A look at the VC financings and exits for SaaS companies serving the SMB market in 2016.

1. S T A T E O F S M B2 0 1 6
A look at fundraising and exit trends of North American
SaaS companies serving the SMB market in 2016

2. 2
Ta b l e o f C o n t e n t s
Introduction
The State of SMB Software
SMB Fundraising Activity
SMB Exit Activity
SurePath SMB public Index
01
07
10
18
25

3. 3
S u r e P a t h : O u r P u r p o s e
Helping you fund, grow and exit your company
The process of raising growth capital is very different from raising early stage capital
It is cheaper than ever to start companies, but more expensive than ever to build market leaders. If that’s your
aspiration, you will need growth capital
We help you prepare for growth stage and help you raise the capital needed to become a market leader
We have sat on both sides of the table. We have funded, grown and exited many companies
We offer up that experience to help our clients prepare for funding and exits
There are few credible advisors to facilitate sub $100M exits. We fill that gap
We work with you to facilitate the intros that pave the way to an eventual exit
If you decide to exit, we manage the process for you from start to finish
SurePath maximizes your optionality:
We make sure you know what it takes to build a market leader and help you fund that goal.
We ensure you are always in the minds of strategic buyers so that if they decide to make a move in your
space, you are in the conversation. You can then decide; Keep going or exit?
Growth
Funding
Strategic
Guidance
Exits

4. Welcome to our first annual State of SMB Software Report, looking at fundraising and exit activity in the Small and Mid-Sized Business
(SMB) software space.
We decided to start small: For our first edition we focused on SaaS companies based in North America that serve the SMB market. Over
time, we will expand our scope both in terms of geography and delivery method / business model.
To find the North American SMB SaaS companies that completed a transaction last year, we analyzed over 4,800 deals, narrowing
them down to 234 fundraising transactions and 68 exits.
These companies raised over $1.9B in 2016. In addition, the SMB exits with disclosed valuations generated total sales proceeds of over
$8.6B.
The companies in this report are diverse. Some are purely focused SMB while others sell to both small and large customers.
While many vertical markets were covered, back office solutions and marketing tech solutions were dominant segments. We see back
office as a growing market category. The growth in back office software is being driven by a change in demographics. Previous
generations of entrepreneurs ran their business on pen and paper or spreadsheets. The new generation does not.
Similarly, despite the intense fragmentation in marketing technology, new fundings and exits remain strong. Marketing is an
increasingly complex and technical challenge. Small business owners are getting more sophisticated in their online marketing needs.
We hope you find this report useful and invite you to get in touch to discuss it with us.
The SurePath team
February, 2017
4
T h e S t a t e o f S M B S o f t w a r e

5. 5
S u r e P a t h & S M B
•We have been part of some the most successful SMB SaaS companies
•We have deep relationships with SMB investors and buyers
•SurePath is committed to becoming the leading strategic financial advisor to the global
SMB software market

6. 6
S u r e P a t h Te a m
S H U B H A M
D AT TA
R E N A
WA N G
M A R K
M A C L E O D
F O U N D E R & P R E S I D E N T D I R E C T O R S E N I O R A N A LY S T
Mark has over 14 years experience as a
CFO for leading companies such as
FreshBooks, Shopify, Tungle and more.
He was a Founding Partner at Real
Ventures, Canada’s most active seed
stage venture fund.
Shubham is a CPA and prior M&A
experience as an Investment Banking
Associate at KPMG Corporate Finance,
advising mid-market FinTech and SaaS
companies.
He co-founded North Pine Ventures, an
advisory firm for university founders.
Rena has a background in
management consulting at a boutique
strategy firm specializing in tech and
telecom.
She co-founded PIQ Pass, a lifestyle
subscription service in Canada.

7. in its Series B financing from
served as the exclusive strategic and
financial advisor to
7
R e c e n t D e a l s *
in its Series B financing from
served as the exclusive strategic and
financial advisor to
in its Series A financing from
served as the exclusive strategic and
financial advisor to
on its sale to
served as the exclusive strategic and
financial advisor to
* Excluding deals that have closed but not yet announced

8. The State of SMB

9. 9
M e t h o d o l o g y
1,054 Raises
378 Exits
234 Raises
68 Exits
302 SMB SaaS
Deals in
9 Verticals
in the B2B
SaaS space
in North
America
Out of the
1,432 deals, we
filtered down to
for companies
that serve the
SMB sector
4,817 deals
In 2016,
there were
in the B2B
SaaS space
globally
We filtered through thousands of deals to get to a list of 302 companies that either raised a venture round
or exited in 2016. We assessed each company for its SMB offering, and determined whether to include it in
the analysis. The final list only includes North American software-as-a-service companies that have a clear
SMB offering.
Out of the 4817,
there was a
total of

10. SMB Fundraising Activity

11. 11
S M B S a a S F u n d r a i s e s i n 2 0 1 6
$0.7 M
$2.2 M $8.4 M
$11.0 M
$22.6 M
$29.6 M
4
57
72
27
15
13
0
10
20
30
40
50
60
70
80
$0 M
$5 M
$10 M
$15 M
$20 M
$25 M
$30 M
Angel Seed Series A Series B Series C Series D+
NumberofDeals
AverageDealSize
Deals and Average Deal Size
Avg Deal Size Number of Deals
*
*46 companies either did not disclose stage of raise, or raised a bridge round
$445.1M
$599.0M
$639.8M
$307.8M
65
75
64
52
0
10
20
30
40
50
60
70
80
$0M
$100M
$200M
$300M
$400M
$500M
$600M
$700M
2016 Q1 2016 Q2 2016 Q3 2016 Q4
NumberofDeals
TotalCapitalRaised
Deals By Quarter
Total Capital Invested Deal Count
234 rounds for $1.95B in aggregate funding

12. 12
I n v e s t m e n t s B y T y p e
The most funded segment in 2016 was marketing tech,
representing almost 1/4 of all deals. This segment
includes solutions such as CRM, marketing automation,
SEO/SEM, and content management.
The second most active segment was business
management solutions. This includes back office tools
and productivity software to allow SMBs to track and
improve their performance.
The data shows that companies serving the full stack
of small business owners’ technology needs are being
funded. SMB software is a large and growing market.
AdTech
3%
Business
Management
20%
FinTech
13%
HR Tech
7%Industry
Specific
7%
IT/Infrastructure
19%
Marketing
Tech
21%
Marketplace
3%
Retail Tech
7%
Investments by Total Funding

13. 13
B r e a k i n g D o w n t h e t o p t w o s e g m e n t s
Business management tools have expanded from
accounting software to more sophisticated business
intelligence tools for SMBs. While the largest sub-segment
funded is back-office SaaS. Productivity and business
analytics are also growing sub-segments.
CRM continues to be a hot area for funding in the SMB
marketing tech space. Marketing analytics tools and content
management solutions are quickly gaining speed, as more
SMBs are looking for DIY solutions to control their digital
marketing performance.

14. 14
I n d u s t r y S p e c i f i c S a a S C o m p a n i e s F u n d e d
2
1
2 2
7
8
3
2
3
0
2
4
6
8
Auto Construction Finance Healthcare Hospitality Legal Logistics Real Estate Other
Industry Specific SaaS Solutions
Vertical market solutions used to be reserved for large enterprises. However, we are now seeing them
come down to the SMB market. 30 industry-specific SaaS vendors serving SMBs were funded in 2016.

15. 15
M o s t A c t i v e I n v e s t o r s i n S M B
1
2 3 4
5 6 7
8 9 1 0
5 of its 12 investments (42%) in
2016 are in SMB
4/10 Investments are in SMB
4/226 investments are in SMB4/108 investments are in SMB
4/8 investments are in SMB
4/54 investments are in SMB4/44 investments are in SMB 4/53 investments are in SMB
4/66 investments are in SMB
4/36 investments are in SMB

16. IT/Infrastructure
HR Tech
Business Management
Marketing Tech
FinTech
FinTech
Business Management
Business Management
Marketing Tech
IT/Infrastructure
16
To p 1 0 S M B R o u n d s i n 2 0 1 6
$180M
$90M
$55M
$50M
$40M
$96M
$75M
$50M
$42M
$35M

17. FinTech
Retail Tech
IT/Infrastructure
Retail Tech
Marketing Tech
AdTech
Business Management
HR Tech
Business Management
AdTech
17
M o s t F u n d e d S M B S o f t w a r e C o m p a n i e s
$395M
$190M
$180M
$155M
$96M
$344M
$184M
$176M
$150M
$93M

18. SMB Acquisition Activity

19. 19
A c q u i s i t i o n s B y T y p e
AdTech
6%
Business
Management
26%
Education
Tech
2%
FinTech
2%
Industry
10%
IT/Infrastructure
3%
Marketing
Tech
25%
Marketplace
13%
Retail Tech
13%
Exits By Type
17%
29%
18%
18%
18%
Marketing Tech
Content
Customer Engagement
Marketing Automation
CRM
Analytics
61%17%
11%
11%
Business Management
Back Office
Collaboration
File Management
Business Intelligence
As with venture funding, the most frequent acquisitions were in the business management and marketing
tech markets, representing just over half of all deals in 2016. Most of the acquisitions for business
management software are for SMB back office solutions. SMB back office is a growing market as business
owners migrate from Word/ Excel to specific software solutions to serve their back office needs.

20. 20
W h e r e a r e t h e a c q u i r e r s c o m i n g f r o m ?
P R O V I N C E E X I T S
U N I T E D S TAT E S 5 7
C A N A D A 4
U K 1
G E R M A N Y 1
S W E D E N 1
J A PA N 1
5 7
4 1
1
1
1
The vast majority of acquirers for North American based SMB focused companies in 2016 were based
in the US. Larger players are acquiring within their borders, while a handful of overseas acquirers made
moves to acquire North American companies in 2016.

21. 21
E x i t s B y S i z e & F u n d i n g
The majority of SMB acquisitions do not have disclosed deal sizes (56 out of 68). This pattern is not limited
to SMB. We see this in other markets as well. Despite the fact that most deals did not have disclosed
values, only 11 of the deals were smaller ‘acqui-hire’ transactions.
56
3 4
1
4
$0 M
$10 M
$20 M
$30 M
$40 M
$50 M
$60 M
Undisclosed <$50M 50-500M 500M - $1B $1B +
Exits By Size
11
37
6
4 4
<10 10-100 100-500 500-2000 2000+
Number of Employees in Acquired Companies
4
Publicly
Traded
7
No
Backing
8
48 1
7
VC PE
Financial Backing of Acquired Companies

22. Acquired by Private Equity
Acquired by Private Equity
Acquired by Salesforce
Acquired by Web.com
Acquired by stamps.com
Acquired by Private Equity
Acquired by EIGI
Acquired by Salesforce
Acquired by Gannett
Acquired by Propel Marketing
22
To p 1 0 E x i t s i n 2 0 1 6
$3B
$1.2B
$750M
$342M
$55M
$1.65B
$1.1B
$360M
$156M
$12M

23. 2 Deals in 2016
23
M o s t A c t i v e B u y e r s i n S M B
$4.2B
$1.1B
$N.D.
Total 2016 Spend Buyer # Deals Purchases
2 Deals in 2016
2 Deals in 2016
$3 billion
$1.2 billion
$750 million
$360 million

24. 24
P u b l i c C o m p a n i e s Ta k e n P r i v a t e
Company Acquired Acquisition Price Buyer
$3 billion
$156 million
$1.65 billion
$1.1 billion

25. The SurePath SMB Index

26. 26
T h e S u r e P a t h S M B I n d e x
SurePath SMB Index
Final Selection of
35 Companies
Selection of Companies
for SMB Focus
Examined 280+ Annual Reports
of Publicly Traded Companies
SCP loves
SMBs
Our
clients
serve
SMBs
Many
Other
Indices
The First
To See The
Trends
In 2016, SurePath introduced the SMB Index, which tracks 35 publicly traded
companies and their performance against other benchmark indices.

27. 27
S C P S M B I n d e x - T h e P l a y e r s

28. 28
S u r e P a t h S M B I n d e x
SCP SMB Index Total Market Cap
$195B
• All 35 companies are weighted based on Market
Cap and indexed at January 4, 2016
• 30 of the 35 companies are part of the $1 billion
market cap club (a club we expect will grow over
time)

29. 29
M o v e m e n t o f t h e I n d e x i n 2 0 1 6

30. 30
To p 5 G a i n e r s i n 2 0 1 6

31. 31
To p 5 L o s e r s i n 2 0 1 6

32. Shubham Datta
Director
shubham@surepathcapital.com
647.972.6834
Rena Wang
Analyst
rena@surepathcapital.com
416.897.8922
Mark MacLeod
Founder & President
mark@surepathcapital.com
416.843.6004