#021 CGES Index: Under the Hood

Unveiling the Top 30 emerging Enterprise SaaS companies of the CGES Index

Let’s take a deep dive into how the CGES Index is built, how were the constituents selected and what is our thought process behind the Index

How is the CGES Index built ?

The CGES Index is built to track the real-time performance and investor sentiments for pure-play emerging Enterprise SaaS companies.

Unlike most public indices, whose constituents are selected mostly on market capitalization, the constituents of CGES Index are selected for an equitable representation across multiple business models, sectors and size of operations.

We categorize Enterprise SaaS models as Self-serve SaaS and Serviced SaaS, primarily depending upon the nature and complexity of the delivery of the SaaS solution (we will discuss more about these models in our forthcoming blogs! ). The Index aims to maintain a healthy ratio representing both the business models.

Infact, our SaaS Metrics are also reported explicitly for both the business models to truly capture the nuances of these models.

The Index covers all major sectors and segments of Enterprise SaaS companies - Core Operations Platform (Vertical SaaS), Process Automation, BI & Data Analytics, IT Infra Management & Cybersecurity, Sales & CRM and Support Function Platforms.

The Index has an inclusive market-cap representation across three categories: (1) Market cap < $10 bn, (2) Market cap < $ 100 bn and (3) Market cap > $100 bn.

Selection Criteria

In addition to ensuring the above representation criteria are met, our selection criteria is simple - Enterprise SaaS business ! Only companies that satisfy the below conditions are considered for the Index :

  1. At least 80% of the annual revenue is generated from sale of software product(s),

  2. At least 80% of the annual revenue is generated from Enterprise Users and

  3. At least 80% of the annual revenue is recurring in nature

Basis above, we excluded some of the most popular tech giants like Apple, Microsoft, Google, Facebook, Amazon, Netflix, etc. that could not satisfy one or more of the above condition to qualify as pure-play Enterprise SaaS company.

Check out more details in our video here.

The Index constituents are reviewed every quarter to ensure optimal representation at all times. The review considers the changing revenue mix of companies – that may qualify or disqualify them as “Enterprise SaaS” and account for corporate actions like mergers, new listing, and delisting that can affect the Index constitution.

The Index Constituents

Here is the list of the Top 30 Enterprise SaaS companies that are part of the CGES Index. These companies represent the universe of Enterprise SaaS across business model - Self-serve & Serviced SaaS, across sectors and scale of operations.

How exactly is the CGES Index calculated ?

The CGES Index is calculated using a modified market capitalization-weighted method as opposed to a price-weighted method used by DJIA or a free-float weighted method used by NIFTY.

We have built a proprietary formula that assigns a “multiplier” for every stock based on various business parameters (that’s our secret sauce !) which when multiplied with its market-cap & divided by the total market cap of the Index, gives the weightage of every stock in the Index.

As the stock prices move during market hours the Index’s real-time value is calculated and reported live on our website here.

The Index calculation formula ensures that no individual stock weighs more than 20% and Top 5 stocks together do not weigh more than 50%. Over time, we will endeavor to reduce the weightage of Top 5 companies to under 40% without losing the essence of the Index.

Learn more about: CSVP Fund | CGES Index | Enterprise SaaS

~ Vatsal Bavishi

#020 CGES Index is Live Now !

Cornerstone Global Enterprise SaaS Index - India's first Enterprise SaaS Index is live now !

CSVP Fund’s Cornerstone Global Enterprise SaaS (CGES) Index is live now !

The CGES Index has outperformed the NASDAQ by 25% yoy as of 31st March 2021 !

Read our official press release in Economic Times.


What is CGES Index ?

Cornerstone Venture Partners Fund has taken a leading initiative to create India’s first Enterprise SaaS only index namely, the Cornerstone Global Enterprise SaaS (CGES) Index - a financial index of Top 30 emerging Enterprise SaaS companies listed on global stock exchanges. The index constituents have been carefully chosen to ensure balanced sectoral and market cap representation

How is CGES different from NASDAQ and other indices ?

Traditional indices like Nasdaq Composite, S&P500 and DJIA are primarily built on the basis of market capitalization of the constituents while giving little emphasis on sectoral representation. These indices are heavy-weighed in the favor of traditional businesses like manufacturing, consumer products and technology services.

CGES Index is a one-of-its-kind index that is specifically designed to track the performance of the new breed of highly scalable companies that operate on the SaaS or SaaS-based business model. Even within SaaS, CGES Index is squarely focused only on the pure-play Enterprise (B2B) SaaS companies and does not include Consumer (B2C) SaaS companies like Netflix, Dropbox, etc.

Additionally, CGES Index companies are not selected basis the market capitalization, but rather selected keeping in mind the diversity of the size, sector, technology and scale of these companies. The CGES Index is built to equitably represent the universe of global emerging enterprise SaaS companies operating across various sectors, technologies and scale of operations.

What is the significance of CGES ?

CGES is a new-age index built on the basis of a specific ‘business model’ of SaaS, rather than the ‘size’ or ‘sector’ of the companies. It is intended to provide a benchmark for investors across the globe looking to invest in enterprise SaaS companies.

Since SaaS companies have a unique business model which is very different from traditional asset-heavy businesses like manufacturing or people-heavy businesses like technology services, it demands its own metrics and benchmarks to accurately understand the economics and valuation of such businesses.

The CGES Index will be accompanied with a set of SaaS metrics that can be used by anyone to analyze & benchmark the performance of any enterprise SaaS company.

What is the historical performance of CGES compared to NASDAQ, S&P500 and DJIA ?

The base date of the CGES Index is set at 01 January 2019 with a base value of 1,000. The closing value of CGES Index on date of publishing this (21 Apr 2021) was 3165.62, which translates into an annualized return upwards of 60% !

The corresponding returns of NASDAQ Composite, S&P 500 and DJIA for the same period are ~37%, ~24% and ~18%. All in all, the CGES Index has outperformed all the major global indices by a margin, and continues to outperform in 2021 as well.

We believe the Indian SaaS ecosystem is on the cusp of an explosive growth propelled by wide-scale adoption of SaaS products by Indian customers. As part of our leading initiative to support this ecosystem, we created the CGES Index. This Index will enable Investors to learn and better understand the SaaS economics, benchmark against the top performing SaaS companies in the world and make informed decisions.


We will share more details about the Index constituents and their selection in a series of our forthcoming blogs !

Learn more about: CSVP Fund | CGES Index | Enterprise SaaS

~ Vatsal Bavishi

#019 Why we like Enterprise SaaS

Enterprise SaaS companies have returned over 300% to Investors in past 2 years !

Most of us are aware of consumer apps and products like Netflix, Spotify, etc. which charge a monthly / annual subscription fees for availing their services. These are typical consumer SaaS companies that have been around for over a couple of decade now.

Enterprise SaaS, or e-SaaS as we call it, are a breed of new-age companies that leverage similar business model to provide enterprise grade software product over a cloud-based subscription.

Enterprise SaaS vs other SaaS companies

Over the past few years, Enterprise SaaS companies have been getting much higher valuation multiples compared to other SaaS companies - on an average, Enterprise SaaS companies are valued at ~20-22x their ARR, while the similar multiple for Consumer SaaS companies has fallen to ~10-15x

As Venture Capital investors, we love e-SaaS companies primarily for the following characteristics:

  1. Scalability - In addition to the typical technology & business model scalability that any SaaS company offers, Enterprise SaaS business have a very high sales scalability - which means that adding one new enterprise customer brings 1000s of new users in one go !

  2. Resilience - Enterprise products are built to solve a particular business problem -, the value of which can be measured in terms of higher revenue or lower cost (in most cases). Due to this tangible value-add of enterprise products, it is very difficult for a customer to switch-out of the product once they start using it. The product eventually becomes a part of the regular business operations and starts to drive significant value-add with scale

  3. Capital Efficiency - Over a long period, Enterprise SaaS products have excellent capital efficiency, primarily due to the recurring nature of revenue, forward revenue visibility, higher gross margins (low cost of delivery) and significantly lower sales & marketing cost compared to other business models. For every $1 in revenue, e-SaaS companies end up spending $0.8 and every $1 spent on sales & marketing typically yields $1 in ARR

  4. Multi-player Markets - Unlike most consumer markets where the “winner-takes-all”, enterprise markets are more accommodative for multiple players to thrive & grow together. e-SaaS companies eventually find their niche to differentiate and survive, because a “one-size fits all” solution rarely works in the enterprise world.

Thus, as investors, we see better risk-adjusted returns from e-SaaS, given the returns are similar or better than any other SaaS companies, while the risk is significantly reduced due to the higher resilience and capital efficiency explained above.

~ Vatsal Bavishi

Learn more about: CSVP Fund | CGES Index | Enterprise SaaS

#018 Investment Alert: EnParadigm Performance Solutions

A Sales Intelligence platform for frontline workforce to improve sales efficiency

A new addition to our Portfolio - EnParadigm Performance Solutions !

We, at Cornerstone Venture Partners Fund, are proud to announce our latest investment from Fund-I, in EnParadigm Performance Solutions: Sales Intelligence platform for Frontline workforce.

Find our detailed media release here.

Core to our focus, EnParadigm has a pure-play enterprise SaaS business model with two distinct products - SmartSell and LaunchPad.

SmartSell is the Sales Enablement platform that empowers the sales team with the right content at the right time to close a new sale, up-sell and cross-sell.

LaunchPad is a digital platform to train and upskill the sales team to improve thier productivity by 20%+ and in-turn reduce the attrition of commission-based frontline staff by upto 50%

Powered by proprietary AI-algorithms, both the products provide highly contextual and personalized content to the user based on his/her strengths and ability to sell a particular product.

The Company has built an exclusive library of sales training content in 8+ languages that is easy to consume on the go (short format videos) and intelligently delivered to the user at the right time in the right context.

Why we invested in EnParadigm ?

  1. Strong founding team - John, Hanuman, Arun and Kumar together bring the perfect blend of product management, technology and enterprise sales domain experience. Their leadership give us immense confidence to back them with our capital and expertise

  2. Enterprise SaaS - SmartSell and LaunchPad products are pure-play eSaaS products, built on scalable technology, providing strong recurring revenues using a per-user per-month pricing

  3. Extremely scalable and cost-efficient business model - a single enterprise customer brings 10,000+ users. The LTV:CAC ratio is significantly improved due to multi-year contracts and smaller sales cycle

  4. Unmatched product capabilities - powered by AI with strong potential to leverage the learnings from each product as a feedback for the other product (Eg: based on a sales persons’ capabilities determined by LaunchPad, he/she can be assigned to a particular product, geography and customer segment by SmartSell to maximize sales)

  5. Large & Growing Market Opportunity - The total organized global frontline workforce is estimated to be in the range of ~30-40 mn people, of which ~10+ mn workforce is in the emerging markets of SEA alone, leading to an untapped market opportunity of over US$ 2 billion

  6. Potential for Category Leadership - A strong product roadmap to build this into an end-to-end Sales Intelligence and Automation platform for any front-line heavy enterprise + DIY tool for SMBs puts EnParadigm Solutions in sweet spot to become an industry leader in Sales Intelligence solutions

We look forward to building a global-scale Sales Intelligence platform together with the Founders !

~ Vatsal Bavishi

Learn more about: CSVP Fund | CGES Index | Enterprise SaaS

Pandemic and its Multi fold Impact on Future of Work

#017

Globally, organizations have been forced to move their workforce remote, almost instantly, without any opportunity to plan or prepare for this new reality. While it’s been extremely challenging for several businesses, it has also created opportunities for as many and accelerated certain value-creation opportunities that have been around but struggled with adoption hitherto.

It’s important to acknowledge that we have never been as prepared as a species to adopt this new way of working from a technology infrastructure perspective – be it the ubiquitous availability of fast connectivity, or the unmatched prowess of cloud computing, allowing us to be ‘online’ anytime anywhere!

We believe this new and accelerated ‘Future of Work’ is further empowered by the sudden and unexpected urgency for businesses to go digital and the growing adoption of artificial intelligence, that have significant and permanent on the workplace, the workforce, and the nature of work itself.

  1. The Workplace - Organizations will change how they work

Improving internal business operations is a benefit on par with enhancing products and services. The AI-aided process reduces actionable events, enabling the professionals to easily manage highly complex operations and make better, data-backed decisions and be more creative

  1. The Workforce - Resource models will change:

Organizations will have to work around growing prevalence and acceptance on floating resources, workforce not committing to a single job, resource sharing models where specializations will be paramount

  1. The Nature of Work – High-end skills will dominate

With increased dependence and process-oriented tasks taken care of by automation, there is an increased need to consider both the dynamic nature of jobs and the equally dynamic potential of people to reinvent themselves. To do this effectively, organizations need to focus on building workforce resilience for both the short and the long term—a focus that can allow organizations to increase their resilience in the face of constant change

Emerging Opportunities

These changing models and dynamics will give rise to the need for Cognitive Collaboration; and will be applicable and embraced across Healthcare, Education, BFSI, Retail & E commerce, Enterprises including SMEs and Manufacturing facilities 

Cognitive collaboration where data may be obtained from many relevant sources, including sensors, bots, enterprise applications such as CRM, Internet of Things (IoT) sensors, people profiles, insights into enterprise calendars and meeting resources, health record, learning patterns, and social data. When combined with analytics that identifies patterns and relational clusters for individuals, teams, organizations, and customer insights, the results can present the right information, to the right team, at the right time and place

New use-cases and cross-platform collaborations will continue to evolve … only far more rapidly!

- Nanika

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