How can you identify SaaS deal sourcing opportunities?

In my journey, I've learned that one of the most effective approaches to boosting a Software as a Service (SaaS) business is to build strong connections and leverage existing relationships. These connections can open doors, generate opportunities, and strengthen your position in the market in an unparalleled way. Another lesson I've learned is the importance of expanding your network, and going beyond your comfort zone. An elevator pitch is the key to making the most of these connections. It's important to have a concise and compelling narrative that describes the unique value your SaaS product or service offers. Remember that business relationships often start with a simple handshake or a casual conversation during these events.

Here is how I would start: 1. Form an opinion on which industry you want to focus on. Horizontally, there's sales and marketing SaaS, HR SaaS and then there is vertical SaaS e.g. Order management platform for restaurants. 2. Form a network of known investors or potential customers in that industry. And ask them for about new products they have been pitched. 3. Attend relevant industry trade shows, demo days at accelerators where such startups would be pitching. Over time, as you get your name out as an investor in a particular industry, your network would start sending you dealflow. Potential customers of SaaS in your target industry are the best source of dealflow.

In my opinion, to find opportunities in SaaS, use online platforms such as Product Hunt, AngelList, and Crunchbase, which list startups. These sources are rich in detailed information and feedback about these companies. Additionally, engage in online communities such as Indie Hackers and Hacker News, and subscribe to specialized newsletters like 'SaaS Weekly,' blogs, podcasts, forums, communities, and social media. Some examples of these platforms include Product Hunt, AngelList, Crunchbase, SaaS Mag, SaaStr, Indie Hackers, Hacker News, LinkedIn groups, and Twitter to stay updated with industry trends. This knowledge is vital for identifying promising partnerships or investments in SaaS startups.

Gross retention rate and net retention rate are the most important measures of whether there is product market fit. Of course if there are only a few customers, this wouldn't matter. But once you have enough customers and you can start looking at cohort charts, you can see if the company is starting to retain and expand customers. A note of caution is that PMF in one market segment doesn't automatically mean PMF in adjacent segments or markets. So you also want to make sure that the market segment of PMF is large enough for continued growth.

One thing I've found helpful is a way to find opportunities in SaaS businesses to conduct due diligence and negotiate with the SaaS startups you're interested in investing in. For legal security and to avoid losses, you need to verify their legal, financial, technical, and operational aspects, as well as their vision, mission, culture, and team, to ensure that you're closing an excellent deal. It's of utmost importance to discuss their valuation, terms, conditions, and expectations and seek alignment and agreement on the business structure and process. These steps should not be neglected to prevent future losses and help you finalize the best SaaS deals.