Investor

HP moves into VR and AR with investment in Venture Reality Fund

Hewlett-Packard is putting on its headsets. One of the world’s oldest technology companies is investing in the fledgling virtual reality market by becoming an investor in The Venture Reality Fund.

The exact amount wasn’t disclosed. But HP Tech Ventures, the new corporate venture arm of HP, has joined as an investor The VR Fund, which has become one of the most active investors in VR, augmented reality, and mixed reality startups. It is HP’s first move into VR investments.

The VR Fund has invested in a number of early-stage startups developing infrastructure, tools, platforms, content and apps for the mixed reality ecosystem.

The VR Fund will provide HP with early access to leading AR/VR/MR technologies with commercial applications in HP’s target markets including office, retail, healthcare, manufacturing and education. The VR Fund’s…

How to tell when a SaaS startup is ready for IPO

Image Credit: Vintage Tone/Shutterstock

If you’re a founder, early employee, or investor of a growing SaaS startup, chances are that the word “Exit” has crossed your mind. Generally, you have two options: get acquired or go public. While the former has long been a viable option, the public market for SaaS businesses is relatively new. Salesforce.com was the first of its ilk to go public (in June 2004); the stock priced 30 percent above the initial filing range and ended its first day of trading up 56 percent. That success demarcated the market’s receptivity to SaaS companies, and a precedent was formed. Blackbaud and RightNow followed in subsequent months, and so have 75+ other SaaS businesses since then.

To understand what it takes for these companies to exist in the public markets, I and James Shalhoub, an investment banking associate at Jefferies, reviewed each of their S-1s and compared their IPO profiles.

At a glance

Based on historical data, the “median SaaS company” at IPO is 10 years old with ~530 employees, generates nearly $100 million in run-rate revenue, grows at 48 percent, and still operates at a loss. Founders, early employees, and investors would likely see their SaaS companies price above the filing range to achieve a ~$600 million market cap and watch their shares pop 32 percent after their first day of trading. The table below shows a range of the general IPO data points for these businesses.

Interesting benchmarks, but it’s unfair to apply these metrics to the entire SaaS universe. We consolidated the SaaS IPOs into three groups based on equity value at IPO: market cap of $500 million or less, between $500 million and $1 billion, and greater than $1 billion. We then analyzed relevant SaaS benchmarks, related to growth, profitability, capital allocation, and efficiency, to uncover deeper trends.

High expectations for growth

While public investors demand higher revenue growth from technology companies over other industries, the benchmark is set even higher for SaaS companies. After all, one merit of these companies is the ease with which they can deploy their product. Management can, in turn, spend more resources on acquiring new customers and expanding sales within existing accounts. The stakes are high for larger SaaS companies, though, as demonstrated in the chart to below.

SaaS players that achieved a $1 billion+ market cap at IPO had a median trailing 12 month (LTM) growth rate of 85 percent, helping fuel their larger valuation. The achievement does not go unnoticed, however. Every single one of these companies priced above their filing range and had a median first day close of +64 percent –…