Growth Equity for SaaS Founder

I am a VP at a growth equity firm.  DM if you'd like to connect.  Some comments to your questions though. 
 

• Is growth equity the best option for me? What other financing types should I consider?
  • Think of minority growth investments along a spectrum.  On one end, you have "silicon-valley" VCs who want hyper-growth, huge markets, and a strong narrative to invest behind.  On the other hand, you have investors looking for strong unit economics, long-term profits, and a solid outcome likely in an M&A outcome.  
  • Before raising capital, you should think about if you want to have all the influence that comes with an outsider.  You've seem to have built a great business that is "chugging along" and doesn't necessarily need to raise.  But, with outside investment comes outside oversight.  Reporting, compliance, potential governance or controls put in place.  You should ask yourself if you are ready for that before considering if its your best option. 
  • Other types of financing you can get is venture debt.  Most SaaS businesses this day can get 1 - 2 turns of ARR w/ 8 - 12% interest.  Because valuations on the equity side are so high though, you may be better off going down the priced growth round route. 
• What is the typical deal structure (preferred equity, liquidation preference, etc.) and should I expect any incentive plan for myself and/or the management team?
  • For a minority growth round, most rounds will come in the form of a preferred equity security.  It's an entrepreneurs-market, so there isn't much to participating preferences or more than 1.0x liq prefs these days.... you should likely aim for clean terms.  
• Most growth equity firms that reach out have an investment minimum of $20M. Is it abnormal for me to raise $5M on the balance sheet and $15 as a secondary? What is the typical split in these deals?
  • There are plenty of firms that will write a $5 - $10M primary check into your business.... just message me and I'll give you names of some great firms
• Most growth equity firms look for >$10M ARR. Am I going to get a big discount for being $8M?
  • Again, I think this is true for the bigger funds.  My fund for instance is investing out of a $1B fund and we wouldn't write a check smaller than $10M.  Having said that, there are plenty of firms that will write smaller checks.  I do think you are right, there is a larger discount the earlier in scale you are.  Crossing the chasm to the >$10M ARR is very challenging and many companies hit a wall then.  With that said, you can still get healthy multiples especially if there is strong belief in the repeatability of your GTM motion and competitive differentiation within your respective market (as well as its size).  
• Friendly culture fit, value creation/ops support, and a high multiple are important to me. Do any firms come to mind that fit this criteria? I've been reached out to by many of the bigger ones, but feel like boutique ones might be the better fits?
  • Sounds like you want the best terms possible :)  I get it... but sometimes the highest paying firms aren't necessarily the best.  When you bring on an investor, you are basically getting married to them.  You may not necessarily want the highest price if the person that will be on your Board is a dick. 
• Should I be walking in with terms or expecting terms?
  • You should definitely know what you want in terms of amount, what you are going to use the proceeds for, what milestones do the proceeds get to you, and what is the ultimate path your business is going to take
• Presumably I should run a competitive process. Is it worth it to hire a banker for this (relatively) small of a deal?
  • Bankers can be very valuable but can also be huge speed bumps and costly.  Specifically, there are bankers that really rub investors the wrong way because they misguide entrepreneurs and set expectations that often are way too high.  If you can tell your story, have a strong grasp of your financials + numbers, have the bandwith to run a process without it impacting business performance, I don't think its necessary to have a banker at your size + scale
• What multiples are you seeing in the market and what range of multiples should I expect for my business?
  • For a business like yours, without knowing anything about it, you will likely get a multiple in the range of 3.0x - 8.0x.  Off what denominator is more art than science.  Some price off of current ARR, forward GAAP revenue, end of year ARR.  It really depends on what conviction you can provide the investor on what metric you think is true run-rate. 
• What else should I be thinking about?