How accelerator organizations boost Software-as-a-Service growth

Software as a Service (SaaS) is growing fast. More than $1B was invested into SaaS across the country last year, and software development accounts for almost 15 per cent of the spots on the 2017 PROFIT 500 ranking of Canada’s Fastest-Growing Companies.

Through the 1980s and into the 90s, Canadian companies like Mitel, Nortel, Newbridge and Cognos laid the foundation for a technology sector that has become a major economic driver for Canada.

You may have heard about many “accelerator” organizations that have popped up across our country, created to help a new generation of Canadian software firms evolve. L-SPARK, the organization that I am a founding member of, is an example of one of these accelerators. We’re based in Ottawa, and are a key resource for Canadian start-ups in today’s ultra-competitive, global, technology ecosystem.

This ultra-competitive global landscape is exactly the reason why so many accelerators exist today. That, and the fact that SaaS organizations face a number of unique challenges as they grow their business.

Because software companies are cloud-based technology, they have a competitive advantage over brick-and-mortar stores when it comes to increasing their business internationally since, like their company, their customer base is online.

With Canada’s tremendous strength in research and development, creating the product isn’t usually an obstacle for Canadian SaaS companies. However, as the development phase decelerates, challenges increase as they try to bring their product to market.

To help with this, there are many opportunities for improvement in the overall SaaS sales process, including identifying the company’s ideal niche and ideal customers, targeted digital marketing, and creating a repeatable process around selling to those ideal customers.

With L-SPARK, our clients attend a series of workshops to help identify and manage these challenges. L-SPARK mentors are embedded within our customer’s company to help create and maintain an effective plan that will supplement the company’s strategy to scale up revenues and generate consistent growth.

Weekly check-ins with the L-SPARK team measures the progress of the custom plan.

Throughout the nine-month accelerator program, companies have the chance to pitch venture capital firms, angel investors and corporate partners, expanding their networks and increasing the potential of an investment or partnership.

Upon graduation, successful companies can pitch at the L-SPARK Best in SaaS Showcase and the Annual Cottage Pitchfest – a private investment event with leading Canadian and U.S. venture capital firms.

While the accelerator program has only been in existence for a short time, the legacy of mentorship is rich within the SaaS community. It draws on the experience and expertise of a community of executives, whose guidance is shaped by real-life lessons gleaned from successes and failures.

Having access to advice rooted in experience is invaluable for young start-ups as they operate in an opportunity-rich environment. A mentor can provide focus to help define which path will likely lead to success.

Once a SaaS company has an understanding of their ideal customer and has created repeatability in their sales process, they can begin to analyze the unit economics associated with their business model and think about scaling up. 

Important for a SaaS company is the LTV:CAC (Customer Lifetime Value to Customer Acquisition) ratio. The LTV:CAC measures the lifetime value of a customer (or the amount of revenue a single user generates over the duration of their account) and the cost per acquisition, or how much it costs to obtain a new user.

Typically, a 3-to-1 LTV:CAC ratio is fundamental to a SaaS company’s sustainable growth.

Traditionally, the SaaS model has been horizontal; it creates industry-neutral software that caters for a need (marketing, accounting, sales) across a variety of industries. Predictions are that we will see a surge in vertical SaaS, targeting specific industries, and allowing companies to adapt software features according to client and industry demand.