Congratulations, you've made it to the funding stage! This is a critical juncture where your meticulously crafted SaaS product and business strategy will be put under the microscope. Investors aren't just looking to write checks; they are performing due diligence to assess the risk and potential return of their investment. Your preparedness here can make the difference between securing funding and a frustrating dead end. This section will guide you through the essential areas investors will scrutinize and how to get your house in order.
Before diving into specific preparations, it's crucial to understand what investors are looking for. They aim to answer several key questions:
- Is the market opportunity large and growing? They want to see significant potential for scalability.
- Does the product solve a real, painful problem for customers? Is there a clear value proposition?
- Is the team capable of executing the vision? Do they have the right skills, experience, and passion?
- What is the competitive landscape, and how will you win? Understanding differentiation is key.
- What is the business model, and how will it generate revenue and profit? This includes pricing, customer acquisition cost (CAC), and lifetime value (LTV).
- What are the financial projections, and are they realistic? Investors will poke holes in overly optimistic forecasts.
- What is the exit strategy? How will they get their return on investment?
Here’s a breakdown of common due diligence areas and actionable steps to prepare your SaaS for investor scrutiny.
This is often the most heavily scrutinized area. Investors need to see a clear financial picture and a believable roadmap for future growth.
- Historical Financials: If you have them, ensure they are accurate, well-organized, and audited if possible. This includes P&L statements, balance sheets, and cash flow statements.
- Financial Model: A robust, dynamic financial model is essential. It should clearly articulate your assumptions around customer acquisition, churn, pricing, operational costs, and revenue growth. It needs to be defensible.
- Key Metrics (SaaS Specific): Investors will deeply analyze your SaaS metrics. Be prepared to explain:
- Monthly Recurring Revenue (MRR) / Annual Recurring Revenue (ARR)
- Customer Acquisition Cost (CAC)
- Customer Lifetime Value (LTV)
- Churn Rate (logo and revenue churn)
- Net Revenue Retention (NRR) / Dollar Retention Rate (DRR)
- Gross Margin
- Burn Rate
- Cap Table: Have a clear and up-to-date capitalization table detailing all equity ownership, including founders, employees, and previous investors.