Three steps to evaluate SaaS businesses
Investor Intelligence

How To Evaluate SaaS Companies in 3 Steps?

November 12, 2018 | Updated August 2, 2022
  • Similarweb’s solution for investors empowers decision-makers with the insights they need to make smarter decisions.
  • SaaS companies have a particular digital profile that requires specific metrics to determine their success.
  • You can best evaluate a SaaS company by looking at the volume of traffic it receives, the quality of that traffic and the way users behave once they reach the site.

Similarweb’s Investors Intelligence Solution gives investors the tools they need to identify potentially investable companies and make better decisions about funding those companies. Many investors are looking at SaaS businesses and trying to determine what are the best metrics for judging whether a young SaaS business is exhibiting the necessary growth indicators for sustainable revenues.

In this post we will identify three key steps for evaluating SaaS businesses. In the past few days, California-based startup PatientPop raised $25M in series B funding for its SaaS platform that helps healthcare providers improve and accelerate their patient acquisition programs. We will use PatientPop’s digital profile as an example of our SaaS businesses in this handy guide.

Step 1: Traffic & Engagement

Traffic to the site of a SaaS company is an important indicator of the digital health of that company even if it isn’t expected to see the volumes of traffic that an eCommerce or ad-dependent site needs to generate to be successful.

In the past year, monthly traffic to patientpop.com has been gradually increasing up from 35K visits in December 2017, to 146K in September 2018 – a 300% increase over the course of 9 months. Morevoer, the site’s unique visitor count tripled, from 19K in December to 62K in September, clearly showing that more people are becoming exposed to the site.

Step 2: Traffic Quality

All online companies use a range of user acquisition tactics. Similarweb’s Investors Solution enables investors to gain a better understanding of a site’s digital strategy, and understand what proportion of their traffic is organic vs. paid.

Looking at the sources of traffic over the past year to patientpop.com shows a site growing organically. Direct traffic is up considerably over the year which is a strong indication of returning users accessing the site by entering the URL in the address bar. Referrals also play a part in the company’s business strategy as links to the site come from the healthcare providers’ sites. Organic traffic is rising as brand awareness is starting to build leading to users searching for the company. Paid traffic is almost non-existent which is a strong indication that the site’s growth is sustainable.

Step 3: On-site Behavior

With SaaS businesses traffic doesn’t necessarily indicate usage, as audiences may simply be interested in the site, or exploring the company’s offering. Using subdomain analysis, we can dig deep into a company’s performance to understand actual platform usage. At patientpop.com, an increasing proportion of visits to the site end at their personalized platform subdomain – app.patientpop.com. This is up from 15% of desktop visits in Dec 2017 to 42% in September 2018.

Traffic to the site is up, and traffic to the important part of the site is up. The final part of the puzzle is user engagement with the site. For patientpop.com the number of pages per visit and the average visit duration have remained stable, but the number of visits to the site per unique visitor has risen steadily which is an impressive indication of the sites traction amongst its most important users.

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