Determine a company’s Software as a Service potential. The development of a perspicuous investment analysis model from a venture capital perspective

Abstract

The software industry is facing significant changes, and new business models are emerging. Instead of providing traditional software, the industry focuses on providing Software as a Service rather than a software product. There is a need to investigate how these new business models can be categorised, evaluated, and analysed. Therefore, this thesis aims to enhance the understanding of objectively evaluating companies with the potential to transform into Software as a Service. The goal was reached by identifying factors that need to be analysed and which conclusions can be drawn by analysing those factors. That knowledge was used to create a robust evaluation tool that can align investment decision-making processes with investment strategies focusing on investing in potential Software as a Service companies, and was performed using an iterative process consisting of three steps: data collection, model visualisation, and validation. Data was gathered through mapping, a workshop, and two rounds of interviews. The data was used to develop models that were validated in the workshop and the interview rounds. Several factors were identified as critical to evaluate when searching for companies with Software as a Service potential. Many of those factors affecting the Software as a Service potential were subjective and challenging to evaluate. Therefore, a more in-depth analysis was made of these factors. The factors were divided into six comparison areas: product strategy, revenue strategy, distribution, service and implementation, market, and organisation. A model was developed to analyse each comparison area systematically by dividing the areas into comparison metrics. The comparison metrics facilitates an objective analysis. The model created enables the user first to collect the information, visualise it in the model, and then get a comprehensive summary of the information, guiding an investment decision. The separation of tasks prevents the user from getting influenced by one factor before information about all necessary factors is gathered, improving objectivity. When a company’s analysis is visualised in the model, an indication is given of the company’s Software as a Service potential.