Gavin Baker+ Your Authors @GavinSBaker Husband, Becky Painter. CIO, Atreides Management. Former PM, Fidelity OTC fund. investorfieldguide.com/baker/ No investment advice, views all my own. Feb. 09, 2020 1 min read + Your Authors

1) Great post on ABS backed by recurring software revenue.

As Robert Smith says “Software contracts are better than first-lien debt. You realize a company will not pay the interest payment on their first lien until after they pay their software maintenance or subscription fee.”

2) Securitizing recurring software revenue is super logical and curious as to when it begins to happen. Likely starts small with OTC/private securitizations and then slowly institutionalizes over several years.

3) Only caveat to @Alex_Danco thesis would be that SaaS valuations are so elevated right now that equity financing is relatively cheap so I’m not sure financing via securitization is cheaper and more founder friendly right now but this won’t always be the case.

4) And for investors: SaaS switching costs feel like they are going down rather than up so caveat emptor whether buying future putative ABS instruments or equity.


You can follow @GavinSBaker.



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