The Evolution of SaaS Business Models

Jamin Ball (@jaminball, Partner @ Altimeter Capital, author Clouded Judgement) talks about SaaS business models, common SaaS terminology in judging financials, models for multiples, the impact of interest rates, vision vs. product

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Topic 1 - Welcome to our guest co-host, Brandon Whichard. Jamin, can you give everyone a quick introduction?

Topic 2 - We’ve been huge fans of the Clouded Judgment Substack since inception in 2020. We regularly reference it during our weekly cloud news and recommend it as required reading for anyone interested in the business side of SaaS. What motivated you to start the substack?

Topic 3 - Can you start with SaaS financial terminology. We hear terms like ARR, customer churn, NTM, EV, LTM, etc. For those new to this, what terms matter the most and why? What picture are you trying to construct about the business from these financial values?

Topic 4 -  One of the sections of your newsletter is “multiples”, can you explain what multiples are and why you use Revenue Multiple as a valuation framework? What are the strengths and weaknesses of this framework? What other frameworks could be used?

Topic 5 - Everyone is talking about the rise of interest rates, how do interest rates affect multiples and valuation? Why should we care about this? Why should employees at SaaS companies know about this? SaaS business models were on an up and to the right trend for a number of years but we’ve recently seen some ups and downs. What are your thoughts on the current and future state of SaaS as an industry sector?

Topic 6 - The newsletter is very focused on financial metrics, how do you as an investor balance these metrics vs. product vision? How much revenue does a company need for this to become value? What metrics should an early startup focus on?

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