E25Bio Raises $2M From Khosla Ventures To Create Rapid COVID-19 Diagnostic Test


This post is by Mary Ann Azevedo from Crunchbase News

E25Bio, a developer of rapid diagnostic tests for dangerous infectious diseases, announced this morning that it has raised a $2 million financing from storied VC firm Khosla Ventures.

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The 2-year-old Cambridge, Massachusetts startup is based out of The Engine at the Massachusetts Institute of Technology (MIT) and had been working on developing technology for rapid diagnosis of diseases such as dengue and zika. Now, of course, E25Bio is turning its attention to creating early and accessible tests to diagnose the novel and rapidly-spreading coronavirus, which has caused a global pandemic.

Its goal is to be able to distribute more rapid, accurate and affordable detectors for coronavirus that can be distributed at scale across geographies.

E25Bio’s rapid diagnostic tests use nanoparticle technology to capture virus or viral proteins secreted into the human body. They are based on technology developed by Dr. Irene Bosch and Dr. Lee Gehrke, the Hermann von Helmholtz Professor of Health Sciences and Technology at MIT.

“The same way a hormone is detected on a pregnancy test, our diagnostics provides doctors and patients with results in 15 minutes or less,” said Bosch, who serves as CTO of E25Bio.

Fast tracking

In the wake of the chaos, the U.S. Food and Drug Administration recently announced it would fast track diagnostics for the virus through its Emergency Use Authorization (EUA), opening the door for both public and private institutions to attack the problem.

Dr. Bobby Brooke Herrera, co-founder and CEO of E25Bio, said the global public health system will require “a concentrated, unified strategy to better respond to the current pandemic.”

Khosla Ventures founder Vinod Khosla said that “in this time of crisis we need every effort to get testing at scale on the market.”

“We are excited about what E25Bio is capable of shipping in a short amount of time: a test that is significantly cheaper, more affordable, and available at-home for consumers without having to rely on primary medical services and can lessen the load on our healthcare systems,” he said in a written statement.

The new funding will go toward research and development, clinical studies and scaling the company’s launch for diagnostic tests upon receiving EUA approval. E25Bio had raised  a $2.3 million seed round last August, according to Crunchbase.

The post E25Bio Raises $2M From Khosla Ventures To Create Rapid COVID-19 Diagnostic Test appeared first on Crunchbase News.

Impossible Foods Continues Growth Trajectory With $500M Series F


This post is by Sophia Kunthara from Crunchbase News

Impossible Foods raised $500 million in a Series F round, bringing its total funding to nearly $1.3 billion.

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Mirae Asset Global Investments, a new backer, led the round, according to a statement from the company. Existing investors, including Khosla Ventures and Temasek Holdings, also participated. The last time Impossible Foods raised money was in May 2019, when it pulled $300 million for its Series E round.

The new round will be used to invest in research, scale up manufacturing, grow the company’s retail presence and presence in certain international markets, and popularize its pork and sausage products.

“Our mission is to replace the world’s most destructive technology–the use of animals in food production–by 2035,” CEO Patrick Brown said in a statement. “To do that, we need to double production every year, on average, for 15 years and double down on research and innovation. The market has its ups and downs, but the global demand for food is always there, and the urgency of our mission only grows.”

Impossible Foods competes in the plant-based alternative food space, which is growing in popularity. Impossible Burgers can be found at restaurants across the country, including at more than 7,000 Burger King locations. Beyond Meat, which was well-received by investors when it went public last year, is the other well-known brand in the space.

Impossible Foods closed the Series F round last week amid the coronavirus pandemic, the company said. That’s a good Continue reading “Impossible Foods Continues Growth Trajectory With $500M Series F”

Real Estate Developer Turned Tech Startup Veev Raises $97M For Panelized Building System


This post is by Mary Ann Azevedo from Crunchbase News

Real estate developers have unique insight into all the challenges of well, developing real estate.

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As such, it’s not entirely shocking when a real estate developer also becomes a tech company. Especially in the Bay Area, where housing costs and construction labor shortages are constraining supply. Case in point: Veev Group Inc. The San Mateo, California-based company has just closed a $97 million Series B round of funding that included $85 million in equity and $12 million in debt.

Zeev Ventures and Lennar Ventures (the arm of homebuilding giant Lennar Corp.) led the round, which also included participation from Eclipse Ventures, Green Spring Associates and Khosla Ventures. Western Technology Investment served as the debt provider.

Veev Group originated in 2008 as a traditional real estate developer and asset manager.

“In each project, we found new ways to improve the building process–always with the customer in mind,” said CEO and co-founder Amit Haller.

In 2017, Veev Group began to focus on prefabrication capabilities, and by 2018 it formally pivoted to what it describes as “a vertically integrated developer focused on building innovation.” (Note the company name changed in 2019 from Dragonfly Group to Veev.)

Over the years, Veev developed a proprietary panelized building system using materials such as steel frames, high-performance acrylic finishes and millwork, low-voltage lighting, and smart sensors. It uses a digital fabrication process, such as 3D design files fed to cold-formed steel and Computer Numerical Control machines, to design Continue reading “Real Estate Developer Turned Tech Startup Veev Raises $97M For Panelized Building System”

DoorDash Files Confidential S-1 Paperwork As It Seeks To Go Public


This post is by Jason D. Rowley from Crunchbase News

On Thursday, popular food delivery platform DoorDash announced it has confidentially filed paperwork with the U.S. Securities and Exchange Commission in its first step toward becoming a publicly traded company.

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DoorDash said in its announcement that the number of shares on offer and a target price range for the transaction “have not yet been determined.”

The brief statement also adds that the IPO “is expected to take place after the SEC completes its review process, subject to market and other conditions.” In recent days, the U.S. stock market has experienced significant downward pressure amid concerns about the spreading SARS-CoV-2 virus and speculation about the scale of its impact on the global economy.

As of 2017, the SEC has granted smaller, high-growth companies a path to initially file their S-1 registration statements confidently, allowing for regulatory review without immediate exposure to scrutiny from the media and would-be public market investors. Confidentially filed S-1 documents are made public prior to IPO.

According to Crunchbase data, San Francisco-based DoorDash has raised at least $2.07 billion in equity funding since its inception in 2013. Its last private market valuation was approximately $12.6 billion, post-money, earned in a November 2019 extension of the company’s Series G round.

The company’s backers include the likes of Y Combinator, Sequoia Capital, Khosla Ventures, CRV, Kleiner Perkins, the Singaporean sovereign wealth fund GIC, and the SoftBank Vision Fund.

DoorDash has never released Continue reading “DoorDash Files Confidential S-1 Paperwork As It Seeks To Go Public”

Tempo Lands $17.5M Series A For AI-Powered Home Workouts


This post is by Sophia Kunthara from Crunchbase News

The connected fitness space just keeps growing.

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Tempo is the latest company to join the pack, announcing it raised $17.5 million for its Series A round and will start taking pre-orders for its system, which will start shipping this summer.

Providing live and on-demand strength and high intensity interval training classes, Tempo uses artificial intelligence to make home workouts more like personal training sessions.

The system’s sensors scan users movements and uses machine learning to prepare workouts for users based on their progress, according to a statement from the company. Tempo counts a user’s reps, recommends weights and gives real-time corrections for a user’s technique–key benefits of having a personal trainer without the steep hourly cost.

“The real groundbreaking thing is helping people work out effectively and safely at home,” Tempo CEO Moawia Eldeeb said in an interview with Crunchbase News.  “And to be able to do that you need to train.”

The Tempo system’s predecessor, SmartSpot, was essentially the data collection process for the whole product, Eldeeb said. SmartSpot was in gyms for about three years, capturing more than 1 million sessions to feed Tempo’s AI.

Tempo’s system, like most other tech-enabled home fitness equipment, doesn’t come cheap. The price for the full station is $1,995 and the monthly content subscription is $39.

Connected fitness is a popular space that has received more than a billion dollars in VC funding overall. Peloton leads the pack, as it raised more than Continue reading “Tempo Lands $17.5M Series A For AI-Powered Home Workouts”

We Went to the SaaStr 2019 Conference, Here’s What You Should Know!


This post is by Fredrik Arnander from Standout Capital

Over 12,000 participants from 96 countries flocked to San Jose at the southern tip of Silicon Valley to take the pulse of the cloud, to network and make deals at the mega-conference SaaStr 2019, the biggest event in the world for the SaaS industry. Standout Capital was on location so please join us in this blog for a roundup of trends, stats and insights from some of the industry’s most successful people and companies.   

SaaS is software as a service, or in other words – cloud-based software that users can access through any browser without the need for installing it on your computer, paid with a subscription for as long as you want to use it. It’s simple, efficient and a fast growing enterprise software industry. At SaaStr, “Where The Clouds Meet”, the industry’s own annual conference, you will find both established SaaS companies like Hubspot, Zendesk, Dropbox, Zoom and Slack as well as fast-growing new startups. Most of the valley’s VC investors are here, and so are the tech giants such as Amazon, Google and Microsoft. Standout Capital’s investment team and our portfolio company Miradore also went to SaaStr and here’s our five key highlights:

  • SaaS is a fast growing industry approaching a market value of 1 trillion dollar
  • As SaaS has matured as a sector, there is also set of standard benchmarks and KPIs
  • SaaS companies are aiming higher today, $1 billion in ARR is the new black
  • SaaS companies and public clouds like AWS and Google drive innovation together
  • It’s not only technology, but also how to create successful and agile SaaS cultures

To set the stage, the SaaS industry is getting big. Byron Deeter and Kristina Shen from Bessemer Venture Partners provided some insight into the key data points of this relatively new market. There are currently over 55 private cloud companies with a valuation of over $1 billion. 2018 alone saw over $90 billion worth of M&A deals in the cloud and SaaS space and there was $44 billion in added market cap through IPOs. The demand for cloud shares has hit record highs. The total market cap of cloud and SaaS companies is now approaching $1 trillion (it currently stands at $690 billion).

The Annual Recurring Revenue (ARR), is at the core of any SaaS business, and it’s different from “revenue” which is backward looking and usually based on the previous calendar year or the Last Twelve Months (LTM), while the magic ARR metric is forward looking and estimates future “secured” or recurring annual revenue based on the subscription revenue in the last recorded month x 12. The beauty of the SaaS subscription model is that revenues are highly predictable, as long as you can fuel and forecast the growth, while keeping customer retention high (and correspondingly churn low). In this respect, SaaS, or any business with recurring models, is like the rent in real estate, but without the physical constraints of buildings and land. All you need is a sticky product with market-fit, great user value, low customer acquisition cost, a sales machine and the digital, global infrastructures for marketing and delivery.

As experienced SaaS investors, Bessemer Venture Partners are interested in building resilient companies with sustainable growth and profitability. Their assessment model is based on a formula of: Year-on-Year % growth in ARR + customer retention + capital runway to take the company to the next stage + NetNew ARR compared to Net Burn (spending efficiency). By analyzing how good SaaS companies are at these four disciplines, they can attach a score. For example, the best SaaS companies today have growth of up to 200% Y-on-Y growth, 150% customer retention (meaning that the customers are growing faster than the churn), 2-3 years capital runway before next financing, while having high spending efficiency, adding up to 1.5 times more ARR than they spend (meaning that $50 million invested will generate $75 million new ARR). The average time to reach $100 million ARR for the top 25% listed SaaS companies were 5 years. The fastest of them, Slack, reached $100 million in just 3 years. The average valuation multiple is 10x revenue.

Jason Lemkin, the CEO and founder of SaaStr, offered what is the new milestone to reach for the new breed of SaaS companies, or “Generational Companies” (the SaaS companies belonging to the current generation of cloud-based software companies). The rule of thumb used to be reaching Annual Recurring Revenues of $100 million before you could go public. The new number to aim for is $1 billion ARR, and it doesn’t even mean that you are going for an IPO at that stage but keep on fuelling growth with private capital. Having said that, most of the major SaaS companies are now public.

For example, RealPage (property management SaaS), and Veeva (SaaS for life sciences), are now at an ARR of $1.1 billion, Shopify (e-commerce SaaS that recently acquired Swedish TicTail), has reached $1.6 billion ARR, Dropbox (file hosting), now enjoys $1.8 billion ARR while Workday (HR software), has an ARR of a whooping $3.8 billion. Significant and fast growing SaaS companies that are now approaching the $1 billion ARR threshold include Hubspot (marketing & CRM), Zendesk (helpdesk tool), Okta (identity management), New Relic (software analytics), Twilio (communication APIs), Zoom (video conferencing), and Box (file storage). These are all the new nobility of the tech industry and Silicon Valley.

So-called unicorns are companies with $1 billion valuation, but the good news is that there is a new generation of software companies that have or are on their way of reaching $1 billion dollar in revenues. This means that there is a real and fundamentally strong tech sector with substantial and growing software companies solving real needs for real users. And that is also one reason why there is currently not much talk of a tech bubble in Silicon Valley.   

Ryan Smith is the founder and CEO of Qualtrics, a SaaS for real-time customer insights. He sold his company to SAP for $8 billion in 2018. How could that valuation be justified? Usually it’s the rare combination of a scalable tech business that is growing fast with profitability, with predictable revenues at already high levels, and a large customer base with high retention in a big market, set for further growth. In Qualtrics case, at the point of the purchase by SAP, they had 9000+ customers, with revenues growing 40% year-on-year with positive cashflow at some $300 million in Annual Recurring Revenue.

Most SaaS products are enterprise software, i.e. products and tools for use in businesses, which is also the focus at the SaaStr conference. But these business products are learning a lot from their consumer product colleagues, especially in terms if user experience. This focus on customer experience is essential as confirmed by Ciara Peter, Invision, Bela Stepanova from Box, Craig Villamor from Google Maps and Shanee Ben-Zur from Crunchbase in a discussion about how to build “consumer grade” enterprise software. It’s basically about “building products that don’t suck” and create the same great user experience in enterprise software as in consumer product, by thinking about the actual end user (which is not always the same thing as the customer, which might be a C-level manager making software purchases). That’s why a modern enterprise SaaS company should spend facetime with users, not only customers. However, although the “consumerization” of software is a buzz, the value finally comes down to usability and actual results in enterprises. And here a word of caution is needed. Consumer software is usually simplified to reduce friction and promote usage and create addiction. This is sometimes not always desirable in enterprise products.

Mark Roberge is the former CRO (Chief Revenue Officer) at Hubspot and a lecturer at Harvard Business School. He too underlines the importance to focus on the users and their product usage, not only revenue. You have to look at both the Annual Revenue Retention (the ARR at start of year – ARR churn) and Annual Customer Retention (number of Customers – customer churn). Churn is a silent killer. This is the key question; How do you identify and measure the customer success that makes the customer to stay? If the user value and experience is low, it will soon lead to churn in borth revenue and number of customers. That’s why identifying a leading indicator to customer success (and potential churn) is critical. So, how do you define your customer success leading indicator? It should be observable over a time period, preferable in weeks or months, not quarters or years. Ideally the measurement is automated and correlated to the product CVP (Customer Value Proposition). Look at metrics like repeat purchase, referrals, setup and usage. Just tracking revenue is usually a mistake. Here are a few examples of Customer Success Leading Indicators at three top SaaS companies:

  • Slack: 2,000 team messages sent
  • Dropbox: 1 file added to 1 folder on 1 device
  • Hubspot: Using 5 of 20 features within 60 days

“Sales is first and foremost about creating customer value. Revenue and profits are an outcome of customer value creation”, says Mark Roberge.

Zendesk is the Danish star in the SaaS industry, growing ARR 40% in the last quarter and set to turn over $800 million in 2019 (from $600 million in 2018). The market value on NYSE is $8.3 billion (Zendesk listed in 2014). The founder & CEO Mikkel Svane says it’s a “crazy amount of change and disruption” going on and a challenge to grow an already big organisation at that pace. They moved to Silicon Valley early from the origins in Copenhagen as a startup in 2008. He thinks that 10 years ago, you could hardly build a tech business in Europe, as there was no startup community and not much venture capital. Now it’s different, and the main challenge is rather to build products with great user experience given the extremely competitive environment and quest for customers’ time and attention when everything is available all the time on every device. Customers have new demands and businesses and enterprise software need to be as agile as consumer services. “The next generation of consumers is ruthless”, he says. Zendesk has learnt much by working with Uber and others, products that have set a new standard for how consumers expect software to work.       

Mikkel Svane says that much has changed also in the way software companies are build today. Before, SaaS-companies had to build pretty much everything themselves. Now, you can buy the entire stack from AWS and other clouds. What used to take a startup 12 months can now be set up in a few days. The role of the public clouds is growing in importance, and it should really be the main choice for both startups and established businesses, he thinks. It’s a paradigm shift. He sees the public cloud infrastructure as their platform, enabling flexibility, speed, agility and the ability to run faster. The user experience is Zendesk’s top priority, in summary; the service must have super ease-of-use. That also translate to the need to scale the applications with use, which is where the public clouds play an important role as they can help a SaaS scale seamlessly.

The big public clouds are where the SaaS companies, or at least their products, naturally reside, as digital infrastructure like servers and networks are now offered as services too. As a consequence, the relationship between SaaS companies and the big cloud providers offering their IT platforms and various capabilities (for example AI, machine learning and analytics), is an important strategic cooperation and partnership. And the big clouds accordingly display an obsession to build their customers’ businesses.     

Sandy Carter, Vice President, Amazon Web Services (AWS), explains how they work with customer projects. They always start with the customer and their business, not the technology, writing “press releases” and “FAQ” to formulate a vision for the success they want to achieve before even writing a single line of code. They have small customer focused teams with a start-up approach to customer projects, working “50/50” (i.e. spending half of their time with the customers, and the other half in internal meetings etc). They also try to deploy AWS capabilities whenever possible, for example helping their customer Redfin, a real-estate website, to set the right house prices on their website using AI. As constant innovation is the only way to stay competitive, AWS helps customers to innovate and create “growth flywheels”.

Eyal Manor, Vice President, Google Cloud, outlines a number of trends in the cloud infrastructure and how it helps customers to stay competitive. The choice of partners is very strategic, it can accelerate your business. Also at Google projects start with the customers and development according to business objectives, maintaining the “voice of the customer”. There are so much more cloud services and capabilities than two years ago, for example emergence of new AI and ML services, and Google wants to be a platform that allows companies to focus on business logic. Meanwhile, the customers also demand much more technical discussions. One such technical concern is the rise of containers that enable customers to move between clouds, as they don’t want to be locked in. It’s thus a strategic consideration. Other questions involve security, local compliance (like GDPR in Europe) and how to make partner integrations. The two main themes are speed and data. Speed concerns maximizing development velocity and development team productivity for faster go to market, automated DevOps, using ready made models (for example AI and ML), aligning sales, marketing and product development.

Integrating engineering and marketing is a special issue, as new developments and product features need to be communicated to customers in a timely manner. But companies should be aware of bombarding customers with changes and new features, while still making sure they get the features they need and want.

Being able to use data for rich insights is getting crucial for businesses, especially for data-driven SaaS companies, while still protecting user data and integrity. Application Data Management (ADM) is important to help users govern and manage data in business applications, and make deep integrations from day one of the data pipeline.

However, a fast-growing SaaS is not only about creating amazing technology and products with great user experience, but just as much winning teams and sales organizations. Given the rapid pace in the SaaS industry with demands on speed, scalability and performance, how to build a strong culture is essential.  

We enjoyed listening to Matt Schatz, the Global Head of Sales at WP Engine, a SaaS for managed WordPress hosting, as he shared his experience from building a sales organization for a SaaS business and scaling it globally. Everybody likes to work for a fast growing companies where they can get their own “first stories”; for example, “I was the first employee at the Paris office”. It’s an adventure and it looks good on your CV. In a strong sales culture where your core values is at work every day, everybody knows that it’s a hard job, but can also be the best job, with no politics or back-stabbing. A strong sales culture is also based on data where the A-players rely more on science than luck to win their deals. Maybe the hardest part in a scaling global sales organization is facetime, as the teams become geographically scattered. The solution is to spend increasing management time on visiting every office personally, a strategy that might be increasingly controversial in our age of “flying shame”. A SaaS offering like Zoom is a good alternative for meeting online instead, but just as often.

Keith Rabois at Khoshla Ventures, an investor in companies like PayPal, Linkedin and  Square, offers more advice on building great teams. One challenge is the team set-up. You can raise the odds of success in a start-up with 50% just by changing the team composition, he thinks. So it’s a well invested effort to do matchmaking to add the missing team DNA. That’s why he also likes to get involved as early as possible to help with the team and get in before the “concrete solidifies”. Furthermore, it’s crucial to pay attention to individuals. Every person in a company has a growth curve – and the company itself has a growth curve. You can only promote people with a steeper growth curve than the company, he says.

Finally, Jennifer Lawrence (not that Jennifer Lawrence), Head of Sales at Duo Security (a SaaS for protecting sensitive data) shared her secrets for a great sales culture. First, get the whole company involved and create teams of hunters-helpers, not a bunch of “sales heroes”. Second, it’s not what you sell, but how. Here we’re talking data driven sales, and more specifically how you super-align sales with marketing, through analysing and selling to the right leads. Third, create a calm and positive culture, instead of increasing pressure, which might be a challenge given the extremely high pulse in the SaaS industry.

Building and running a SaaS company is an art in itself. Tomasz Tunguz from Redpoint Ventures is an experienced SaaS-investor and provided much insight into the nitty gritty of operating a SaaS business, and provided some of the the metrics and insights you should aim for based on their research and surveys.

  • Annual contracts are better economics than monthly contracts
  • Base your free trials on time or usage
  • A long trial doesn’t make better conversions, shorten the trial instead
  • Create strong lead generation, hire sales people to convert them (i.e. call leads)
  • 4% is a good conversion number for unassisted conversions
  • But shoot for 15% with assisted conversion (i.e. sales people)
  • Require payment at the start of the funnel to increase conversion later

Finally some words on marketing, a key aspect of growing a SaaS business online. One of the leading figures in the SaaS landscape is Brian Halligan, the CEO and founder of Hubspot. One of his main ideas is that the traditional funnel in online marketing and sales is more or less dead. The funnel starts with marketing, that drives leads to a website or app where the leads are converted to actions like sales and sign-ups in an assisted (sales people) or unassisted (self-service) way. But what if the first part does not work? Brian Halligan thinks that trust today is at an all-time low, i.e. people don’t really believe in either news, politicians or advertising. Instead, people trust friends and colleagues.That’s why customers are your best marketers, and the best companies create products that can grow through their customers usage and network effects. Thus, as the funnel is not really working, the model is more like a flywheel with reinforcing dynamics that can drive growth. A great product will help create its own growth.   

To sum up, the SaaS industry is growing fast and with increasing self confidence. You can even say that SaaS is eating software, at least the old kind that you buy and install on your server. And SaaS is eating the software market in two ways, by new SaaS companies that offer smarter solutions that were previously offered by traditional so called on-prem software (installed on premise instead of residing in the cloud), and by traditional software companies trying to transform their old products to SaaS. However, this was a story that we did not hear at SaaStr, most of the traditional software giants like SAP or Oracle were simply not there among this new generation of SaaS companies.

The post We Went to the SaaStr 2019 Conference, Here’s What You Should Know! appeared first on Standout Capital.

We Went to the SaaStr 2019 Conference, Here’s What You Should Know!


This post is by Fredrik Arnander from Standout Capital

Over 12,000 participants from 96 countries flocked to San Jose at the southern tip of Silicon Valley to take the pulse of the cloud, to network and make deals at the mega-conference SaaStr 2019, the biggest event in the world for the SaaS industry. Standout Capital was on location so please join us in this blog for a roundup of trends, stats and insights from some of the industry’s most successful people and companies.   

SaaS is software as a service, or in other words – cloud-based software that users can access through any browser without the need for installing it on your computer, paid with a subscription for as long as you want to use it. It’s simple, efficient and a fast growing enterprise software industry. At SaaStr, “Where The Clouds Meet”, the industry’s own annual conference, you will find both established SaaS companies like Hubspot, Zendesk, Dropbox, Zoom and Slack as well as fast-growing new startups. Most of the valley’s VC investors are here, and so are the tech giants such as Amazon, Google and Microsoft. Standout Capital’s investment team and our portfolio company Miradore also went to SaaStr and here’s our five key highlights:

  • SaaS is a fast growing industry approaching a market value of 1 trillion dollar
  • As SaaS has matured as a sector, there is also set of standard benchmarks and KPIs
  • SaaS companies are aiming higher today, $1 billion in ARR is the new black
  • SaaS companies and public clouds like AWS and Google drive innovation together
  • It’s not only technology, but also how to create successful and agile SaaS cultures

To set the stage, the SaaS industry is getting big. Byron Deeter and Kristina Shen from Bessemer Venture Partners provided some insight into the key data points of this relatively new market. There are currently over 55 private cloud companies with a valuation of over $1 billion. 2018 alone saw over $90 billion worth of M&A deals in the cloud and SaaS space and there was $44 billion in added market cap through IPOs. The demand for cloud shares has hit record highs. The total market cap of cloud and SaaS companies is now approaching $1 trillion (it currently stands at $690 billion).

The Annual Recurring Revenue (ARR), is at the core of any SaaS business, and it’s different from “revenue” which is backward looking and usually based on the previous calendar year or the Last Twelve Months (LTM), while the magic ARR metric is forward looking and estimates future “secured” or recurring annual revenue based on the subscription revenue in the last recorded month x 12. The beauty of the SaaS subscription model is that revenues are highly predictable, as long as you can fuel and forecast the growth, while keeping customer retention high (and correspondingly churn low). In this respect, SaaS, or any business with recurring models, is like the rent in real estate, but without the physical constraints of buildings and land. All you need is a sticky product with market-fit, great user value, low customer acquisition cost, a sales machine and the digital, global infrastructures for marketing and delivery.

As experienced SaaS investors, Bessemer Venture Partners are interested in building resilient companies with sustainable growth and profitability. Their assessment model is based on a formula of: Year-on-Year % growth in ARR + customer retention + capital runway to take the company to the next stage + NetNew ARR compared to Net Burn (spending efficiency). By analyzing how good SaaS companies are at these four disciplines, they can attach a score. For example, the best SaaS companies today have growth of up to 200% Y-on-Y growth, 150% customer retention (meaning that the customers are growing faster than the churn), 2-3 years capital runway before next financing, while having high spending efficiency, adding up to 1.5 times more ARR than they spend (meaning that $50 million invested will generate $75 million new ARR). The average time to reach $100 million ARR for the top 25% listed SaaS companies were 5 years. The fastest of them, Slack, reached $100 million in just 3 years. The average valuation multiple is 10x revenue.

Jason Lemkin, the CEO and founder of SaaStr, offered what is the new milestone to reach for the new breed of SaaS companies, or “Generational Companies” (the SaaS companies belonging to the current generation of cloud-based software companies). The rule of thumb used to be reaching Annual Recurring Revenues of $100 million before you could go public. The new number to aim for is $1 billion ARR, and it doesn’t even mean that you are going for an IPO at that stage but keep on fuelling growth with private capital. Having said that, most of the major SaaS companies are now public.

For example, RealPage (property management SaaS), and Veeva (SaaS for life sciences), are now at an ARR of $1.1 billion, Shopify (e-commerce SaaS that recently acquired Swedish TicTail), has reached $1.6 billion ARR, Dropbox (file hosting), now enjoys $1.8 billion ARR while Workday (HR software), has an ARR of a whooping $3.8 billion. Significant and fast growing SaaS companies that are now approaching the $1 billion ARR threshold include Hubspot (marketing & CRM), Zendesk (helpdesk tool), Okta (identity management), New Relic (software analytics), Twilio (communication APIs), Zoom (video conferencing), and Box (file storage). These are all the new nobility of the tech industry and Silicon Valley.

So-called unicorns are companies with $1 billion valuation, but the good news is that there is a new generation of software companies that have or are on their way of reaching $1 billion dollar in revenues. This means that there is a real and fundamentally strong tech sector with substantial and growing software companies solving real needs for real users. And that is also one reason why there is currently not much talk of a tech bubble in Silicon Valley.   

Ryan Smith is the founder and CEO of Qualtrics, a SaaS for real-time customer insights. He sold his company to SAP for $8 billion in 2018. How could that valuation be justified? Usually it’s the rare combination of a scalable tech business that is growing fast with profitability, with predictable revenues at already high levels, and a large customer base with high retention in a big market, set for further growth. In Qualtrics case, at the point of the purchase by SAP, they had 9000+ customers, with revenues growing 40% year-on-year with positive cashflow at some $300 million in Annual Recurring Revenue.

Most SaaS products are enterprise software, i.e. products and tools for use in businesses, which is also the focus at the SaaStr conference. But these business products are learning a lot from their consumer product colleagues, especially in terms if user experience. This focus on customer experience is essential as confirmed by Ciara Peter, Invision, Bela Stepanova from Box, Craig Villamor from Google Maps and Shanee Ben-Zur from Crunchbase in a discussion about how to build “consumer grade” enterprise software. It’s basically about “building products that don’t suck” and create the same great user experience in enterprise software as in consumer product, by thinking about the actual end user (which is not always the same thing as the customer, which might be a C-level manager making software purchases). That’s why a modern enterprise SaaS company should spend facetime with users, not only customers. However, although the “consumerization” of software is a buzz, the value finally comes down to usability and actual results in enterprises. And here a word of caution is needed. Consumer software is usually simplified to reduce friction and promote usage and create addiction. This is sometimes not always desirable in enterprise products.

Mark Roberge is the former CRO (Chief Revenue Officer) at Hubspot and a lecturer at Harvard Business School. He too underlines the importance to focus on the users and their product usage, not only revenue. You have to look at both the Annual Revenue Retention (the ARR at start of year – ARR churn) and Annual Customer Retention (number of Customers – customer churn). Churn is a silent killer. This is the key question; How do you identify and measure the customer success that makes the customer to stay? If the user value and experience is low, it will soon lead to churn in borth revenue and number of customers. That’s why identifying a leading indicator to customer success (and potential churn) is critical. So, how do you define your customer success leading indicator? It should be observable over a time period, preferable in weeks or months, not quarters or years. Ideally the measurement is automated and correlated to the product CVP (Customer Value Proposition). Look at metrics like repeat purchase, referrals, setup and usage. Just tracking revenue is usually a mistake. Here are a few examples of Customer Success Leading Indicators at three top SaaS companies:

  • Slack: 2,000 team messages sent
  • Dropbox: 1 file added to 1 folder on 1 device
  • Hubspot: Using 5 of 20 features within 60 days

“Sales is first and foremost about creating customer value. Revenue and profits are an outcome of customer value creation”, says Mark Roberge.

Zendesk is the Danish star in the SaaS industry, growing ARR 40% in the last quarter and set to turn over $800 million in 2019 (from $600 million in 2018). The market value on NYSE is $8.3 billion (Zendesk listed in 2014). The founder & CEO Mikkel Svane says it’s a “crazy amount of change and disruption” going on and a challenge to grow an already big organisation at that pace. They moved to Silicon Valley early from the origins in Copenhagen as a startup in 2008. He thinks that 10 years ago, you could hardly build a tech business in Europe, as there was no startup community and not much venture capital. Now it’s different, and the main challenge is rather to build products with great user experience given the extremely competitive environment and quest for customers’ time and attention when everything is available all the time on every device. Customers have new demands and businesses and enterprise software need to be as agile as consumer services. “The next generation of consumers is ruthless”, he says. Zendesk has learnt much by working with Uber and others, products that have set a new standard for how consumers expect software to work.       

Mikkel Svane says that much has changed also in the way software companies are build today. Before, SaaS-companies had to build pretty much everything themselves. Now, you can buy the entire stack from AWS and other clouds. What used to take a startup 12 months can now be set up in a few days. The role of the public clouds is growing in importance, and it should really be the main choice for both startups and established businesses, he thinks. It’s a paradigm shift. He sees the public cloud infrastructure as their platform, enabling flexibility, speed, agility and the ability to run faster. The user experience is Zendesk’s top priority, in summary; the service must have super ease-of-use. That also translate to the need to scale the applications with use, which is where the public clouds play an important role as they can help a SaaS scale seamlessly.

The big public clouds are where the SaaS companies, or at least their products, naturally reside, as digital infrastructure like servers and networks are now offered as services too. As a consequence, the relationship between SaaS companies and the big cloud providers offering their IT platforms and various capabilities (for example AI, machine learning and analytics), is an important strategic cooperation and partnership. And the big clouds accordingly display an obsession to build their customers’ businesses.     

Sandy Carter, Vice President, Amazon Web Services (AWS), explains how they work with customer projects. They always start with the customer and their business, not the technology, writing “press releases” and “FAQ” to formulate a vision for the success they want to achieve before even writing a single line of code. They have small customer focused teams with a start-up approach to customer projects, working “50/50” (i.e. spending half of their time with the customers, and the other half in internal meetings etc). They also try to deploy AWS capabilities whenever possible, for example helping their customer Redfin, a real-estate website, to set the right house prices on their website using AI. As constant innovation is the only way to stay competitive, AWS helps customers to innovate and create “growth flywheels”.

Eyal Manor, Vice President, Google Cloud, outlines a number of trends in the cloud infrastructure and how it helps customers to stay competitive. The choice of partners is very strategic, it can accelerate your business. Also at Google projects start with the customers and development according to business objectives, maintaining the “voice of the customer”. There are so much more cloud services and capabilities than two years ago, for example emergence of new AI and ML services, and Google wants to be a platform that allows companies to focus on business logic. Meanwhile, the customers also demand much more technical discussions. One such technical concern is the rise of containers that enable customers to move between clouds, as they don’t want to be locked in. It’s thus a strategic consideration. Other questions involve security, local compliance (like GDPR in Europe) and how to make partner integrations. The two main themes are speed and data. Speed concerns maximizing development velocity and development team productivity for faster go to market, automated DevOps, using ready made models (for example AI and ML), aligning sales, marketing and product development.

Integrating engineering and marketing is a special issue, as new developments and product features need to be communicated to customers in a timely manner. But companies should be aware of bombarding customers with changes and new features, while still making sure they get the features they need and want.

Being able to use data for rich insights is getting crucial for businesses, especially for data-driven SaaS companies, while still protecting user data and integrity. Application Data Management (ADM) is important to help users govern and manage data in business applications, and make deep integrations from day one of the data pipeline.

However, a fast-growing SaaS is not only about creating amazing technology and products with great user experience, but just as much winning teams and sales organizations. Given the rapid pace in the SaaS industry with demands on speed, scalability and performance, how to build a strong culture is essential.  

We enjoyed listening to Matt Schatz, the Global Head of Sales at WP Engine, a SaaS for managed WordPress hosting, as he shared his experience from building a sales organization for a SaaS business and scaling it globally. Everybody likes to work for a fast growing companies where they can get their own “first stories”; for example, “I was the first employee at the Paris office”. It’s an adventure and it looks good on your CV. In a strong sales culture where your core values is at work every day, everybody knows that it’s a hard job, but can also be the best job, with no politics or back-stabbing. A strong sales culture is also based on data where the A-players rely more on science than luck to win their deals. Maybe the hardest part in a scaling global sales organization is facetime, as the teams become geographically scattered. The solution is to spend increasing management time on visiting every office personally, a strategy that might be increasingly controversial in our age of “flying shame”. A SaaS offering like Zoom is a good alternative for meeting online instead, but just as often.

Keith Rabois at Khoshla Ventures, an investor in companies like PayPal, Linkedin and  Square, offers more advice on building great teams. One challenge is the team set-up. You can raise the odds of success in a start-up with 50% just by changing the team composition, he thinks. So it’s a well invested effort to do matchmaking to add the missing team DNA. That’s why he also likes to get involved as early as possible to help with the team and get in before the “concrete solidifies”. Furthermore, it’s crucial to pay attention to individuals. Every person in a company has a growth curve – and the company itself has a growth curve. You can only promote people with a steeper growth curve than the company, he says.

Finally, Jennifer Lawrence (not that Jennifer Lawrence), Head of Sales at Duo Security (a SaaS for protecting sensitive data) shared her secrets for a great sales culture. First, get the whole company involved and create teams of hunters-helpers, not a bunch of “sales heroes”. Second, it’s not what you sell, but how. Here we’re talking data driven sales, and more specifically how you super-align sales with marketing, through analysing and selling to the right leads. Third, create a calm and positive culture, instead of increasing pressure, which might be a challenge given the extremely high pulse in the SaaS industry.

Building and running a SaaS company is an art in itself. Tomasz Tunguz from Redpoint Ventures is an experienced SaaS-investor and provided much insight into the nitty gritty of operating a SaaS business, and provided some of the the metrics and insights you should aim for based on their research and surveys.

  • Annual contracts are better economics than monthly contracts
  • Base your free trials on time or usage
  • A long trial doesn’t make better conversions, shorten the trial instead
  • Create strong lead generation, hire sales people to convert them (i.e. call leads)
  • 4% is a good conversion number for unassisted conversions
  • But shoot for 15% with assisted conversion (i.e. sales people)
  • Require payment at the start of the funnel to increase conversion later

Finally some words on marketing, a key aspect of growing a SaaS business online. One of the leading figures in the SaaS landscape is Brian Halligan, the CEO and founder of Hubspot. One of his main ideas is that the traditional funnel in online marketing and sales is more or less dead. The funnel starts with marketing, that drives leads to a website or app where the leads are converted to actions like sales and sign-ups in an assisted (sales people) or unassisted (self-service) way. But what if the first part does not work? Brian Halligan thinks that trust today is at an all-time low, i.e. people don’t really believe in either news, politicians or advertising. Instead, people trust friends and colleagues.That’s why customers are your best marketers, and the best companies create products that can grow through their customers usage and network effects. Thus, as the funnel is not really working, the model is more like a flywheel with reinforcing dynamics that can drive growth. A great product will help create its own growth.   

To sum up, the SaaS industry is growing fast and with increasing self confidence. You can even say that SaaS is eating software, at least the old kind that you buy and install on your server. And SaaS is eating the software market in two ways, by new SaaS companies that offer smarter solutions that were previously offered by traditional so called on-prem software (installed on premise instead of residing in the cloud), and by traditional software companies trying to transform their old products to SaaS. However, this was a story that we did not hear at SaaStr, most of the traditional software giants like SAP or Oracle were simply not there among this new generation of SaaS companies.

The post We Went to the SaaStr 2019 Conference, Here’s What You Should Know! appeared first on Standout Capital.

We Went to the SaaStr 2019 Conference, Here’s What You Should Know!


This post is by Fredrik Arnander from Standout Capital

Over 12,000 participants from 96 countries flocked to San Jose at the southern tip of Silicon Valley to take the pulse of the cloud, to network and make deals at the mega-conference SaaStr 2019, the biggest event in the world for the SaaS industry. Standout Capital was on location so please join us in this blog for a roundup of trends, stats and insights from some of the industry’s most successful people and companies.   

SaaS is software as a service, or in other words – cloud-based software that users can access through any browser without the need for installing it on your computer, paid with a subscription for as long as you want to use it. It’s simple, efficient and a fast growing enterprise software industry. At SaaStr, “Where The Clouds Meet”, the industry’s own annual conference, you will find both established SaaS companies like Hubspot, Zendesk, Dropbox, Zoom and Slack as well as fast-growing new startups. Most of the valley’s VC investors are here, and so are the tech giants such as Amazon, Google and Microsoft. Standout Capital’s investment team and our portfolio company Miradore also went to SaaStr and here’s our five key highlights:

  • SaaS is a fast growing industry approaching a market value of 1 trillion dollar
  • As SaaS has matured as a sector, there is also set of standard benchmarks and KPIs
  • SaaS companies are aiming higher today, $1 billion in ARR is the new black
  • SaaS companies and public clouds like AWS and Google drive innovation together
  • It’s not only technology, but also how to create successful and agile SaaS cultures

To set the stage, the SaaS industry is getting big. Byron Deeter and Kristina Shen from Bessemer Venture Partners provided some insight into the key data points of this relatively new market. There are currently over 55 private cloud companies with a valuation of over $1 billion. 2018 alone saw over $90 billion worth of M&A deals in the cloud and SaaS space and there was $44 billion in added market cap through IPOs. The demand for cloud shares has hit record highs. The total market cap of cloud and SaaS companies is now approaching $1 trillion (it currently stands at $690 billion).

The Annual Recurring Revenue (ARR), is at the core of any SaaS business, and it’s different from “revenue” which is backward looking and usually based on the previous calendar year or the Last Twelve Months (LTM), while the magic ARR metric is forward looking and estimates future “secured” or recurring annual revenue based on the subscription revenue in the last recorded month x 12. The beauty of the SaaS subscription model is that revenues are highly predictable, as long as you can fuel and forecast the growth, while keeping customer retention high (and correspondingly churn low). In this respect, SaaS, or any business with recurring models, is like the rent in real estate, but without the physical constraints of buildings and land. All you need is a sticky product with market-fit, great user value, low customer acquisition cost, a sales machine and the digital, global infrastructures for marketing and delivery.

As experienced SaaS investors, Bessemer Venture Partners are interested in building resilient companies with sustainable growth and profitability. Their assessment model is based on a formula of: Year-on-Year % growth in ARR + customer retention + capital runway to take the company to the next stage + NetNew ARR compared to Net Burn (spending efficiency). By analyzing how good SaaS companies are at these four disciplines, they can attach a score. For example, the best SaaS companies today have growth of up to 200% Y-on-Y growth, 150% customer retention (meaning that the customers are growing faster than the churn), 2-3 years capital runway before next financing, while having high spending efficiency, adding up to 1.5 times more ARR than they spend (meaning that $50 million invested will generate $75 million new ARR). The average time to reach $100 million ARR for the top 25% listed SaaS companies were 5 years. The fastest of them, Slack, reached $100 million in just 3 years. The average valuation multiple is 10x revenue.

Jason Lemkin, the CEO and founder of SaaStr, offered what is the new milestone to reach for the new breed of SaaS companies, or “Generational Companies” (the SaaS companies belonging to the current generation of cloud-based software companies). The rule of thumb used to be reaching Annual Recurring Revenues of $100 million before you could go public. The new number to aim for is $1 billion ARR, and it doesn’t even mean that you are going for an IPO at that stage but keep on fuelling growth with private capital. Having said that, most of the major SaaS companies are now public.

For example, RealPage (property management SaaS), and Veeva (SaaS for life sciences), are now at an ARR of $1.1 billion, Shopify (e-commerce SaaS that recently acquired Swedish TicTail), has reached $1.6 billion ARR, Dropbox (file hosting), now enjoys $1.8 billion ARR while Workday (HR software), has an ARR of a whooping $3.8 billion. Significant and fast growing SaaS companies that are now approaching the $1 billion ARR threshold include Hubspot (marketing & CRM), Zendesk (helpdesk tool), Okta (identity management), New Relic (software analytics), Twilio (communication APIs), Zoom (video conferencing), and Box (file storage). These are all the new nobility of the tech industry and Silicon Valley.

So-called unicorns are companies with $1 billion valuation, but the good news is that there is a new generation of software companies that have or are on their way of reaching $1 billion dollar in revenues. This means that there is a real and fundamentally strong tech sector with substantial and growing software companies solving real needs for real users. And that is also one reason why there is currently not much talk of a tech bubble in Silicon Valley.   

Ryan Smith is the founder and CEO of Qualtrics, a SaaS for real-time customer insights. He sold his company to SAP for $8 billion in 2018. How could that valuation be justified? Usually it’s the rare combination of a scalable tech business that is growing fast with profitability, with predictable revenues at already high levels, and a large customer base with high retention in a big market, set for further growth. In Qualtrics case, at the point of the purchase by SAP, they had 9000+ customers, with revenues growing 40% year-on-year with positive cashflow at some $300 million in Annual Recurring Revenue.

Most SaaS products are enterprise software, i.e. products and tools for use in businesses, which is also the focus at the SaaStr conference. But these business products are learning a lot from their consumer product colleagues, especially in terms if user experience. This focus on customer experience is essential as confirmed by Ciara Peter, Invision, Bela Stepanova from Box, Craig Villamor from Google Maps and Shanee Ben-Zur from Crunchbase in a discussion about how to build “consumer grade” enterprise software. It’s basically about “building products that don’t suck” and create the same great user experience in enterprise software as in consumer product, by thinking about the actual end user (which is not always the same thing as the customer, which might be a C-level manager making software purchases). That’s why a modern enterprise SaaS company should spend facetime with users, not only customers. However, although the “consumerization” of software is a buzz, the value finally comes down to usability and actual results in enterprises. And here a word of caution is needed. Consumer software is usually simplified to reduce friction and promote usage and create addiction. This is sometimes not always desirable in enterprise products.

Mark Roberge is the former CRO (Chief Revenue Officer) at Hubspot and a lecturer at Harvard Business School. He too underlines the importance to focus on the users and their product usage, not only revenue. You have to look at both the Annual Revenue Retention (the ARR at start of year – ARR churn) and Annual Customer Retention (number of Customers – customer churn). Churn is a silent killer. This is the key question; How do you identify and measure the customer success that makes the customer to stay? If the user value and experience is low, it will soon lead to churn in borth revenue and number of customers. That’s why identifying a leading indicator to customer success (and potential churn) is critical. So, how do you define your customer success leading indicator? It should be observable over a time period, preferable in weeks or months, not quarters or years. Ideally the measurement is automated and correlated to the product CVP (Customer Value Proposition). Look at metrics like repeat purchase, referrals, setup and usage. Just tracking revenue is usually a mistake. Here are a few examples of Customer Success Leading Indicators at three top SaaS companies:

  • Slack: 2,000 team messages sent
  • Dropbox: 1 file added to 1 folder on 1 device
  • Hubspot: Using 5 of 20 features within 60 days

“Sales is first and foremost about creating customer value. Revenue and profits are an outcome of customer value creation”, says Mark Roberge.

Zendesk is the Danish star in the SaaS industry, growing ARR 40% in the last quarter and set to turn over $800 million in 2019 (from $600 million in 2018). The market value on NYSE is $8.3 billion (Zendesk listed in 2014). The founder & CEO Mikkel Svane says it’s a “crazy amount of change and disruption” going on and a challenge to grow an already big organisation at that pace. They moved to Silicon Valley early from the origins in Copenhagen as a startup in 2008. He thinks that 10 years ago, you could hardly build a tech business in Europe, as there was no startup community and not much venture capital. Now it’s different, and the main challenge is rather to build products with great user experience given the extremely competitive environment and quest for customers’ time and attention when everything is available all the time on every device. Customers have new demands and businesses and enterprise software need to be as agile as consumer services. “The next generation of consumers is ruthless”, he says. Zendesk has learnt much by working with Uber and others, products that have set a new standard for how consumers expect software to work.       

Mikkel Svane says that much has changed also in the way software companies are build today. Before, SaaS-companies had to build pretty much everything themselves. Now, you can buy the entire stack from AWS and other clouds. What used to take a startup 12 months can now be set up in a few days. The role of the public clouds is growing in importance, and it should really be the main choice for both startups and established businesses, he thinks. It’s a paradigm shift. He sees the public cloud infrastructure as their platform, enabling flexibility, speed, agility and the ability to run faster. The user experience is Zendesk’s top priority, in summary; the service must have super ease-of-use. That also translate to the need to scale the applications with use, which is where the public clouds play an important role as they can help a SaaS scale seamlessly.

The big public clouds are where the SaaS companies, or at least their products, naturally reside, as digital infrastructure like servers and networks are now offered as services too. As a consequence, the relationship between SaaS companies and the big cloud providers offering their IT platforms and various capabilities (for example AI, machine learning and analytics), is an important strategic cooperation and partnership. And the big clouds accordingly display an obsession to build their customers’ businesses.     

Sandy Carter, Vice President, Amazon Web Services (AWS), explains how they work with customer projects. They always start with the customer and their business, not the technology, writing “press releases” and “FAQ” to formulate a vision for the success they want to achieve before even writing a single line of code. They have small customer focused teams with a start-up approach to customer projects, working “50/50” (i.e. spending half of their time with the customers, and the other half in internal meetings etc). They also try to deploy AWS capabilities whenever possible, for example helping their customer Redfin, a real-estate website, to set the right house prices on their website using AI. As constant innovation is the only way to stay competitive, AWS helps customers to innovate and create “growth flywheels”.

Eyal Manor, Vice President, Google Cloud, outlines a number of trends in the cloud infrastructure and how it helps customers to stay competitive. The choice of partners is very strategic, it can accelerate your business. Also at Google projects start with the customers and development according to business objectives, maintaining the “voice of the customer”. There are so much more cloud services and capabilities than two years ago, for example emergence of new AI and ML services, and Google wants to be a platform that allows companies to focus on business logic. Meanwhile, the customers also demand much more technical discussions. One such technical concern is the rise of containers that enable customers to move between clouds, as they don’t want to be locked in. It’s thus a strategic consideration. Other questions involve security, local compliance (like GDPR in Europe) and how to make partner integrations. The two main themes are speed and data. Speed concerns maximizing development velocity and development team productivity for faster go to market, automated DevOps, using ready made models (for example AI and ML), aligning sales, marketing and product development.

Integrating engineering and marketing is a special issue, as new developments and product features need to be communicated to customers in a timely manner. But companies should be aware of bombarding customers with changes and new features, while still making sure they get the features they need and want.

Being able to use data for rich insights is getting crucial for businesses, especially for data-driven SaaS companies, while still protecting user data and integrity. Application Data Management (ADM) is important to help users govern and manage data in business applications, and make deep integrations from day one of the data pipeline.

However, a fast-growing SaaS is not only about creating amazing technology and products with great user experience, but just as much winning teams and sales organizations. Given the rapid pace in the SaaS industry with demands on speed, scalability and performance, how to build a strong culture is essential.  

We enjoyed listening to Matt Schatz, the Global Head of Sales at WP Engine, a SaaS for managed WordPress hosting, as he shared his experience from building a sales organization for a SaaS business and scaling it globally. Everybody likes to work for a fast growing companies where they can get their own “first stories”; for example, “I was the first employee at the Paris office”. It’s an adventure and it looks good on your CV. In a strong sales culture where your core values is at work every day, everybody knows that it’s a hard job, but can also be the best job, with no politics or back-stabbing. A strong sales culture is also based on data where the A-players rely more on science than luck to win their deals. Maybe the hardest part in a scaling global sales organization is facetime, as the teams become geographically scattered. The solution is to spend increasing management time on visiting every office personally, a strategy that might be increasingly controversial in our age of “flying shame”. A SaaS offering like Zoom is a good alternative for meeting online instead, but just as often.

Keith Rabois at Khoshla Ventures, an investor in companies like PayPal, Linkedin and  Square, offers more advice on building great teams. One challenge is the team set-up. You can raise the odds of success in a start-up with 50% just by changing the team composition, he thinks. So it’s a well invested effort to do matchmaking to add the missing team DNA. That’s why he also likes to get involved as early as possible to help with the team and get in before the “concrete solidifies”. Furthermore, it’s crucial to pay attention to individuals. Every person in a company has a growth curve – and the company itself has a growth curve. You can only promote people with a steeper growth curve than the company, he says.

Finally, Jennifer Lawrence (not that Jennifer Lawrence), Head of Sales at Duo Security (a SaaS for protecting sensitive data) shared her secrets for a great sales culture. First, get the whole company involved and create teams of hunters-helpers, not a bunch of “sales heroes”. Second, it’s not what you sell, but how. Here we’re talking data driven sales, and more specifically how you super-align sales with marketing, through analysing and selling to the right leads. Third, create a calm and positive culture, instead of increasing pressure, which might be a challenge given the extremely high pulse in the SaaS industry.

Building and running a SaaS company is an art in itself. Tomasz Tunguz from Redpoint Ventures is an experienced SaaS-investor and provided much insight into the nitty gritty of operating a SaaS business, and provided some of the the metrics and insights you should aim for based on their research and surveys.

  • Annual contracts are better economics than monthly contracts
  • Base your free trials on time or usage
  • A long trial doesn’t make better conversions, shorten the trial instead
  • Create strong lead generation, hire sales people to convert them (i.e. call leads)
  • 4% is a good conversion number for unassisted conversions
  • But shoot for 15% with assisted conversion (i.e. sales people)
  • Require payment at the start of the funnel to increase conversion later

Finally some words on marketing, a key aspect of growing a SaaS business online. One of the leading figures in the SaaS landscape is Brian Halligan, the CEO and founder of Hubspot. One of his main ideas is that the traditional funnel in online marketing and sales is more or less dead. The funnel starts with marketing, that drives leads to a website or app where the leads are converted to actions like sales and sign-ups in an assisted (sales people) or unassisted (self-service) way. But what if the first part does not work? Brian Halligan thinks that trust today is at an all-time low, i.e. people don’t really believe in either news, politicians or advertising. Instead, people trust friends and colleagues.That’s why customers are your best marketers, and the best companies create products that can grow through their customers usage and network effects. Thus, as the funnel is not really working, the model is more like a flywheel with reinforcing dynamics that can drive growth. A great product will help create its own growth.   

To sum up, the SaaS industry is growing fast and with increasing self confidence. You can even say that SaaS is eating software, at least the old kind that you buy and install on your server. And SaaS is eating the software market in two ways, by new SaaS companies that offer smarter solutions that were previously offered by traditional so called on-prem software (installed on premise instead of residing in the cloud), and by traditional software companies trying to transform their old products to SaaS. However, this was a story that we did not hear at SaaStr, most of the traditional software giants like SAP or Oracle were simply not there among this new generation of SaaS companies.

The post We Went to the SaaStr 2019 Conference, Here’s What You Should Know! appeared first on Standout Capital.

AI: Scary for the Right Reasons


This post is by Justine Sink from Khosla Ventures

This post also appears on Hackernoon.

Artificial intelligence, AI, has grabbed headlines, hype, and even consternation at the beast we are unleashing. Every powerful technology can be used for good and bad, be it nuclear or biotechnology, and the same is true for AI. While much of the public discourse from the likes of Elon Musk and Stephen Hawking reflects on sci-fi like dystopian visions of overlord AI’s gone wrong (a scenario certainly worth discussing), there is a much more immediate threat when it comes to AI. Long before AI goes uncontrollable or takes over jobs, there lurks a much larger danger: AI in the hands of governments and/or bad actors used to push self-interested agendas against the greater good.

For background, as a technology optimist and unapologetic supporter of further development, in 2014 I wrote about the massive dislocation in society AI may cause, and while our economic metrics like GDP, growth, and productivity may look awesome as a result, it may worsen the less visible, but in my opinion, far more critical metrics around income disparity and social mobility. More importantly, I argued why this time might be different than the usual economists’ refrain that productivity tools always increase employment. With AI, the vast majority of current jobs may be dislocated regardless of skill or education level. In the previous industrial revolution, we saw this in agriculture between 1900–2000, when it went from a majority of US employment to less than 2%, and in industrial jobs, Continue reading “AI: Scary for the Right Reasons”

Economics of AI Workshop 2017 / AI: Musings of a Technology Optimist


This post is by Justine Sink from Khosla Ventures

Video

Economics of AI Workshop 2017 / AI: Musings of a Technology Optimist

The post Economics of AI Workshop 2017 / AI: Musings of a Technology Optimist appeared first on Khosla Ventures.

SLUSH 2017: Re-inventing Societal Infrastructure with Technology


This post is by Stephanie Camacho from Khosla Ventures

Video

SLUSH 2017: Re-inventing Societal Infrastructure with Technology

The post SLUSH 2017: Re-inventing Societal Infrastructure with Technology appeared first on Khosla Ventures.

Forbes / The next technology revolution will drive abundance and income disparity


This post is by Kathy Chan from Khosla Ventures

This post also appears on Forbes.com.

There have been and will continue to be multiple big technology revolutions, but the most impactful on human society may be the one that finally builds systems with judgment and decision-making capability more sophisticated and nuanced than trained human judgment. Machine learning, sometimes called big data or artificial intelligence, is making rapid progress in complex decision-making (for instance: driving a car was thought to be too difficult for computers even five years ago). Without speculating on what is probable, it is at least possible that such systems may even be better at creativity, emotion and empathy than human beings (for instance: writing the best music, love story or creative fiction). At the very least these systems may be able to handle much more data to which we now have access and use it to make better judgments than humans with their supposed instinct, gut, holistic and integrative decision capability. Although any one software program may not do everything a human brain can do, specialized programs will likely make decisions and predictions in their domain better than most trained humans. Many, if not most, domains will be well covered by such programs. Many problems in our work environments aren’t ones the human brain evolved to solve for in the African savannah. To achieve these goals, a machine learning system does not need to exactly replicate the brain or even use brain like techniques.

While the future is promising and this technology revolution may result Continue reading “Forbes / The next technology revolution will drive abundance and income disparity”

TechCrunch / Do we need doctors or algorithms?


This post is by Kathy Chan from Khosla Ventures

This article is also posted on TechCrunch.

Editor’s note: This is Part II of a guest series written by legendary Silicon Valley investor Vinod Khosla, the founder of Khosla Ventures. In Part I, he laid the groundwork by describing how artificial intelligence is a combination of human and computer capabilities. In Part III, he will talk about how technology will sweep through education.

I was asked about a year ago at a talk about energy what I was doing about the other large social problems, namely health care and education. Surprised, I flippantly responded that the best solution was to get rid of doctors and teachers and let your computers do the work, 24/7 and with consistent quality.

Later, I got to cogitating about what I had said and why, and how embarrassingly wrong that might be. But the more I think about it the more I feel my gut reaction was probably right. The beginnings of “Doctor Algorithm” or Dr. A for short, most likely (and that does not mean “certainly” or “maybe”) will be much criticized. We’ll see all sorts of press wisdom decrying “they don’t work” or “look at all the silly things they come up with.” But Dr A. will get better and better and will go from providing “bionic assistance” to second opinions to assisting doctors to providing first opinions and as referral computers (with complete and accurate synopses and all possible hypotheses of the hardest cases) to the Continue reading “TechCrunch / Do we need doctors or algorithms?”