When River SaaS did its annual survey of companies in and outside of its portfolio companies, looking to get an understanding from where the industry is, it found as of the third quarter, that many companies were doing well within the COVID environment.
Wendy Jarchow, chief investment officer at the firm, says companies that were able to pivot and bring all of their functionality online really benefited. For example, a portfolio company that takes landline messages and converts them into a text offering was focused on automotive, RV and marine industries. Jarchow thought those industries would experience a pull-back in spending, and the company would struggle because of it. But that’s not what happened.
“That company exploded in 2020 because many people went out and because they could work remotely from anywhere we're renting RVs, were buying boats, were buying new cars because they were traveling more, or they might have had a second home somewhere where they were working out of,” she says. “So that company exploded. And we saw that in many facets, not just within our portfolio, but across SaaS companies industry-wide.”
Where the struggle came for companies was either onboarding new customers or the sales cycle being extended led to a flat year. But a lot of companies were able to dig deep into their existing customer base and come up with additional offerings. For example, a company in the food industry came up with a contact tracing tool that used QR codes, a new product that they could roll out specific to COVID-19.
“I think everybody had a knee-jerk reaction in early March when this first took hold,” she says. “But by April and May, they had really come to an understanding of how are they going to dig deep with their existing customers, whether that was from a client success perspective or rolling out new products to really help kind of bolster their year. So although they might not have experienced the 30 to 40 percent growth that they were looking to achieve, I would say almost every portfolio company that we have experienced at least 20 to 25 percent year-over-year growth.”
On the equity side, the firm didn’t make any new equity investments last year. But it did re-up with an existing investment that was going through an acquisition.
“On the debt side, we didn't have to have to really change anything because these companies we're navigating their cash flow and understanding what they needed to do to be able to not just look at the growth but to be able to understand what they need to do to maintain,” she says.
Jarchow spoke on the Smart Business Dealmakers Podcast about how early-stage companies fared during the pandemic, what she expects from that segment in 2021 and the factors that could influence their year.
Listen to the podcast