Feb 27 2008
Financing a SaaS model
For many years, I’ve been frustrated by the banking community’s reaction to financing SaaS (Software as a Service) opportunities. In my view, long term contractual commitments from credit worthy customers should be an asset that can be evaluated and funded. HOWEVER, from an GAAP perspective, the contracts aren’t considered a “receivable” as the service hasn’t yet been delivered. So, banks don’t tend to be very creative! I’ve run into SaaS Capital a few times and I think their model has a lot of merit. The linked white paper below, provided by Saas Capital, walks through SaaS financing issues and options.
Understanding the Financial Implications of the SaaS Business Model
The SaaS revenue and profitability model looks risky to those who haven’t seen how well it can work.
Years ago at GE’s timesharing division (now GXS) we proved year after year just how profitable and consistent this model is.
Today, the model works even better. The Internet has made it easy to connect people and companies via SaaS applications, which creates many profitable opportunities.