Why would you invest in Saas companies in LLM PE when you dont have to?
Currently at a LLM fund focused on ETA/search backed transactions with a global focus. One of the partners did operate a Saas company about 12 years ago but I would say that we are by no means experts in Saas investing.
We have recently come a cross a couple vertical/nice Saas deals in the $15M-20 TEV range, both in the US and Europe. I am of the opinion that we should stay away from Saas investment given the undertainty surrounding the space. I dont know what the outlook will be for these investments in 10 years - I say 10 and not 5 because the next buyer will come in 5 years and will want to make sure they will be able to sell it in another 5.
I do recongize that there is a real possibility the Saaspocalypse is blown out of proportion and/or non all Saas companies are the same. But for us specifically taking that risk is not worth it because
- we are not Saas experts and we wont be able to pick the winners in case there are winners
- we are not Saas/tech focused and we can invest in other industries that dont have that uncertainty. We dont have to deploy into the sectors like a growth fund does
- I dont see that valuations are down enough to justify that risk
Am i missing something? Would love a sanity check. Also if you have any primers, articules, etc that can help me get a better understanding of what is going on in the Saas space.
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