Private sector tech companies have been raising staggering amounts of money (looking at you Uber, Airbnb, Cloudera) which poses the question: is raising a lot of money the only way to grow? The answer is no. We did an analysis of 45 publicly traded tech SaaS companies looking at their annual revenue, total debt and equity to get a sense of capital raised, and free cash flow. In conclusion, there are two ways to grow: i) the expensive way which is to raise a lot of money and suffer the dilution, or ii) the efficient way which is to generate free cash flow so the business can grow off re-invested profits. The raw data set is at the following link and observations are below.
As expected, the largest companies by revenue (Salesforce is the biggest at $6.3bln) both have raised the most cash and generated the freest cash flow on which to grow the business with re-invested profits. The table below summarizes the 45 companies into 5 silos based on revenue. It then shows the average rank of each for free cash flow generated and Debt+Equity (a proxy for capital raised). For instance, of the top 9 companies by revenue, on average they ranked 8th for annual free cash flow generated and 7th for total capital raised. The table is showing us what we would expect: those companies that have raised the most money and have the freest cash flow are the largest by revenue.
|Average Rank by Revenue||FCF||Debt+Eq|
|Top 9 in Revenue||8||7|
|10 through 18||20||18|
|19 though 27||21||24|
|28 through 35||30||32|
|36 through 45||36||33|
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