SaaS funding Round2 & Vainu | Christian Czernich | Negotiator 44

Christian Czernich founded Round2 Capital in Vienna after a PhD at the Stockholm School of Economics and Stanford and a career in investment banking that included working alongside Sami at Translink. Round2 does something most investors do not, namely revenue based funding, where the firm buys into a share of a company's revenue rather than its equity, leaving the cap table untouched. The conversation uses Vainu, one of the largest bootstrapped tech companies in the Nordics and Round2's portfolio company, as the worked example. Along the way Czernich explains why SaaS is mostly B2B and therefore slower to scale than people assume, gives his three favourite SaaS metrics plus a fourth that almost nobody tracks properly, and describes what happens to a software company's cash flow when it moves from licence sales to subscriptions. 00:00 Why B2B and B2C scale very differently 00:36 Welcome and introduction to Round2 Capital 01:12 From academia to investment banking 01:59 Research on venture capital in Silicon Valley 02:26 Starting Round2 in 2017 and the second fund 02:53 Why Round2 invested in Vainu 03:48 What bootstrapped actually means 04:53 What makes a SaaS company different 05:20 Recurring revenue and the newspaper analogy 06:02 Predictability scalability and gross margin 06:24 Consumer subscription software as its own niche 06:45 The big misunderstanding about B2B growth 07:18 Acquisition cost and the value of low churn 07:34 The first favourite metric annual recurring revenue 07:56 The myth that SaaS is only recurring revenue 08:36 Lifetime value versus customer acquisition cost 09:38 When firms do not know their real acquisition cost 10:02 Churn net churn and the power of upselling 10:35 How upselling works in practice 11:26 Valuing LinkedIn and Microsoft's shift to subscriptions 12:16 Moving from licence sales to a SaaS model 13:06 Why the transition is harder than firms expect 13:26 Why SaaS companies can look unprofitable 13:48 The M-Files example from Finland 14:28 A fourth metric engagement data 14:56 What low engagement reveals about a customer 15:36 Key account management still matters 16:12 Consulting fees and implementation partners 17:04 The dream of an implementer network 17:25 Equity mandates versus what Round2 does 17:54 Revenue based funding explained 18:32 A two to six percent share of revenue 18:46 Fully non dilutive and no cap table involvement 19:24 Capital as a service 19:57 Funding growth out of high gross margin 20:52 How Round2 protects against misallocation 21:10 Turnover thresholds and use of funds 21:49 Preferring companies near break even 22:16 Who should get in touch 22:28 Doing deals with Austrians and Germans 22:56 Austrian and Nordic negotiating styles compared 23:52 Risk taking and joint ventures in Eastern Europe 24:20 Why Finland produces strong B2B software 24:50 Closing and contact details