As we prepare to close out a highly successful 2018, the Technology Finance team is already looking ahead to 2019 and holding meaningful conversations about the challenges and opportunities our customers will face in the New Year. Recognizing that software companies, particularly those that sell into mid-size businesses and large enterprises, have inherent strengths in their business models, we see our customers as being well positioned for 2019. For example, the strength of a software company’s recurring revenue model provides tremendous revenue visibility, enabling strategic planning initiatives to take hold, knowing that the predictability of revenue and cash flows provide a strong baseline for making investment decisions. Think of it this way – how many companies in industry verticals outside of software can wake up on January 1st knowing that most of their calendar year revenue is in the bag? This really helps when planning strategic hiring and capital deployment decisions for the upcoming year, as evidenced across our portfolio.
That said, there are many other risks and challenges that software companies face. The rapid pace of change, the consumerization of IT in general, and the significant amount of capital flowing into the space requires software companies to continually invest in their product while providing excellent service to their existing customer base. Often times, the biggest pitfall software companies face occurs when they don’t take good care of their existing customers, resulting in higher levels of customer departures, or churn. Another risk to software companies, particularly highly acquisitive ones, occurs when acquisition integration is mishandled – resulting in the accumulation of technical debt that can impact longer term operating margins. And, of course, the age old story of overinvesting in an inefficient sales model can cause a downfall in otherwise strong businesses.
Sticking to fundamentals, measuring KPIs, and holding leaders accountable for results are key elements to ensuring success. If a company is losing a lot of customers and/or paying too much to acquire new ones, it will be very difficult to build a sustainable business. And trying to generate growth through acquisition, without regard to successfully integrating the disparate businesses, will only compound the challenges.
We have a dedicated team that focuses on lending to software companies ready to help you navigate these challenges within your industry. By helping hundreds of software companies for well over a decade, we have created a deep bench of talent that can evaluate companies while leveraging our institutional knowledge and thousands of data points to provide sound advice for our customers. We look forward to working together for a successful 2019!
Leverage the value of your recurring revenue stream
With more companies moving to cloud-based technologies and shifting from standard on-premise licensing and maintenance models to fully recurring subscription models, the ability to understand the underlying value of your business becomes increasingly important. The knowledge and expertise we’ve gained by working with companies like yours can help your business meet its goals and keep pace in a dynamic industry.
Our company’s accelerating growth and continued global expansion will be fueled by Wells Fargo’s extensive network of resources and it’s capability to grow with us. Wells Fargo has years of experience in supporting the SaaS market and the depth and breadth of their highly professional team will be a real asset. We look forward to a long and mutually beneficial relationship with Wells Fargo Capital Finance.