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Investing in startups: why are investors obsessed with SaaS?

I am often asked how to scale a company.

There are 3 ways to scale a company:‍

- Technology 💻

- Content 📚

- People 👩

Once that's established, founders often choose the SaaS model. Investors have understood this well—it's magic!

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Is SaaS the best business model?

Marc Andreessen (a16z) wrote "Why software is eating the world" back in August 2011! And it still holds true today, especially with Generative AI.

• SaaS is the most profitable model!
• Gross margins are typically in the 80% to 90% range.
• Revenue is recurring (customers often commit to an annual term).
• The churn rate (customers who do not renew) is often less than 5%.
• Customers stay if the product is sticky!‍

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SaaS: A model of simplicity

In 2023, software must be a "must-have" rather than a "nice-to-have."

• Customers are cutting costs, keeping only what is essential and what brings value to their business.
• The SaaS model is highly scalable: rapid growth with low infrastructure costs (hosting and software maintenance).
• It is simple!
• It requires few operations, no inventory, and no logistics.
• It is easy to start a SaaS compared to other models.
• Startup costs are low.

All you need is an internet connection to use a SaaS. You can even create a "copycat" of what already exists in other countries. There is no need to synchronize supply and demand as you would with a marketplace, or to onboard strategic suppliers as in e-commerce.

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The benefits of SaaS

If you are looking for a SaaS startup studio in Europe, the best is eFounders Hexa. The sales cycle is short (except for "Enterprise" clients). It is often B2B, so revenues are more predictable. Distribution is made easier by two possible channels (direct and indirect sales via distributors/partners).

And SaaS is more easily scalable internationally! This is thanks to existing clients who may have subsidiaries abroad, or by translating the software if there is no significant customization required by local regulations.

The icing on the cake is that when a SaaS is well-funded with equity, banks are quick to follow! Especially if it is a SaaS in the circular economy.

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In short, SaaS may be the most efficient and least risky business model. However, the biggest global successes are often marketplaces, including in France (Backmarket...).

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At Super Capital, our favorite subject is tech! We invest in a huge number of SaaS companies. To join us, clickhere.