NachoNacho Founder: "When Covid hit, the whole supply chain of money just stopped"
I spoke with Sanjay Goel, a serial entrepreneur and founder of SaaS marketplace NachoNacho, about today's SaaS landscape, venture ecosystem, and his experience growing a business during a pandemic.
In 2011, venture capitalist Marc Andreessen famously declared that “software is eating the world.” The ensuing decade has confirmed Mr. Andreessen’s thesis, as software companies have wound themselves into the fabric of business, society, and culture.
A major beneficiary of this trend have been SaaS (software-as-a-service) companies, which sell software products and services to small and large businesses on a subscription basis. From multibillion-dollar players like AWS and Salesforce to countless startups with niche focuses, the B2B SaaS world is thriving and growing.
But a surplus of SaaS players has created logistical headaches for SMEs (small to medium-sized enterprises) that rely on multiple SaaS subscriptions. From identifying the right vendors to managing multiple subscription payments, SMEs often struggle to juggle – and maximize the value of – their various subscriptions. At the same time, SaaS companies are fighting to gain recognition and clients in an increasingly crowded market.
Enter NachoNacho, a company that is addressing both problems at once.
"We want to be the Amazon of the B2B SaaS World"
Sanjay Goel, CEO and founder of NachoNacho, describes his company as a “fintech-enabled B2B SaaS marketplace.” Like other marketplace providers (think Ebay, Airbnb or Shopify), NachoNacho is building a virtual space for buyers and sellers to connect. In NachoNacho’s marketplace, the buyers are SMEs and the sellers are SaaS subscription providers.
Mr. Goel conceived the idea for NachoNacho after selling his last startup Oximity (another marketplace-oriented business, but for news content) in 2016 to Scribd, the venture-backed reading subscription service. While leading performance marketing at Scribd, Mr. Goel had something of an epiphany: there were a growing number of SMEs and SaaS companies, but no centralized space for those companies to connect.
“What happens today in the subscription world is every manufacturer, every vendor, has to do their own distribution,” said Mr. Goel. “There’s a need for a subscriber marketplace where a large number of buyers and a large number of sellers can come together.”
The market is certainly there. According to Mr. Goel, there are over 25 million SMEs in the U.S. and over 200,000 SaaS service providers. What’s more, those SMEs need new forms of technology to compete. A report from McKinsey finds, “the productivity gap between large companies and SMEs can vary by a factor of two or more,” and incorporating “proven technologies” can help SMEs compete with larger firms. NachoNacho is trying to help those SMEs identify (and save money on) the right SaaS subscription services to turbocharge their growth.
In addition to providing a marketplace, NachoNacho is creating an ecosystem of auxiliary products and services. For example, NachoNacho provides SME clients with a subscription management system, allowing them to centralize the subscription budgeting process and allocate subscription spending power to specific employees.
The NachoCard, which centralizes a company’s subscription spend to a single account, is part of the company’s broader appeal to SMEs.
“When Covid hit, the whole supply chain of money just stopped.”
NachoNacho was speaking with VC firms back in February and March about investing in a Series A round, but Mr. Goel stepped back from those discussions when the magnitude of the pandemic became apparent. Many LPs and VCs had similar reactions. Seed stage investments plummeted in February and March, while many LPs held off on allocating to new funds. The entire VC money supply – from LPs to VCs, and from VCs to startups – felt the squeeze.
“When Covid hit, we completely stopped fundraising and basically said, We’re going to ride this through and use the money we have. We had a 5 year runway, so let’s focus on the business,” according to Mr. Goel. As the pandemic’s shock value waned and equities rebounded, VC investors started reaching back out to NachoNacho, but “unless it’s the right investor, we won’t initiate discussions,” said Mr. Goel, citing his company’s long runway and laser focus on growing their marketplace.
In some ways, NachoNacho’s fundraising situation reflects the trajectory of venture sentiment and activity during the pandemic. CrunchBase’s Q1 Global Venture Report, published April 17th, observed that the slowdown in Q1 dealmaking reflected a “consensus [that] we’re in for a protracted decline.” But that prolonged slowdown never happened. Even as the coronavirus spread globally in the spring and summer, venture activity rebounded in Q2, rising 17% quarter over quarter, according to CrunchBase’s Q2 Global Venture Report.
In the coronavirus era, SaaS companies make for good VC bets. In early 2020, just before the pandemic, SaaS companies saw a surge in VC investment, but mostly among the larger players. The broad, ongoing societal pivot to “remote everything” will create new opportunities for specialized SaaS companies – and their VC investors – that cater to market segments that did not exist in pre-Covid times (e.g. learning tools for online elementary education).
Sanjay Goel, pictured here, started his career on Wall Street, working at large financial institutions like Citigroup and Deutsche Bank before going full-time into entrepreneurism.
“Ultimately, there’s been almost no change to our business during Covid.”
As a startup focused on B2B software, NachoNacho is one of those technology companies that is uniquely fitted to withstand a global pandemic.
“We already worked at home, and remote work is great if you have preexisting relationships,” said Mr. Goel. “In many ways, it made our work easier because it was easier to reach our clients on the buyer and seller side.”
But like most businesses, NachoNacho’s bottom-line took a hit in the early spring when stock markets plummeted, states went into lockdown, and panic spread across the business community. “We saw a dip in overall spend during March and April. Our customers scaled back. They weren’t sure how this was going to turn out,” said Mr. Goel.
Since then, despite persistently high unemployment and widespread economic dislocation, stock markets have rebounded – with technology stocks leading the way. Those tailwinds have benefitted technology companies like NachoNacho.
“In the last few months, we’ve seen a massive pickup in spend,” said Mr. Goel. “Our clients have learned how to cope with the pandemic. We’ve seen significant pickup.”
Worth noting: many of NachoNacho’s clients (on the buy and sell side) may have benefitted from the U.S. government’s Paycheck Protection Program, which doled out billions of dollars in loans to companies, allowing less afflicted firms to potentially splurge on new SaaS subscriptions and participate in the NachoNacho marketplace.
“We were built for a cloud world.”
Looking ahead, Mr. Goel says that NachoNacho is “well placed to take advantage of the trends that have been accelerated by Covid.” Specifically, he points to three key themes:
The digitization of the economy, which still has significant runway
The inexorable rise of cloud computing and software
The growth of subscription revenue models across the private sector
“These trends,” according to Mr. Goel, “are facilitating our business, and at the same time, we’re facilitating those trends.”
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John Hyatt, the newsletter’s author, is a financial writer and Marjorie Deane fellow at NYU’s Arthur L. Carter Journalism Institute. (Connect with him on Twitter and LinkedIn).
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