Weekly SaaSology ⚡ 12.12.21
FP&A Automation 📒, Future of Spreadsheets 🛠️, and Market Sizing (TAM) ✔️
Inflation soaring to a 31-year high of 6.8% 💸, S&P 500 recording its best week since February 📈, and Better.com laying off 900+ employees over Zoom 😱!
A lot of action in the tech world this week, so let’s dive right in 🔥.
Top Five Investments 🚀
Tipalti, a San Mateo-based accounts payable automation 🔁 platform, raised $270 million at a $8.3 billion valuation in Series F funding led by G Squared. Tipalti provides an AI-powered platform for managing suppliers, invoices, compliance, payments, billing, and other accounting services, to 2,000+ high-velocity, mid-market businesses. More on FP&A automation tools below.
Rho, a New York City-based corporate spend and cash management platform, raised $75 million in Series B funding led by Dragoneer. Rho automates back-office tasks 💰 of small and mid-sized businesses including banking, cards, and accounts payable management, through its “self-driving” workflow solution.
Resolve, a San Francisco-based B2B Buy Now, Pay Later platform, raised $25 million in Series A funding led by Insight Partners. Unlike consumer BNPL plans, Resolve focuses on B2B purchases 🧾 and integrates with the tech stack of businesses to automate credit checks, accounting workflows, and payments.
Circle, a New York City-based creator community platform, raised ~$25 million at a $200 million valuation in Series A funding led by Tiger Global. Circle offers creators and brands a community-building platform to manage discussions, members, live streams, events, and memberships. It serves 4,000+ communities and just crossed $4 million in ARR, up 3x annually, which means Tiger valued Circle at ~44x ARR 🥵 (Q3 2021 median multiple for public SaaS was 13.2x).
First Resonance, a Los Angeles-based manufacturing software platform, raised $14 million in Series A funding led by Craft Ventures. Founded by former SpaceX engineers, First Resonance provides software for making hardware 🛠️. It helps engineers and technicians at 30+ manufacturing businesses efficiently manage assembly lines, supply chains, engineering, design, and other processes.
Top Two Trends ☁️
The Future of Financial Planning and Analysis (FP&A) 🤖
Based on a 2020 APQC survey, FP&A participants reported spending 75% of their time gathering data and administering finance processes, down only 2% from 2010.
FP&A teams spend a significant amount of time on mundane tasks that can be automated, hampering the ability of FP&A to provide impactful analysis and insights. They spend a considerable amount of time looking for cost-saving strategies while that information could be hiding in plain sight. Automating FP&A 📒 involves adopting strategies focused on process automation, agility, transparency, and metric-based insights. As discussed (last week) in the case of sales enablement tools, building a robust tech stack of FP&A tools like Tipalti and Pilot can help accelerate digital transformation for this business function.
FP&A automation may also surface data and insights on pricing 🏷️ strategies, expansion opportunities, etc. As routine tasks like regulatory reporting and accounts payable are automated, labor needs are expected to decline. However, the automation of other functions such as reporting and planning may also result in an increase in the number of humans needed to implement and work with AI-powered tools to provide insights and drive optimized decision-making.
Are Excel Spreadsheets holding us back?
According to IBM, 58% of midsize and large companies use spreadsheets to manage their planning and budgeting processes, and yet, 41% of Excel users say it cannot handle their data volumes. Businesses lacking a centralized tool spend 20% of their planning and analysis time collecting data and 30% validating that information.
The broader the use of spreadsheets, the greater the chance for human error and risk. More often than we realize, spreadsheets create flawed models and provide inaccurate calculations due to lack of standardization, poor data integrity, and ineffective collaboration methods. Powered by AI/ML 🔁, the next generation of FP&A platforms will capitalize on the following trends:
Robotic Process Automation (RPA): AI robots 🤖 can automatically execute recurring and rule-based process steps within the framework of processes across several systems. The prerequisite for RPA application is the existence of structured, repetitive, and rule-based processes.
Financial Analytics: Descriptive analytics relies on historical data and answers the question “what has happened” while predictive analytics is future-oriented and forecasts “what could happen”. Once integrated with disparate data sources, financial analytics tools can easily synthesize information and provide actionable insights for making key decisions 🎯.
Startup Spotlight ✨
Founded in 2014, Frame.io is a video review and collaboration platform with over 169 employees and $90+ million in funding prior to its $1.28 billion acquisition by Adobe. With over a million users across media and entertainment 📺 businesses, agencies, and brands like Netflix and Google, Frame.io streamlines video production by enabling editors and other stakeholders to collaborate using cloud-based workflows.
Frame.io provides audio and video professionals 🎥 with an immersive work environment. It allows them to communicate asynchronously, provide feedback or time-stamped comments on videos, draw on video snapshots (like on a whiteboard), perform an advanced search across asset libraries, and showcase the final video 🎬.
As a collaborative work tool, similar to Google Docs for knowledge workers or Microsoft Visual Studio Live Share for coders, Frame.io focuses on becoming the go-to video collaboration platform 🖥️ for media professionals. By integrating with all major editing tools like Apple’s Final Cut Pro, Adobe’s After Effects, and Premiere Pro, it made a strong case as an acquisition target for the industry behemoth Adobe.
VC Topic of the Week 📚
As founders execute on their idea, it is crucial for them to take a step back and evaluate the size of the market to estimate the growth potential of their startup 📈. That’s where the concept of Total Addressable Market comes into play.
Total Addressable Market or TAM represents the total revenue opportunity 💰 available to a product or service, assuming 100% of the market share is achieved!
While unrealistic to assume a monopoly, estimating TAM allows business leaders to evaluate the total size of a specific market opportunity and prioritize specific products or services, customer segments, and business opportunities 💼.
The basic equation for calculating TAM is quite simple: Average revenue per user (ARPU) 🏷️ times the total number of potential customers in the target market.
While ARPU is pretty straightforward and can be easily adjusted, the second part of the equation is a little trickier. There are three distinct methods of calculating TAM:
Top-Down 📊: Generating a macro view using reports from Gartner, Forrester, or other industry research groups to identify and calculate the TAM. However, it isn’t always reliable as the data generated by these groups may not always be up to date or reflect niche elements of a startup’s specific market.
Bottom-Up 📋: Estimating TAM using more reliable data on pricing and usage of a product from early selling efforts/primary research. A SaaS platform for dentists that charges $100 annually can reasonably estimate the number of dentists in its target market to obtain the TAM.
Value Theory 🔎: When introducing new products or cross-selling to existing customers, value theory relies on an estimate of the value provided by the product and how much of that value can be reflected in the price. Startups can estimate how much value they can add and price the value they aim to capture.
For investors, reflecting an intelligent approach to estimating TAM is as important as demonstrating a sizeable TAM/penetration. We’ll discuss TAM sizes and benchmarks for each stage of a startup in a later edition 🙌🏻. TAM can also be broken down into:
Tweet of the Week 🐦
Feel free to reach out to me by replying to this email or @dhruvcashpoor on Twitter!
This newsletter is intended for informational purposes only. Sources: TechCrunch, Twitter, Giphy, Tenor, VM Cinema Magazine, Gfycat, CFI, Qubix, Payments Journal, IBM, KPMG Advisory, Towards Data Science, Toptal, HubSpot, Axios