Why VC funding is important to SaaS industry

imageIf you have worked in a start-up and have been a part of the core team in any start-up, you would be familiar with and know the importance of venture capital; and their steep terms and targets :-)

If you want a higher funding in the next round, give me more revenues.

How many of us have heard this line? In fact, it’s interesting to note that VC’s are not looking at higher bottomline, they are looking at increasing the topline. I am not complaining, it is a good perspective to hold if you want to keep an eye on the big picture.

This stand is also helping the slew of applications which are being launched as Softwares-as-a-Service (SaaS). Why? Read on.

As a business owner, one of the major targets dictated by a VC would be revenue targets. Not profitability. So I, as a business owner, will be willing to try out different new services in order to increase my offering. If a service exists which otherwise will take me ages to build or acquire, I am now more than willing to try it out on a month-on-month basis.

The overall cost of a SaaS pricing would be more, but the brunt of it on a monthly basis would be less. This impacts my profitability, but these days I am not looking at profits as much as I am looking at revenues. If I able to increase the reach or richness of my service offering using SaaS, then so be it. I will go ahead for the same at the cost of profitability.

Your thoughts?