Ep 6: John Gallagher on Filling the Void in SAAS lending

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Even if you’ve never heard the term software as a service (SaaS), you are likely to make use of it on a regular basis. In today’s episode, John Gallagher explains where the concept of SaaS originated from and shares examples of both the consumer elements and the business-to-business elements of it. The SaaS industry is growing with speed, and the company John runs helps founders of software companies to expand their businesses through lending them capital. The company is called Element SaaS Finance, and John explains how their model of lending differs from the traditional venture capital model, and why it offers a much greater degree of sustainability. We also dig into why the company’s interest rates are quite high, why banks generally don’t like to lend money to SaaS companies, the due diligence that John makes sure to do before lending money, competitors to Element SaaS Finance, and one of John’s most important learnings through his years of experience in the space.

Key Points From This Episode:

  • The origin of software as a service (SaaS) and the massive scope it has today.
  • Consumer elements and business-to-business elements of Saas, and examples of these.
  • The growth that is being experienced in the SaaS industry.
  • How John found his way in the world of SaaS.
  • Sustainable venture capital versus unsustainable venture capital.
  • The aspects of SaaS companies that make them appealing to lend to for certain people.
  • Why banks typically don’t want to lend to SaaS companies.
  • What a warrant is in the context of lending, and why John’s company doesn’t them on.
  • Reasons that John’s company places quite high-interest rates on their loans.
  • Due diligence that John will do before lending money to a SaaS company.
  • The approach that John takes to dealing with clients.
  • Competitors to John’s company, and the similarities and differences in how those companies work.
  • Getting to know the people to who you are lending is vital.
  • How, on average, John divides his time between current clients and new ones.

Links Mentioned in Today’s Episode:

John Gallagher on LinkedIn

Element SaaS Finance

Salesforce

Oracle

IBM

Marc Benioff

Scaleworks

Lighter Capital

SaaS Capital

Pike

ClearBank

Jennifer Merchant

PitchBoard

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