1.
GO BIG OR GET RICH
LIQUIDITY ALTERNATIVES
AT $3M+ ARR
JOANNE YUAN
VP of Investment
Turn / River Capital
@joanneyuanyuan

2.
Joanne Yuan
VP of Investment
Turn/River Capital
@joanneyuanyuan
Go Big or Get Rich: Liquidity Alternatives at $3M+ ARR

3.
We All Want to Make a Dent in the Universe (and Bank Account!)

4.
$0
$20
$40
$60
$80
$100
$120
1 2 3 4 5 6 7
$M
Years from $1M ARR
That’s Doable, Right?
IPO
+300%
+300%
+200%
+200%
+200%

5.
(Actual Picture of Me Riding a Unicorn That Poops Rainbows)

6.
$0
$20
$40
$60
$80
$100
$120
1 2 3 4 5 6 7
$M
Years from $1M ARR
• Infrastructure
• Development
• Communication
• Marketing
• Sales
• Customer support
• Operations
There Was Only One Way: Go Big (with VC) or Go Home
IPO: $150M Raised
Seed: $1M
Series A: $5M
Series B: $15M
Series C: $50M
Series D: $80M

7.
What Happens to Venture Funded Companies?
26% Sustain or Exit <$50M
70% Fail
4% Exit >$50M
0.1% Ever IPO

8.
I Know What You Are Thinking

9.
Turns Out, It’s The Universe That’s Going to Make in a Dent in
You (AND Your Bank Account!)
• 736 software companies that
raised funding were acquired in
2018
• 40% fail to exit for more than
they raised, including 25% of
$50M+ acquisitions
• Another 20% exit for <2x raised
Fail
<1x <2x

10.
In Actuality, What This Means Is
This 1
Guy
SAASTR 2017

11.
What If I Told You There Was Another Way

12.
Barriers For Software Building Have Fallen Dramatically…
More than 35k APIs Exist Today
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
$0.45
Falling Cost of Instance

13.
...As The Community of Software Developers Has Expanded…

14.
… Even Across the Globe
63%
Departments have team members
that work significant time
remotely
Hiring managers predict their
workforce will be predominantly
remote in 10 years
38%

15.
Coupled With The Rise of Recurring Revenue Models…
11%
13%
34%
22%
20%
40%
0%
10%
20%
30%
40%
50%
Systems Infrastructure Applications
Gartner Forecast: Cloud % of IT Spend
2018
2022

16.
• Venture debt
• MRR/ARR line
• Revenue-based financing
• Debt-Equity hybrids
• Private Equity funds investing earlier, more operational
• Venture buyouts
…A New Asset Class Has Emerged: Software ARR

17.
$0
$20
$40
$60
$80
$100
$120
1 2 3 4 5 6 7
$M
Years from $1M ARR
• Bootstrap to
$millions, then
partner to scale
• Raise angel funding
to build product, then
go solo
• A first round of
funding that derisks
with secondary
rather than adds to
preference stack
There Are Now More Ways to Win: Get Big or Get Rich
5-6 VC
Rounds,
then IPO
Secondary +
Partner

18.
-80%
-60%
-40%
-20%
0%
20%
40%
-10% 0% 20% 40% 60% 80% 100%
Turn/River Capital’s SaaS Archetypes at Scale
Growth
Profitability Escape
Velocity
Cash
Cows
No
Man’s
Land
Efficient
Machines

19.
-80%
-60%
-40%
-20%
0%
20%
40%
-10% 0% 20% 40% 60% 80% 100%
If You Are One of These Guys, You’re Good!
Growth
Profitability
Escape
Velocity
Land of Rainbows: >60%
Growth and Profitable? 
Congrats! Lots of options
Escape Velocity: >60% Growth at Scale, Not
Profitable
 Silicon Valley is built around you! VC,
growth equity, venture debt, secondary
marketplaces, 3rd party funded employee
tenders

20.
-80%
-60%
-40%
-20%
0%
20%
40%
-10% 0% 20% 40% 60% 80% 100%
Growth
Profitability
For Those In The Death Zone:

21.
For Those In The Death Zone:

22.
For The Rest of Us: Welcome to the Great, Big Middle!

23.
-80%
-60%
-40%
-20%
0%
20%
40%
-10% 0% 20% 40% 60% 80% 100%
Growth
Profitability Escape
Velocity
Cash
Cows
No
Man’s
Land
Efficient
Machines
Cash Cows: Milk or Move

24.
Cash Cows: Low Growth, Profitable
Revenue EBITDA
• Low growth (<20%) but strongly
profitable
• Multiple devaluation at this
growth level unless get growth
back above 20%
• Different buyer profile and
valuation even though liquidity
categories are same as Efficient
Machines
• Most likely path to liquidity is
harvesting cash flows through
debt-like alternatives

25.
Cash Cows: Stay Slow Growth, Milk Liquidity
Outside Help? Liquidity
Timing
Alternatives
No Now • Traditional bank debt: 1-2x profitability; no dilution;
restrictive covenants and default risk; only modest
liquidity available
Yes Now and
Later
• Value Oriented Private Equity: Initial liquidity 35-
100%; ops help to reduce costs; return thru
dividends or 2nd exit

26.
Cash Cows: Get Growth >20% for Valuation Bump
Outside Help? Liquidity
Timing
Alternatives
No Later • MRR Line of Credit: 4-12x MRR, expensive and
may include warrants. Can’t be used for liquidity,
only bridge for growth
Yes Now and
Later
• Lower Mid-Market Private Equity: Initial liquidity 35-
100%; ops help; returns thru dividends or 2nd exit

27.
Cash Cows: Full Exit Now
Liquidity Timing Alternatives
Now • Strategic M&A: Value synergies, more flexible on financial
profile, may require 1-3 years stay
• Lower Mid-Market Private Equity: Can buy up to 100%, no
requirements to stay

28.
Revenue EBITDA
Cash Cows + Private Equity: Getting Growth >20%
Illustrative Company
$10M ARR, 10% growth,
30% EBITDA Initial Exit
Sell majority
to private
equity for
initial $15M
liquidity to
founders

29.
Revenue EBITDA
Cash Cows + Private Equity: Getting Growth >20%
Illustrative Company
$10M ARR, 10% growth,
30% EBITDA Initial Exit
Sell majority
to private
equity for
initial $15M
liquidity to
founders
2.5x sales
via organic +
inorganic
tactics based
on fund
strategy

30.
Revenue EBITDA
Cash Cows + Private Equity: Getting Growth >20%
Illustrative Company
$10M ARR, 10% growth,
30% EBITDA Initial Exit
Sell majority
to private
equity for
initial $15M
liquidity to
founders
2.5x sales
via organic +
inorganic
tactics based
on fund
strategy
Full Exit
3 Years Later
$25M ARR
25% growth
40% EBITDA
5x sale to strategic
$85M to founders
in 3 years

31.
Revenue EBITDA
Cash Cows + Private Equity: Getting Growth >20%
Illustrative Company
$10M ARR, 10% growth,
30% EBITDA Initial Exit
Sell majority
to private
equity for
initial $15M
liquidity to
founders
2.5x sales
via organic +
inorganic
tactics based
on fund
strategy
Full Exit
3 Years Later
$25M ARR
25% growth
40% EBITDA
5x sale to strategic
$85M to founders
in 3 years

32.
-80%
-60%
-40%
-20%
0%
20%
40%
-10% 0% 20% 40% 60% 80% 100%
Growth
Profitability Escape
Velocity
Cash
Cows
No
Man’s
Land
Efficient
Machines
Efficient Machines: Accelerate Profitable Growth

33.
Efficient Machines: Moderate Growth, Profitable
Revenue EBITDA
• Medium growth (20-80% y/y)
• Medium profitability
• May have raised some funding
but now self sustaining
• Cash generation limits growth 
more years to scale
• Accelerating growth >50%
improves valuation multiple and
strategic value and shortens time
to reach meaningful scale

34.
Efficient Machines: Stay Moderate Growth
Outside Help? Liquidity Timing Alternatives
No Now • Traditional bank debt: 1-2x profitability; no
dilution; ops covenants and default risk; only
modest liquidity available
Yes Now and Later • Lower Mid-Market Private Equity: Initial
liquidity 35-100%; organic and inorganic ops
strategies; full returns in 3-4 years at up to 6x

35.
Efficient Machines: Get Growth >50% for Value Bump
Outside Help? Liquidity Timing Alternatives
No Later • MRR Line of Credit: 4-12x MRR, expensive
and may include warrants. Can’t be used for
liquidity, only bridge for growth
Yes Now and Later • Lower Mid-Market Private Equity: Initial
liquidity 35-100%; organic and inorganic ops
strategies; full returns in 3-4 years at up to 10x
• Growth Equity: Initial stake of minority through
majority ownership

36.
Efficient Machines: Full Exit Now
Liquidity Timing Alternatives
Now • Strategic M&A: Value synergies, may require 1-3 years stay
• Lower Mid-Market Private Equity: Can buy up to 100%, no
requirements to stay

37.
Revenue EBITDA
Efficient Machines + Private Equity: Get Growth >50%
Illustrative Company
$10M ARR, 30% growth,
15% EBITDA
Initial Exit
Sell stake to private
equity for initial $25M
liquidity to founders

38.
Revenue EBITDA
Efficient Machines + Private Equity: Get Growth >50%
Illustrative Company
$10M ARR, 30% growth,
15% EBITDA
Initial Exit
Sell stake to private
equity for initial $25M
liquidity to founders
3.5x sales
via organic +
inorganic
tactics based
on fund
strategy

39.
Revenue EBITDA
Efficient Machines + Private Equity: Get Growth >50%
Illustrative Company
$10M ARR, 30% growth,
15% EBITDA
Initial Exit
Sell stake to private
equity for initial $25M
liquidity to founders
3.5x sales
via organic +
inorganic
tactics based
on fund
strategy
Full Exit
3 Years Later
$35M ARR
50% growth
40% EBITDA
8x sale to strategic
$165M to
founders in 3
years

40.
-80%
-60%
-40%
-20%
0%
20%
40%
-10% 0% 20% 40% 60% 80% 100%
Growth
Profitability Escape
Velocity
Cash
Cows
No Man’s Land
Efficient
Machines
No Man’s Land: Don’t Have to Go Home But You Can’t Stay Here

41.
No Man’s Land: Moderate Growth, Unprofitable
Revenue EBITDA
• Slow to medium growth (<50%)
but not yet profitable
• Perhaps raised capital and grew
fast at expense of efficiency but
now needs to change as growth
slows and VC isn’t an option
• Used to be Death Zone, but
today more options exist to
bridge to exit
• Goal to get back to safety:
reaccelerate growth back to
Escape Velocity or become
profitable

42.
No Man’s Land: Get to Profitable Growth
Outside
Help?
Liquidity
Timing
Alternatives
No Later • Venture Debt: 4-12x MRR, quick underwriting, no
operating covenants; more expensive; may include
warrants; default risk
• Revenue-Based Loan: 20-40% effective rates from
royalty payments for 24-36 months; no covenants or
warrants
Yes Now and
Later
• Lower Mid-Market Private Equity: Initial liquidity 35%+;
turnaround help in cost cutting operations; full returns in
3-4 years at up to 10x

43.
No Man’s Land: Reaccelerate to Escape Velocity
Outside
Help?
Liquidity
Timing
Alternatives
No Later • MRR Line of Credit: 4-12x MRR, expensive and may
include warrants; default risk
• Venture Debt: 4-12x MRR, quick underwriting, no
operating covenants; more expensive; may include
warrants; default risk

44.
No Man’s Land : Full Exit Now
Liquidity Timing Alternatives
Now • Strategic M&A: Value synergies, potentially care less about
economics if strategic, product or talent value; may require
1-3 years stay
• Lower Mid-Market Private Equity: Can buy up to 100%; no
requirements to stay

45.
Revenue EBITDA
No Man’s Land + Private Equity: Get to Profitable Growth
Illustrative
Company
$10M ARR
30% growth
-20% EBITDA
Initial Exit
Sell majority to private
equity for initial $20M to
cap table

46.
Revenue EBITDA
No Man’s Land + Private Equity: Get to Profitable Growth
Illustrative
Company
$10M ARR
30% growth
-20% EBITDA
Initial Exit
Sell majority to private
equity for initial $20M to
cap table
3x sales & +40%
margin
Focus on right-sizing
metrics (CAC, churn)
and costs (FTEs, rent)

47.
Revenue EBITDA
No Man’s Land + Private Equity: Get to Profitable Growth
Illustrative
Company
$10M ARR
30% growth
-20% EBITDA
Initial Exit
Sell majority to private
equity for initial $20M to
cap table
3x sales & +40%
margin
Focus on right-sizing
metrics (CAC, churn)
and costs (FTEs, rent)
Full Exit
4 Years Later
$30M ARR
40% growth
20% EBITDA
6x sale to
strategic
$110M to
founders in 3
years

48.
Change is Possible

49.
A Real Life Efficient Machine From The Turn/River Portfolio
Bootstrapped Security SaaS
8 Years In
• $3M ARR
• Growth slowed to 30%
• Founders wanted to de-risk
with significant liquidity, then
double down on growth
• Mission focused: help secure
the web in a meaningful way,
felt like job wasn’t done
Note: Not Actual Picture of Founders.

50.
• Provided Early Liquidity: $7M in cash
to founders for significant minority
• Provided operating resources to drive
profitable growth: We worked together
to build the team and optimize pricing,
sales & marketing, doubling growth to
70%
• Bought by large strategic 3 years later,
resulting in another $43M to founders,
for a total of $50M
• Access to their security product went up
100x+, delivering on their Mission to
secure the web
How We Helped These Founders
By Quarter
Actual Turn/River Ops Results

51.
Let’s Make a Dent in the Universe Together
3 Years Later
• 5x Revenue
• 70% Growth
• 100x Customer Reach
• $50M Founder Liquidity
• Eliminated risk of getting zero
return early
• Their SaaS is now a foundational
part of internet infrastructure
Where They Were
• $3M Revenue
• 30% and slowing growth
• Founders: Equity rich but
cash poor 8 years in
• Mission: Secure the web with
their software

52.
Real Turn/River Portfolio Co
• Helped grow sales $3M $15M
• $85M Valuation at Strategic Exit
• 50% Founder Owned
• $50M to Founder, including $7M
initial liquidity from T/R
Real Public SaaS Co
• $100M Revenue
• $700M Valuation at IPO
• 4% Founder Owned
• $30M to Founder
Let’s Make a Dent in the Universe Together
… Differently Than Silicon Valley

53.
THANK YOU