Blurring lines in enterprise SaaS; the race to own customer data

I’ve written before about the competitive nature of SaaS and the amount of entrants in every category.

Lately after every conversation, I feel like the world is being divided into two camps and there is a massive battle going on in terms of who is going to own them and how. To oversimplify, I’ll call it pre-customer and post-customer domination. And there are companies looking to blur both of those categories as well.

It’s pretty hard to create a new system of record these days as Salesforce, Marketo, Gainsight and the like are building tighter lock-in around their products. That’s not to say it can’t be done as those companies have larger fish to fry, mainly huge enterprise customers and $1mm + deals. Opportunities abound in the SME (small, medium enterprise), and we’ve seeded a number of founders going after that space.

The Race for the Customer – Owning the Central Repository for Customer Data

After every pitch, I seem to hear one thing – we will be the central place where all customer data resides to make intelligent decisions. Forget about web analytics, marketing automation, email platforms, customer support, customer success, and sales intelligence. The world is moving towards an all-in-one place and holistic view of the customer. This is the blending of tons of different SaaS segments and every company is adding more data to their approach. With APIs everywhere, this is making it easier for companies to start integrating data from multiple sources. Doing that is not the hard part; getting in the mind of the end user of these apps and ensuring seamless workflows will be much harder. At the end of the day, the more you know about your customer, the easier you can understand their mindset, and increase their happiness, and thus your revenue.

Data-driven platforms like segment looker, and mixpanel have an interesting view as a central repository for customer data which feeds into apps. Mixpanel, it seems, is going one step further trying to capture more value from their customers by creeping into customer success. App players in various segments like zendesk want to move beyond customer support and into proactive marketing campaigns. Gainsight is pitching how to operationalize the customer lifecyle with cross-functional collaboration and proactive marketing. I can go on and on. This race also plays into another theme, automation and intelligence. Once the data is clean and in one place, it is easier to analyze and make predictions. We made an investment in March of 2013 in Preact, a SaaS platform for customer success which sold to Spotify. The company never completed its mission but big on Gooley’s mind was proactive intelligence. I now believe we have the tools Continue reading "Blurring lines in enterprise SaaS; the race to own customer data"

Blurring lines in enterprise SaaS; the race to own customer data

I’ve written before about the competitive nature of SaaS and the amount of entrants in every category.

Lately after every conversation, I feel like the world is being divided into two camps and there is a massive battle going on in terms of who is going to own them and how. To oversimplify, I’ll call it pre-customer and post-customer domination. And there are companies looking to blur both of those categories as well.

It’s pretty hard to create a new system of record these days as Salesforce, Marketo, Gainsight and the like are building tighter lock-in around their products. That’s not to say it can’t be done as those companies have larger fish to fry, mainly huge enterprise customers and $1mm + deals. Opportunities abound in the SME (small, medium enterprise), and we’ve seeded a number of founders going after that space.

The Race for the Customer – Owning the Central Repository for Customer Data

After every pitch, I seem to hear one thing – we will be the central place where all customer data resides to make intelligent decisions. Forget about web analytics, marketing automation, email platforms, customer support, customer success, and sales intelligence. The world is moving towards an all-in-one place and holistic view of the customer. This is the blending of tons of different SaaS segments and every company is adding more data to their approach. With APIs everywhere, this is making it easier for companies to start integrating data from multiple sources. Doing that is not the hard part; getting in the mind of the end user of these apps and ensuring seamless workflows will be much harder. At the end of the day, the more you know about your customer, the easier you can understand their mindset, and increase their happiness, and thus your revenue.

Data-driven platforms like segment looker, and mixpanel have an interesting view as a central repository for customer data which feeds into apps. Mixpanel, it seems, is going one step further trying to capture more value from their customers by creeping into customer success. App players in various segments like zendesk want to move beyond customer support and into proactive marketing campaigns. Gainsight is pitching how to operationalize the customer lifecyle with cross-functional collaboration and proactive marketing. I can go on and on. This race also plays into another theme, automation and intelligence. Once the data is clean and in one place, it is easier to analyze and make predictions. We made an investment in March of 2013 in Preact, a SaaS platform for customer success which sold to Spotify. The company never completed its mission but big on Gooley’s mind was proactive intelligence. I now believe we have the tools Continue reading "Blurring lines in enterprise SaaS; the race to own customer data"

Blurring lines in enterprise SaaS; the race to own customer data

I’ve written before about the competitive nature of SaaS and the amount of entrants in every category. Lately after every conversation, I feel like the world is being divided into two camps and there is a massive battle going on in terms of who is going to own them and how. To oversimplify, I’ll call it pre-customer and post-customer domination. And there are companies looking to blur both of those categories as well. It’s pretty hard to create a new system of record these days as Salesforce, Marketo, Gainsight and the like are building tighter lock-in around their products. That’s not to say it can’t be done as those companies have larger fish to fry, mainly huge enterprise customers and $1mm + deals. Opportunities abound in the SME (small, medium enterprise), and we’ve seeded a number of founders going after that space.

The Race for the Customer – Owning the Central Repository for Customer Data

After every pitch, I seem to hear one thing – we will be the central place where all customer data resides to make intelligent decisions. Forget about web analytics, marketing automation, email platforms, customer support, customer success, and sales intelligence. The world is moving towards an all-in-one place and holistic view of the customer. This is the blending of tons of different SaaS segments and every company is adding more data to their approach. With APIs everywhere, this is making it easier for companies to start integrating data from multiple sources. Doing that is not the hard part; getting in the mind of the end user of these apps and ensuring seamless workflows will be much harder. At the end of the day, the more you know about your customer, the easier you can understand their mindset, and increase their happiness, and thus your revenue. Data-driven platforms like segment looker, and mixpanel have an interesting view as a central repository for customer data which feeds into apps. Mixpanel, it seems, is going one step further trying to capture more value from their customers by creeping into customer success. App players in various segments like zendesk want to move beyond customer support and into proactive marketing campaigns. Gainsight is pitching how to operationalize the customer lifecyle with cross-functional collaboration and proactive marketing. I can go on and on. This race also plays into another theme, automation and intelligence. Once the data is clean and in one place, it is easier to analyze and make predictions. We made an investment in March of 2013 in Preact, a SaaS platform for customer success which sold to Spotify. The company never completed its mission but big on Gooley’s mind was proactive intelligence. I now believe we have the tools Continue reading "Blurring lines in enterprise SaaS; the race to own customer data"

Why I love and fear AWS

The AWS launch of Amazon Connect (see techcrunch article) got me thinking about the current state of play in SaaS. Amazon Connect is a call center in a box, the same tech it uses in-house for their current platform. With that release, companies like Talkdesk and others have much to fear. While I see partnerships with companies like zendesk, salesforce and freshdesk to integrate voice with chat and email, I also firmly believe that it is just a matter of time before AWS continues to extend outward and deploy their own chat/email customer support system to go after their partners. Trust me, it will happen.

I fully acknowledge and love AWS for the opportunity to fund so many amazing founders who are fully leveraging the power of the cloud platform and services. What I also greatly fear is that Amazon and AWS have proven that they are amazing at taking markets that become hyper competitive and just blowing them up overnight with the lowest cost and good enough offering. AWS has also proven that it will continue to move upstream in the stack from the pure infrastructure layer to the application layer.

Here are a few examples:

  1. Amazon Quicksight (launched 10/15) –  fast, easy to use business analytics at 1/10 the cost of traditional BI Solutions
  2. Amazon Chime (launched 2/17) – frustration-free online meetings with exceptional audio and video quality – companies like gotomeeting (Citrix) made a smart move selling to LogMeIn
  3. Amazon Workdocs (1/15) – fully managed, secure enterprise storage and sharing service, users can comment on files, share, etc – box, dropbox watch out

There are many more examples in the infrastructure space like identity management, API gateways, etc. To be clear, this does not mean that AWS will win everything as those products above have not seemed to make a meaningful dent in competitors, but at the same time, we also can’t ignore the power of AWS. Advantage wise, I would say startups will clearly have the ability to go premium, offering a much better and more comprehensive product but prices will eventually come down.

So as I think about where the world is going, I am constantly reminded of the mid-2000s and now when retailers were/are concerned about being “Amazoned.” As an investor in infrastructure software, I have always been fully aware of this same phenomenon. It’s just now that I can also clearly see that we need to think about which SaaS apps are the next in line to be disrupted. AWS won’t win and own every market, but they sure as hell can disrupt pricing and make life difficult for many competitors.

also published on Medium

The post Why I love and fear AWS appeared first on BeyondVC.

Why I love and fear AWS

The AWS launch of Amazon Connect (see techcrunch article) got me thinking about the current state of play in SaaS. Amazon Connect is a call center in a box, the same tech it uses in-house for their current platform. With that release, companies like Talkdesk and others have much to fear. While I see partnerships with companies like zendesk, salesforce and freshdesk to integrate voice with chat and email, I also firmly believe that it is just a matter of time before AWS continues to extend outward and deploy their own chat/email customer support system to go after their partners. Trust me, it will happen. I fully acknowledge and love AWS for the opportunity to fund so many amazing founders who are fully leveraging the power of the cloud platform and services. What I also greatly fear is that Amazon and AWS have proven that they are amazing at taking markets that become hyper competitive and just blowing them up overnight with the lowest cost and good enough offering. AWS has also proven that it will continue to move upstream in the stack from the pure infrastructure layer to the application layer. Here are a few examples:
  1. Amazon Quicksight (launched 10/15) –  fast, easy to use business analytics at 1/10 the cost of traditional BI Solutions
  2. Amazon Chime (launched 2/17) – frustration-free online meetings with exceptional audio and video quality – companies like gotomeeting (Citrix) made a smart move selling to LogMeIn
  3. Amazon Workdocs (1/15) – fully managed, secure enterprise storage and sharing service, users can comment on files, share, etc – box, dropbox watch out
There are many more examples in the infrastructure space like identity management, API gateways, etc. To be clear, this does not mean that AWS will win everything as those products above have not seemed to make a meaningful dent in competitors, but at the same time, we also can’t ignore the power of AWS. Advantage wise, I would say startups will clearly have the ability to go premium, offering a much better and more comprehensive product but prices will eventually come down. So as I think about where the world is going, I am constantly reminded of the mid-2000s and now when retailers were/are concerned about being “Amazoned.” As an investor in infrastructure software, I have always been fully aware of this same phenomenon. It’s just now that I can also clearly see that we need to think about which SaaS apps are the next in line to be disrupted. AWS won’t win and own every market, but they sure as hell can disrupt pricing and make life difficult for many competitors.

also published on Medium

The post Why I love and fear AWS appeared first on BeyondVC.

Thoughts from Mulesoft and AppDynamics IPO Filings

I finally had a chance to take a quick read of the respective S1 filings for AppDynamics and Mulesoft. While the growth for each company is quite amazing, two thoughts jumped out at me. As we move to a cloud-only world with instant-on capabilities and low friction in onboarding customers, why does professional services revenue keep increasing year over year for these enterprise cloud businesses. Secondly, as the world continues to move to the cloud, why does on-prem software exist any more? Looking at both S1 filings, it’s clear that AppDynamics and Mulesoft have caught on to what Salesforce already knows – if you want to be a massive business you also need to sell professional services. As these tech companies get larger and larger, their target customer also increases in size as these vendors look to move from 6 to 7 figure deals. In order to support continued ARR growth upstream, some of the best companies successfully use professional services as a weapon and make implementation, support and training part of the sale. See Jeff Leventhal’s post (boldstart venture partner and Workrails cofounder/CEO) on why services continue to matter for cloud vendors. Same goes for why on-prem. In both S1s, we can see Mulesoft and AppDynamics discussing the need for multiple delivery models as many larger customers have regulatory and compliance needs, esp. in banking, insurance, and health care. On-premise and hybrid cloud deployments are not going away despite the continued adoption of the cloud. There is a whole world of what being enterprise ready from a product perspective looks like, and how SaaS companies can use new technology like Docker to have the best of both worlds, SaaS and on-prem without multiple code bases. If interested, take a look at EnterpriseReady.io curated by Replicated (full disclosure: boldstart is an investor).

Professional services drives subscription revenue

From a customer and revenue perspective, Mulesoft has continued to move upstream as their average selling price was $82k in 2014, $105k in 2015, and $143k in 2016. For AppDynamics, the best I could find was total number of customers at end of October 2016 of 1,975 with revenue of $158mm for average selling price of $80k. From both filings, we can see that professional services revenue became a bigger part of the revenue pie. And in both cases, it’s pretty clear that professional services exist to drive the recurring subscription growth. In other words, neither group is making tons of gross margin and in fact one is almost breakeven while AppDynamics is losing money. Here is a deeper dive into the importance of professional services revenue at Mulesoft and AppDynamics: from Mulesoft S1 Filing: Screen Shot 2017-03-20 at 8.40.38 PM.png
Increasingly, our platform has been deployed in large scale, complex technology environments, and we believe
Screen Shot 2017-03-20 at 8.41.11 PM.png
Continue reading "Thoughts from Mulesoft and AppDynamics IPO Filings"

Building AI on CXOTalk

I had a great time participating on CXOTalk by Michael Krigsman with boldstart portfolio co founders, Sean Chou from Catalytic and Keith Brisson from Init.ai When you get down to it, AI is going to be huge in the enterprise but you need to make sure to focus on solving real business problems. Watch to learn more on our discussion about “applied AI.”
Here are some nuggets of wisdom:

Companies are removing #data silos. This will enhance usage of applied #AI

@keithbrisson @edsim  on #CxOTalk

There’s lots of hard work to make #AI easy for the user

@sychou @wearecatalytic on #CxOTalk

Great #AI is invisible to user.

@sychou @keithbrisson @edsim #CXOTALK

AI is like water. Every company will have it eventually. i like to talk about “applied AI.” What problem does it solve? ~ @edsim #cxotalk

also published on Medium

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