B2B SaaS Finance and Metrics - A European Perspective - with Joyce Mackenzie Liu, Pegafund

As businesses shift towards the Cloud, SaaS has become the de facto distribution method for modern day software solutions across the US and increasingly so in Europe.

Joyce Mackenzie Liu, Founder of Pegafund which provides go-to market strategy and financial planning services to early stage, high growth B2B SaaS companies shares her perspective on the European ecosystem.

In this episode, Joyce shares that the majority of investment volume in European SaaS companies occurs in the pre-seed, seed and Series A stages of funding in large part thanks to generous government support. European and country-specific governments remain the largest investor in technology and entrepreneurship, providing direct and indirect funding in the form of individual tax credits, startup grants, and VC equity and debt fund managers.

The beauty and challenge of scaling an European SaaS company is the fragmentation of the continent and the distinct business cultures in each region. Europe can be broken down into 8 smaller "target markets" : 1) UK and Ireland; 2) Scandinavia/Nordics; 3) Baltics; 4) Germany and DACH; 5) Benelux (Netherlands and Belgium); 6) Spain and Portugal; 7) Italy; and 8) Eastern Europe. Each country within a sub-region has its own legal and tax framework as well as business customs.

This market reality requires different go-to market motions for each region, making it more difficult to scale across Europe. This phenomenon encourages more creative and out-of-the-box thinking which Joyce believes leads to a relative higher likelihood of European SaaS companies having successful US expansion when go-to market fit has been achieved across Europe.

The main KPI's for SaaS companies across Europe are very similar to the U.S.; the metrics also evolve in tandem at each stage of business maturity: < $2M ARR, $2-5M ARR, $5-10M ARR and > $10M ARR.

In order to get to the right metrics, it requires a business, its leaders and Board members to invest early into data quality and SaaS reporting & metrics, ideally before raising an institutional Series A funding round.

We also talked through some examples of private and public B2B software companies in Europe and the US, and how those with impressive growth metrics and unit economics command much higher valuations from investors and buyers alike. In fact, at over $400 million in ARR, UiPath, a business founded in Romania, is one of the fastest growing global enterprise software companies today.

The episode closes off with some tips and best practices for European SaaS companies launching and expanding into the U.S. market.

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