controlling personal information that one shares online.

Peter: Consumers have a lot of choices when it comes to data privacy protection, as this has become an increasingly hot topic. How does Disconnect differentiate itself and capture market share?

Casey: Disconnect’s guiding principles include creating products that are easy to use and don’t slow down or break the internet. Many solutions put too much burden on users. We believe that the best privacy solutions are those that people will actually use.

Peter: In 2018, Europe implemented the General Data Protection Regulation (GDPR) to address data privacy issues for consumers. Where is the U.S. in its evolution to adopt similar measures?

Casey: The California Consumer Privacy Act was passed in 2018 and goes into effect on January 1, 2020. This is the most notable privacy legislation ever passed in the U.S., providing California residents with robust rights. It requires businesses serving California residents to disclose details about any personal information collected, to provide consumers access to the personal information collected and gives consumers the ability to request deletion of any personal information that has been retained. These and other provisions will require many businesses in and outside of California to make significant changes to their data practices and policies.

There are several federal privacy initiatives that are currently being debated. Although it’s difficult to predict congressional timelines, I expect that Congress will adopt a bill into law in 2020. Voters overwhelmingly want more control over their personal information, and businesses want a national standard rather than a patchwork of statewide laws. Based on these developments, I wouldn’t be surprised to see a federal law, which is now more than a decade in the making, come together relatively quickly.

Peter: What are the benefits and drawbacks of using a “freemium” pricing model?

Casey: We have experimented with many different pricing models and freemium has proven to work the best for us. There are two main benefits of freemium for Disconnect: first, from a mission perspective, we can provide high-quality, free protection to millions of people who may never pay for privacy; second, allowing people to use our products for free helps us retain an active communication channel and build a relationship with a large user base, a percentage of whom will convert to paid features over time. The main drawback of a freemium model is that we support many free users, which is costly in terms of support.

Peter: How did you scale Disconnect quickly, to be able to handle more than 350 million customers?

Casey: From the beginning we designed our solutions to scale. We wanted to make it effortless for other companies to integrate our solutions, and we worked up front to ensure that was the case. We also designed our technology to be dead simple for end users. Our hypothesis early on was that literally everyone wants privacy, so long as there is no trade-off, meaning they don’t have to change their internet behavior and there’s no loss of convenience.

Peter: Ownership dilution is a necessary evil of growing a startup business. How should founders approach securing the funding they need while maintaining ownership of their business?

Casey: To me, ownership dilution is less important than losing operational freedom and control over major business decisions. Founders may want to consider optimizing for board and voting power versus valuation and dilution. This strategy isn’t about trusting investors or not, it has to do with preserving the chemistry and decision-making structure that brought the business to a place where investors want to fund it in the first place.

Peter: You have a background in law, which is not the most common founder story you hear in Silicon Valley. How have you applied your law background to founding and running a successful B2C SaaS company?

Casey: My legal background gave me the organizational, strategic, communication and deal-making skills necessary to run a successful business. The primary skill I developed as a lawyer was the ability to efficiently analyze facts, which is essential to running a data-driven business. As a lawyer, I made hundreds of deals not only for my clients, but also when signing representation agreements with clients. These skills were directly applicable to running Disconnect, not just to close revenue and distribution partnerships, but also in recruiting key employees.

Starting and operating a business requires founders to wear many different hats. Most founders have to become proficient not just in the technology their company creates, but in data analytics, operations, finance, forging partnerships and understanding the implications of legal decisions. When I first started Disconnect in 2011 there was an overt bias among investors against nontechnical founders, but I think that’s changed somewhat. The bottom line is that diversity of experience on a team is absolutely critical. Strong technical skills are required, but in the case of Disconnect and many other startups, survival is also dependent on nontechnical skills that a legal background can provide.

Peter: What is your best piece of advice for the CEO of a growing software company?

Casey: Identify your relative strengths and weaknesses, as an individual and as a company. Focus your time on what you’re best at and surround yourself with people who possess complementary skills and experience. Focus the company’s strategy around what your team is best at, or if that doesn’t seem feasible, then focus on attracting people who are capable of executing on the company’s strategy.

Golub Capital would like to thank Casey Oppenheim and Disconnect 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.

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.