SaaS learnings from the latest IPO

Definitive Healthcare just went public.?While it may not be a household name in SaaS, there are some learnings from their prospectus.?Below we summarize the highlights.

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It was a 10 year journey.?“We were founded in 2011 by our CEO, Jason Krantz. Mr. Krantz founded the company to provide healthcare commercial intelligence that enables companies that compete within or sell into the healthcare ecosystem to make better, informed decisions.”

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Nice revenue growth, and revenue to burn ratio of 2.3:1.?“We generated revenue of $118.3 million and $85.5 million in the years ended December 31, 2020 and December 31, 2019, respectively, representing an increase of 38%.?Our net loss was $51.2 million for the year ended December 31, 2020.”

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Smart multi-year customer contracts with escalators.?“Subscriptions generally range from 1 to 3 years and are non-cancellable during the subscription term. Over 61% of our year end 2020 ARR was under multi-year agreements. Our subscription agreements typically include annual contracted price escalations.?no single customer contributed more than 2% of our revenue.”

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Enterprise always has better retention.?“For 2020, our NDR for all customers over $17,500 in ARR was 108%. For the year ended December 31, 2020, our NDR for Enterprise Customers was 124%?In 2020, 292 customers generated more than $100,000 in ARR, representing 53% of our total ARR.”

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Inside sales model.?DH “combines effective marketing with an inside sales force made up of highly trained, vertically focused SEs.?The efficiency of the team is demonstrated through our 2020 LTV to CAC ratio of over 10x.?Only approximately one-third of a sales representative’s day is spent selling.?Of the 38% increase in total revenue, approximately 33% was attributable to net expansion with existing customers and 5% to the addition of new customers inclusive of those acquired through the acquisition of Monocl in October 2020.”

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New product and use cases drive upsells.?“Our customers have historically increased their spend by adding intelligence modules and expanding use-cases across departments.?Our customers are typically assigned to one of our vertically-focused teams, which is responsible for driving usage and increasing adoption of the platform, identifying expansion opportunities and driving customer renewals.?Our platform currently offers 13 intelligence modules. As of June 30, 2021, 78% of our customers subscribed to fewer than four intelligence modules.”

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Customer feedback drives the product roadmap.?“Real-time input from these customer centric teams feeds directly into our product innovation teams, enhancing the development of new intelligence modules. We believe this feedback loop and our ability to innovate creates significant opportunities for continual existing customer expansion.”

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Acquisitions drive growth and product.?“In October 2020, we acquired Monocl, a cloud-based platform with millions of expert profiles. In December 2019, we acquired HSE, a software analytics firm that helps life science companies and healthcare providers find patient clusters who would most benefit from their products and services. In January 2019, we acquired HIMSS Analytics, a global healthcare advisor providing guidance and market intelligence solutions. In June 2016, we acquired Billian’s HealthDATA, a provider of data and analytics on U.S. healthcare organizations. In October 2015, we acquired US Lifeline, a provider of real-world data and intelligence for the healthcare supply chain.”

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Prior to the IPO, DH was private equity owned.?“On July 16, 2019, Advent acquired us for $1,699.6 million, consisting of $1,129.3 million of cash and $570.3 million in equity.”

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The internet bubble taught the founder about cash efficiency.?“Between course work, I raised a small seed round of financing and landed a six-figure client before graduation. Things got a bit rocky when the Internet bubble burst, but those were the years when I learned the most. I learned how to be capital-efficient and how important it is to measure every aspect of your business. But the biggest lesson that I learned was the importance of surrounding yourself with amazing, mission-driven people. We built a great team and a great platform at Infinata over the next seven years and successfully sold the company to the Financial Times Group in 2007.”

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