Types of Revenue

Not all revenue is the same as there are several types of revenue.

SaaS companies earn different types of revenue through their product offering.

Here’s a list to consider:

Software licenses are quite valuable as one can charge recurring fees for them.

Maintenance fees can also be valuable as they often recur on an annual basis.

Subscriptions are the highest value because they recur every month in many cases.

Services can be valuable as they can often be priced high relative to their cost to perform.

Hardware is the least valuable as it’s a one-time charge and has limited revenue-generating capacity.

Investors view each of these revenue streams differently and will focus on those that recur most often.

This comes into play in setting valuations for a fundraise or an exit event.

Highlight the recurring revenue and how those streams are increasing over time. 

The more predictable the revenue, the higher its value.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.