The Capital Needed to Create a SaaS Company

This is a follow on to my post on July 18th, 2008 titled “Does it Really Take $100M to Build a SaaS Business? Say it ain’t so, Joe!”. As part of some research I’ve been doing, I wanted to dig into the actual amount of capital it takes to make a successful SaaS company.

Wachovia Securities issued a report in May 2008 on the state of the SaaS market. On page 25, it shows amount of capital paid in prior to an IPO for 18 out of the 28 public SaaS companies. Here is that list below:

Platform as a Service – PaaS: What’s Not to Like?

Over the past year or so, PaaS – Platform as a Service – has emerged as a new and interesting strategy for Salesforce.com with Force.com and NetSuite with NS-BOS. The value proposition for developers is:

  • Object-oriented development environment for rapid prototyping and application development.
  • “Out-of-the-cloud’ integration with other applications developed on the platform
  • No need to invest in commodity operational infrastructure such as “ping, power, and pipe” and disaster recovery services which can be expensive to set up yet completely non-differentiating.

So, if you’re a SaaS application developer or investor, what’s not to like?

Well, first let’s talk about the SaaS business model.