eResearch| Saskatchewan might be known for more than berries and melonheads if Vendasta’s impressive growth continues.
Vendasta is riding the software-as-a-service (SaaS) tsunami created by COVID-19 and plans to list on the TSX exchange under the ticker “VND”. Vendasta provides digital solutions for small and medium-sized businesses (SMBs).
Vendasta intends to raise C$100 million as part of the public offering, targeting a share price between C$14-C$16. Funds raised will be used to improve the financial position and grow revenues.
The most recent funding round raised C$40 million in July 2019, valuing the company post-money at C$200 million, according to Crunchbase.
The current issuance price range pegs the market capitalization after IPO around C$660‑C$750 million. A healthy return for early investors like BDC and Canadian Business Growth Fund.
Revenue growth, not profitability or cash flows, provides the basis for Vendasta’s valuation.
Vendasta’s product mix had healthy gross margins of 55.3% in 2020, but marketing and R&D expenses led to losses and are likely to continue as the Company captures market share and develops the product portfolio.
Funds raised will give Vendasta a healthy runway. Last year they recorded a C$16.6 million loss from operations, more than double compared to 2019. At that rate, the cash raised could support growth for six years.
SaaS Gets a COVID Jolt
COVID-19 changed the business world as social distancing requirements and government orders saw many companies adopt digital solutions.
SaaS (“Software-as-a-service”) offers customers digital solutions for monthly fees, enabling many businesses to quickly launch eCommerce stores or seamlessly manage customer relationships without going into the office.
The market has taken off. In 2020, Statista estimated the SaaS market was worth $157 billion, having grown at a 27.9% CAGR over the past decade.
Major SaaS companies include Salesforce (NYSE: CRM | BMV: CRM | ETR: FOO | FRA: FOO), ServiceNow (NYSE: NOW | BMV: NOWW), Shopify (TSX: SHOP | NYSE: SHOP), and Workday (NASDAQ: WDAY | BMV: WDAY | BVMF: W1DA34 | FRA: W7D) represent some of the most valuable companies.
FIGURE 1: Vendasta Dashboard Helps SMBs Manage Digital Solutions
About Vendasta
Vendasta was co-founded in 2008 by Brendan King, the current President and CEO. Headquartered in Saskatoon, it provides SaaS digital solutions and tools for SMBs.
Vendasta creates a platform that enables customers to select and integrate digital solutions (CRM, Customer Support, eCommerce, etc.) from a network of channel partners. Data integration if often timely and expensive; its platform reduces the integration headache by providing a common data platform.
Vendasta differs from competitors by creating a product mix that focuses on SMBs and enables SMBs to compete with larger competitors using similar digital tools.
Recent media suggest that Vendasta is finding placing its C$100-million IPO challenging and the Company might drop the offering price or pull the deal amid a softening in the Canadian technology IPO market.
Like many SaaS companies, Vendasta has had remarkable growth over the past two years, and in 2020, revenue grew 23.3% to C$42.6 million. The types of numbers should help with finding investors.
FIGURE 2: Vendasta Growth is Impressive
