One other idea about SaaS and VC that was recently voiced (I wish I could remember the contributor) was that a typical SaaS growth rate is so consistent and a relatively low risk that
a) A SaaS start-up that has a very steady growth rate can generally sustain itself on recurring cash stream, founder infusions, and loans, and so does not need VC infusion
b) SaaS risk, growth rate, and the corresponding rate of return does not warrant VC’s interest.

It seems like a logical argument and may certainly hold true in the instances where a SaaS shop can sustain itself with some regulated internal and external cash infusions. For these SaaS companies, cash infusion does not equate to substantial growth and does not justify the loss in ownership.

However, that is not always the case. A SaaS start-up incurs high maintenance costs while it is building out to maintain the high security and uptime that do not increase in line with the customer base. In other words, a SaaS vendor may not have the advantage of economies of scale for some time after launch and may need substantial capital to keep up and running until that is achieved.

On the other hand, there are SaaS companies that are growing much faster than overall SaaS industry rates and those companies would present more that acceptable returns to the investors.

In a recent conversation with a later stage private equity firm, I got the perception that the investment community in general is aware of these factors and is ready and waiting for the SaaS market to mature on its own terms.