Category Archives: Fundraising
Bench Strength: Announcing BCV’s Investment in Bench
Earlier today, Bench announced a $16MM round of funding led by Bain Capital Ventures. This is the story of why we invested.
Bench provides fully automated bookkeeping services to small business owners, eliminating the need for designers / architects / dentists / personal trainers to learn bookkeeping themselves.
Exciting stuff right?
Actually it is. Bench saw close to 3X revenue growth last year and already serves thousands of small businesses across the US. When a company can hit that level of scale and growth early in its trajectory, there is a real opportunity to build a new standard.
Growth like Bench does not happen in a vacuum. Every successful startup has to find a tailwind to ride. So what’s the fuel behind the numbers?
Serving a Retooled Economy…
Since the 2001 recession, the growth of sole proprietorships and the “gig economy” has dramatically outpaced W-2s (corporate payroll jobs).
- In 2013, the IRS received 24.1 million 1040 Schedule Cs (the form filed by sole proprietorships), up from 19.7 million in 2003.
- In 2014, they received around 90 million 1099-MISCs (the form filed by contract workers), up by 16.4MM from 2010.
Those numbers represent a structural shift in the US economy. And an opportunity to serve a new and growing class of small business owners.
…Powered by Small Business Owners who want a New Stack…
That post-2001 cohort of small business owners grew up on the internet. They proactively seek out cloud and mobile products that meet their expectations around ease of use. That generational shift is also behind several important companies that collectively represent a new small business tech stack.
The scale of these companies – each serves thousands to millions of accounts – speaks to the potential in becoming a de-facto standard in any slice of that new stack.
…and have Better Data.
Dial back the clock by 5 years. Stripe and Braintree are tiny companies. Square is just starting to scale. Gusto does not exist yet.
Today, electronic revenue collection and online payroll are ubiquitous. IRS regulations have also evolved and now electronic records are allowed and e-filings are the norm. In same time-frame, online banking (and digital bank statements) became pervasive.
In short, all the key inputs and data sources for automated bookkeeping came online in recent years, setting the stage for a service like Bench.
Harnessing those Tailwinds: Great Product…
Every small business owner has to solve bookkeeping somehow in order to file taxes. The status quo involves some combination of in-house records (spreadsheets, receipt bins, etc.), hired bookkeepers (outsourced or part-time or DIY) and maybe software (Quickbooks, Xero, etc.). All those options suffer from 3 major flaws:
- A low cadence of interaction – you only talk to your rent-a-bookkeeper a few times per month.
- Poor visibility – as a business owner, you send receipts off into the ether, but how do those numbers roll up? How are you tracking against plan? What if you need to run your business differently?
- The business owner has to do all the work around organizing and categorizing expenses and would rather spend that time on growing the business itself.
Customers give Bench very high Net Promoter Scores because it obviates all the problems listed above at 25-35% of the cost of a traditional solution. Customers can interact with bookkeepers at any point via chat, SMS and soon, via a mobile app. They can constantly monitor the financial health of their business by logging in. Most importantly, Bench’s backend automates almost all the data entry, expense classification and other manual work. Small business owners get time back in their day.
…and an Awesome Team
Ian, Jordan, Adam and Pavel saw all these trend lines 4 years ago and have gone on a journey that has taken them to thousands of customers and a 230 person team. Ian has personally worked as a small business bookkeeper and deeply understands the pain he is solving for his customers. We are incredibly excited to partner with the Bench team as they continue their journey towards liberating small businesses from bookkeeping!
PS – Bench is hiring: https://bench.co/careers/
“To run my business is to run it on Wrike”
Why we are in investing in Wrike
Today, Wrike announced a $10MM Series A funding round led by Bain Capital Ventures. We are thrilled to be partnering with Andrew Filev and Team Wrike! Here are just a few qof the reasons why we are excited to be on board.
Because Wrike is a great product
We could tell you that Wrike is a unique product because it adapts to your existing workflows, vs. requiring you to change how you get things done. Or that it sits across task management AND collaboration, vs. just doing one. Or my personal favorite – it works in your email.
But task management software is like ice-cream – everyone has their favorite flavor. So let’s just look at Wrike by the (engagement) numbers:
Being boot-strapped, Andrew and his team had to build a product that users love (and pay for). These usage metrics speak to something special. In the words of one customer:
“Wrike is the backbone of our company. It is so integrated within our company that it would be painful – and painful is not a strong enough word – to replace it.”
Because the “work cloud” needs more connective tissue
Between Google Drive, Dropbox, Box, email, etc., businesses have an incredible amount of data and documents in the cloud. Managing workflows across those platforms is increasingly challenging. Doing so within the app that most knowledge workers live in – email – is even harder.
And the next generation of knowledge workers will be even more cloud centric.
We think Wrike, with its flexible workflows and Drive / Dropbox / Email integrations, can be the connective tissue across those cloud apps.
Because “land-and-expand” is already working
As noted earlier, Wrike customers more than double their number of seats within the 1st year of using the product. That only happens if you have a great product and happy customers.
BCV has a long history of backing companies with “land-and-expand” DNA, including SolarWinds (NYSE: SWI), LinkedIn (NYSE: LNKD), SurveyMonkey, Rapid7, Optimizely and many more. When we see those fingerprints in a company, we know it can be special.
Because it all starts with the people
Andrew and his team have delivered a category-leading product, happy customers and huge growth with no outside capital. And they have built a great company culture with a real sense of mission around empowering their users.
Those are incredible achievements, but we get the feeling that Wrike is just getting started. We are excited to see what this crew does with a full tank of gas!
Keeping it SaaS-y: Valuations for SaaS Companies
But how should you think about valuation? What is “market” for high growth SaaS companies?
Well, here’s one way to think about it:
SaaS Valuations Grouped by Growth Rate & Margin
In short, high growth (30% per year or more) and high margin (65% or more) businesses trade at a big premium. How much of a premium? 7 times your NTM (next 12 months) sales, vs. 4-5 times NTM sales for “regular” SaaS businesses.
Your business (and founder shares) could be worth 40-75% more if you are in that top right category.
Duh right?!? But it raises an important question every founder should care about – how do I get there and what are the signposts?
Some “SaaScid Tests” to live by:
All 3 tests relate to sustainable, high revenue growth:
- If LTV > 3X CAC, every dollar of sales & marketing spend builds strong, sustainable revenue backlog, assuring future growth.
- If months to recover CAC < 12, you are capital efficient (less fundraising and dilution!) and can use your own cashflows to fund your CAC
- Low churn = higher starting point for next years revenue = higher growth rate
If you manage your pricing and your sales & marketing model to these benchmarks, you will enjoy strong profitability. And if you have profitability, you can pursue growth because the customer economics scale.
Oh, and if you’re hitting those benchmarks, we should talk!