Haatch has a clear aim for the businesses they invest in: help B2B SaaS companies hit their first £1 million in annual recurring revenue (ARR).
Haatch EIS and SEIS funds invest in exciting early-stage UK B2B SaaS companies with a clear opportunity to increase revenues, achieve high profit levels, and create shareholder value.
The Haatch team have established their SEIS and EIS funds as pre-seed and seed-stage investment vehicles seeking out B2B SaaS companies they feel have the potential to scale quickly at a relatively low cost.
High margins and long-term relationships
Core to Haatch’s investment thesis is that once a software service is launched by a B2B SaaS company and they win their first customers, the incremental cost attributed to adding further customers is minimal and high margins can be achieved as the business grows.
To secure the returns required by their investors, Haatch has stringent criteria for assessing the growth potential of individual SaaS companies. This focuses on the ‘pain’ points their potential portfolio companies will fix for their customers.
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Identifying the ‘pain’ for their customers and providing them with a solution increases the chance of long-term profitable relationships as the software services are embedded into the companies’ operations.
The investment team at Haatch has reviewed over 2,000 pitches from companies that believe they fit these criteria and invested in only a fraction of them.
Haatch has set out ‘3 truths’ that drive clear investment strategy:
- Operators with experience taking companies from 0-to-1 and experienced entrepreneurs are the most valuable support to founders of early-stage companies.
- Sales and product are the most critical levers and the hardest to get right before a business can scale.
- Pain is the biggest driver of a purchasing decision for a buyer and creates long-lasting lifetime value.
This strategy has provided investors with returns of as much as 276x in the case of Elevaate when it was acquired by Quotient Technology Inc. (NYSE:QUOT).
Elevaate, founded by Scott Weavers-Wright OBE, boosts online monetisation programmes by enhancing relationships between suppliers and retailers. Elevaate’s technology platform powers global supplier sponsorship programmes for Morrisons, Iceland and Office Depot.
Portfolio value growth
The value of Haatch’s first EIS fund has increased 320% based on recent funding rounds.
This has been achieved by portfolio companies gaining substantial traction and securing subsequent funding to pursue further growth. Haatch does invest in follow-on rounds up to seed stage.
An example is Aerocloud, a SaaS provider of cloud infrastructure for airport operations, which provided Haatch investors with a 6x uplift on their valuation after it secured series A funding.
While investors will focus on Haatch’s investment returns, their funds have generated deep value for the UK economy in the form of 2,000 jobs created by their portfolio companies.
Haatch’s team has substantial experience in scaling businesses and securing exits for investors in a variety of industries.
Fred Soneya, Co-Founder and Partner at Haatch, summarises the Haatch team’s investing experience and how this enables them to select companies with material growth potential:
“I’m delighted to launch the next iteration of our EIS fund. It draws on the learnings of investing in 70+ companies over the past four years via Haatch funds and the previous 10 years as angels to more accurately define our narrative on what makes companies successful and how we strategically support them on that journey.”
Their SEIS and EIS funds target a 10x return on the initial investment, although exits have returned less than this and, as we discussed in the case of Elevaate, much more.
Of the 70+ companies Haatch has invested in, 3 have achieved exits. The total value of their portfolio is £800m.
As with all early-stage companies, while Haatch has achieved substantial returns for their investors from a selection of companies, not all portfolio companies will do this, and some may fail.
