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Unit Economics

Recurring Revenue: The Rise of an Asset Class | by John Street Capital | Medium

In June we wrote a piece entitled This Time It’s Different: Maybe? where we highlighted the outperformance of Cloud / SaaS stocks vs. the broader market, while noting that within the sector, public…

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Marcelino Pantoja founder-in-residence
over 2 years ago

Founder-in-Residence @ Platform Venture Studio

Risk-return spectrum:

Marcelino Pantoja founder-in-residence
over 2 years ago

Founder-in-Residence @ Platform Venture Studio

Pipe is another good example of “if it can be measured, it can be financed.” All recurring financial activity will eventually be securitized.

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"In a world of negative rates, investors of all types are searching for alternative sources of yield. While the market has clearly developed a favorable outlook towards the equity of SaaS companies with recurring revenue models, and those business that are repositioning themselves with a greater mix shift of recurring revenue, what if you were able to isolate the subscriptions themselves for the creation of a 'new' asset class? Investors will have the ability to earn a fixed income-esque rate of return on the underlying contracts as opposed to taking equity or credit risk."

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"Pipe solves a pain point for SaaS companies across the continuum including earlier stage startups, growth-stage ventures backed companies, the long tail of ~14,000+ mature software companies that serve broadly defined merchant end-markets, PE backed companies, and the largest public companies alike. As opposed to having <10% of clients pay for annual contracts upfront at 20-30%+ discounts; SaaS companies will be able to turn MRR into ARR, continue to invest in growth, all without disrupting existing workflows. As illustrated above the cost of capital will be the cheapest form for private companies, and for public companies should be on par to a discount to the cost of even public debt; let alone converts.

This is a considerable value unlock for these companies who for the first time are able to monetize their most valuable assets; recurring revenue."

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AM
over 2 years ago

Head of Marketing @ Waydev