5 VCs discuss the future of SaaS and software after Pfizer’s vaccine breakthrough


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Monday’s news that a COVID-19 vaccine candidate looks to be incredibly effective gave investors reasons to believe in a better future. Perhaps COVID-19 won’t be with us for years, investors appeared to think, but will instead become something that we can bend the curve on sooner than we thought.

A strong vaccine would be key toward moving back to life as it was. And for many companies battered by the pandemic, news that one was coming was more than a shot in the arm — it was stock market salvation. Airline shares soared. Cruise companies jumped. Even long-suffering Boeing shares took flight.


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But amidst the cheering, one sector of the stock market, a key comp for a host of startups, took hits. Yes, the high-flying SaaS and cloud stocks that have been such a key narrative in 2020 thanks to the pandemic and low interest rates, fell sharply while other sectors rallied off the vaccine tidings.

SaaS and cloud stocks are off more this morning, though their declines are shallower than Monday’s losses.

We asked yesterday what signal public investors were trying to send with their trades. But that’s just one angle of the picture. So, to better understand how private investors are viewing the same signals, I reached out to a few VCs who invest in SaaS and, in my experience, are worth listening to.

Below I’ve compiled notes from Bessemer’s Mary D’Onofrio, Work Life Ventures’ Brianne Kimmel, Day One Ventures’ Masha Drokova, Floodgate’s Iris Choi and Shasta’s Jacob Mullins on our question.

Are the bulls still bullish? Let’s find out.

SaaS, vaccines and the future of work

D’Onofrio wrote that her firm was still digesting the vaccine news and that it was “too early to say decisively whether or not people will be back to a pre-COVID life in the next few quarters.” That’s fair. Some good vaccine news does not mean that I’ll be back to speed-running United Economy Plus across the country every two weeks come April.

That said, D’Onofrio doesn’t appear too worried about the early-week selloff, noting that SaaS and cloud stocks — as measured via her firm’s cloud index — are still far ahead of other, broader indices this year. Why does that matter? “Stocks are forward-looking,” she said, which tells her “that even with more visibility into returning to ‘normal,’ the market anticipates that cloud companies will still be able to capitalize on the [market expansion] and growth opportunities that COVID helped to propel.”

“The pie,” she concluded, “has expanded.” That’s bullish and fair, I reckon.

3 VCs discuss the state of SaaS investing in 2020


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Yesterday during Disrupt 2020 I sat down with three investors who know the SaaS startup market very well, hoping to get my head around how hot things are today. Coming on the heels of the epic Snowflake IPO (more to come on that in this weekend’s newsletter), it was a great time for a chat.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


I’ve boiled our 40-minute discussion down to my favorite parts, getting you the goods in quick fashion.

What follows are notes on:

  • how fast the SaaS investing market is today
  • why Snowflake priced where it did and what that tells us about today’s market
  • how SaaS companies are seeing different growth results based on their sales motion
  • why some private-market SaaS multiples can get so high
  • which software sectors are accelerating
  • and what I learned about international SaaS.

There are more things to pull out later, like the investors’ thoughts regarding diversity in their part of the venture world and SaaS startups, but I want to give that topic its own space.

So, into today’s SaaS market with an eye on the future, guided by commentary from Canaan’s Maha Ibrahim, Andreessen Horowitz’s David Ulevitch and Bessemer’s Mary D’Onofrio.

Inside SaaS

To help us get through a good bit of the written word without slowing down, I’ll introduce an idea, share a quote and provide a little commentary. This should be good fun.

Software stocks set new records despite earnings, pandemic


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

You might have missed it, but amidst the current political-M&A-pandemic-election-disinformation news cycle we find ourselves in this week, SaaS and cloud companies reached new public market records.

Yesterday, the Bessemer-Nasdaq cloud index closed at 2,035.54, a new record finish for the basket of software companies. And, today, the index broached the 2,040 mark before ceding some ground.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


What matters for our purposes is that with a good chunk of the Q2 earnings cycle behind us, software companies are not only holding onto their gains from earlier in the year, they are managing to add to them, albeit modestly. Of course, valuation expansion during earnings season could still lead to gently falling multiples; as companies grow, if their shares gain value at a slower pace, their price/sales ratio can lose ground.

Regardless, for our purposes it’s notable that recent public market gains are not dissipating. Tech valuation boosts have helped major American indices regain ground lost early in the year, and Q2 earnings were a possible threat to prior progress. So far earnings-related dents are thin on the ground.

So, what’s going on? Why are SaaS and cloud stocks doing so well? Leaning on notes from two VCs — Jamin Ball from Redpoint and Mary D’Onofrio from Bessemer — we can unspool recent valuation highs.

SaaS and cloud stocks finally give back ground


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

After a heated run, SaaS and cloud stocks dipped sharply during regular trading on Monday.

According to the category-tracking Bessemer cloud index, public SaaS and cloud stocks dropped around 6.5% today, a material blow to the value of some of the world’s most highly valued companies, measured by sector-averaged revenue multiples.

After recovering all their COVID-19-related losses earlier this year, SaaS and cloud stocks kept on rising, reaching new all-time highs with regularity. But earnings season is starting, meaning that the value of modern software and digital infrastructure companies will soon be tested against Q2 results — results that were recorded fully during the global pandemic.

To hear bulls — both private and public — tell the story, COVID-19 and its ensuing workplace disruptions have provided software companies with a huge boon. Namely, that customers current and future have radically changed their procurement models and will need more software solutions, more quickly, than they previously anticipated. (Stay tuned to The Exchange for more on this later in the week.)

The thought that there are more and better customers coming for SaaS and cloud companies made them relative safe havens in otherwise turbulent public markets; while other industries had uncertain demand curves, the thinking went, software companies were being pushed forward by an accelerating secular shift.

Today, however, the broader markets slipped from early-day positions of strength while SaaS and cloud shares dropped sharply. Prior patterns in investor behavior didn’t hold up, in other words.

Why today brought such sharp selling is not clear. No more, really, than reasons for prior days’ gains were clear at the time. Profit taking? Rotation to other sectors? Whatever you want to ascribe to the day’s declines you can make stick.

For our purposes here at TechCrunch, the dropping share prices of public software companies serves as an anti-signal for late-stage valuations in SaaS startups, and a general headwind toward venture investors making more early-stage bets in the sector. Of course, one day doesn’t change the game. But several days of sharp losses could begin to change sentiment, and days when shares of modern software companies drop by 6% are few and far between.

Earnings are next, but for many companies in the SaaS and cloud world, reporting their results just got easier. When expectations drop, everyone loses a bit of worry, right?

As SaaS stocks retrace highs, a glance at today’s cloud fundamentals


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

The domestic stock market is advancing today on the back of some better-than-anticipated economic recovery data in the United States. While retail spending is still lower compared to the year-ago period, gains in May from April were better than anticipated.

The American stock market, ready to trade higher on any scrap of good news — even news predicated on economic weakness and the need for continued intervention — shot north, with the tech-heavy Nasdaq Composite index rising 2.3% to 9,947.5 and the SaaS-focused BVP Nasdaq Emerging Cloud Index (EMCLOUD) rising 1.6% to 1,719.2.

From Bessemer, a venture capital firm that invests in cloud startups, here’s some data on today’s SaaS market:

  • Median enterprise value/annualized revenue multiple for public SaaS/cloud companies: 12.6x
  • Median forward enterprise value/annualized revenue multiple for public SaaS/cloud companies: 10.5x
  • Median “efficiency” (revenue growth plus FCF Margin): 37.8%
  • Median revenue growth: 31%
  • Media gross margin: 73.6%

We’re marking this moment in time, just days after the Nasdaq Composite index crossed the 10,000 point mark, as it’s a useful yardstick for us to use in the future. Today, the above median results were enough to push EMCLOUD back to within a fraction of a point of its all-time highs.

What surprised me in this data is that the resulting revenue multiples haven’t gone completely bonkers; I expected more extreme figures going into preparing this post.

In fairness, by looking at median results instead of average results, we’re skewing the multiples a bit. Here’s the same data, with average results on top and the previously mentioned medians down below:

Image Credits: BVP

The good, better and best of cloud and SaaS growth


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

The crew at Bessemer released their new, yearly cloud report this week. It’s a useful lens into how venture capitalists are thinking about cloud and SaaS startup performance metrics. Bessemer’s cloud and SaaS exits include Twilio, Shopify, PagerDuty, Box, and a few others, so they’re worth listening to at least a little on the topic.

I bring all this up as I finally got the chance to read the 2020 report (here, if you want to dig through it yourself, and here’s the 2019 version for reference). I’m going to chat with Bessemer’s Mary D’Onofrio about some numbers from the presentation next week, but this morning I wanted to discuss the report’s SaaS and cloud startup scorecard.

Bessemer likes to invent metrics, something that I approve of. In 2019, the firm debuted a G.R.I.T (“ARR growth, retention, years of runway, and efficiency”) score that was a bit complicated. This year the report included a six metric rundown of “good, better, and best” startup cloud and SaaS startup performance.

Let’s chew over the set of SaaS metrics that investors, before COVID-19, were looking for. Next week we’ll find out if Bessemer has changed any of them in light of the new economic collapse cum malaise.

Grow this fast, lose this much

TechCrunch has a general rule against screenshots of text, but today there’s no way around it. Here’s the pertinent summary slide from the Bessemer report:

How to value a startup in a downturn


This post is curated by Keith Teare. It was written by Alex Wilhelm. The original is [linked here]

The value of technology companies has fallen as the broader public markets have repriced themselves in light of COVID-19-related market and economic disruptions.

And as the public markets sort out the new value of a huge piece of global business, private companies are being shaken as well.

What happens in the public markets trickles into the private markets, so if we’re seeing the value of public tech companies fall, startups are going to take a hit. To understand that dynamic, we spoke with Mary D’Onofrio, an investor with Bessemer Venture Partners. She’s the right person to chat with about the links between private valuations and public share prices as she not only helps put capital into growing startups, she also helps run the Bessemer cloud index (now a partnership with Nasdaq, and trackable on a day-to-day basis).

As she’s versed on both sides of the public-private divide, we asked her how she values startups in normal market conditions and in more turbulent times like today. We also dug into how founders are reacting to the changing world that may no longer be as amenable to their business plans. Pulling from our conversation, D’Onofrio told TechCrunch that startups want to be valued like companies were a few months ago, while investors want to pay today’s market prices.

But enough introduction, let’s get to the conversation. This interview has been edited for length and clarity; thanks to Holden Page and Walter Thompson for help with the transcription.

TechCrunch: During our last conversation, we discussed how to value startups. You explained a method in which you consider the future value of cash flows. How do you value startups today versus how much you think they’ll be worth down the road?

Mary D’Onofrio: I think what’s important to know is that outside of a market disruption, which I think was the the nature of the question to begin with, cloud software tends to trade on revenue and revenue growth. Companies should fundamentally be valued on the present value of their future free cash flows. But I think with cloud software, in particular, there’s a prioritization of taking [market]share, and then applying a very long term healthy margin structure on a very massive revenue base once you get there, and generating cash then.

And so I think in bull markets, when capital is readily available, prioritizing growth makes a lot of sense because you want to capture as much share as you can. And then losses are also tolerable because the capital is available to fund that massive growth. And there are actual measurable metrics that validate that structure, with CLTV to CAC [customer lifetime value to customer acquisition costs] being one of them.

How to value a startup in a downturn


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

The value of technology companies has fallen as the broader public markets have repriced themselves in light of COVID-19-related market and economic disruptions.

And as the public markets sort out the new value of a huge piece of global business, private companies are being shaken as well.

What happens in the public markets trickles into the private markets, so if we’re seeing the value of public tech companies fall, startups are going to take a hit. To understand that dynamic, we spoke with Mary D’Onofrio, an investor with Bessemer Venture Partners. She’s the right person to chat with about the links between private valuations and public share prices as she not only helps put capital into growing startups, she also helps run the Bessemer cloud index (now a partnership with Nasdaq, and trackable on a day-to-day basis).

As she’s versed on both sides of the public-private divide, we asked her how she values startups in normal market conditions and in more turbulent times like today. We also dug into how founders are reacting to the changing world that may no longer be as amenable to their business plans. Pulling from our conversation, D’Onofrio told TechCrunch that startups want to be valued like companies were a few months ago, while investors want to pay today’s market prices.

But enough introduction, let’s get to the conversation. This interview has been edited for length and clarity; thanks to Holden Page and Walter Thompson for help with the transcription.

TechCrunch: During our last conversation, we discussed how to value startups. You explained a method in which you consider the future value of cash flows. How do you value startups today versus how much you think they’ll be worth down the road?

Mary D’Onofrio: I think what’s important to know is that outside of a market disruption, which I think was the the nature of the question to begin with, cloud software tends to trade on revenue and revenue growth. Companies should fundamentally be valued on the present value of their future free cash flows. But I think with cloud software, in particular, there’s a prioritization of taking [market]share, and then applying a very long term healthy margin structure on a very massive revenue base once you get there, and generating cash then.

And so I think in bull markets, when capital is readily available, prioritizing growth makes a lot of sense because you want to capture as much share as you can. And then losses are also tolerable because the capital is available to fund that massive growth. And there are actual measurable metrics that validate that structure, with CLTV to CAC [customer lifetime value to customer acquisition costs] being one of them.

Stocks fall again, pushing deeper into bear territory as SaaS reaches 1 year lows


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

American-listed shares are off sharply this morning, falling after a steep selloff yesterday was not staunched by a presidential address. The declines echo what happened to Asian-listed stocks earlier today.

All major American indices are now in bear-market territory, having shed the requisite 20% from recent highs. Today’s carnage is simply bleak. As we write to you, here’s where stocks are:

  • Dow Jones Industrial Average (DJIA): -1,688.5, or -7.2%
  • S&P 500: -191.2, or -7.0%
  • Nasdaq Composite: -557.1, or -7.0%

The bad news continued for tech’s darling cohort, SaaS and cloud companies. That group of public companies is off 6.7% today, according to the Bessemer-Nasdaq cloud index. SaaS and cloud companies are now trading at one-year lows, and could approach their lows set in late-2018, early 2019 with a few more bad days’ trading. (SaaS companies were early to the bear-market trend.)

Shares of Uber and Lyft are selling heavily today, as the two American ride-hailing companies give back all their profit-promise driven gains that they’d achieved in recent months. Uber is off over 10% as of the time of writing, while Lyft, is down over 13%.

The selloff has proven to be so bad that, once again, market circuit breakers were tripped:

Cryptos, thought of at times as a hedge against other asset classes, are also sharply down, Continue reading “Stocks fall again, pushing deeper into bear territory as SaaS reaches 1 year lows”

After turbulent week, the stock market sees record gains


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

So much for that correction!

After a desolate week, the United States saw its major indices rally on Monday, pushing the value of domestic and domestically listed securities higher. The gains came despite a rising number of infections in the country of the novel coronavirus, now known as COVID-19.

Last week, rising concern about an international slowdown caused by the infection led to sharp declines in the value of equities both at home and abroad. News continued to spill over the weekend, pushing up the confirmed global caseload and rolling human toll.

Update: It’s worth keeping in mind the fate of one of tech’s biggest success stories during all of this, namely Robinhood, the free stock trading app. Instead of this being a day in which is crushed its growth expectations, its service has struggled to stay online today. For a company worth so many billions, it’s an embarrassing bout of downtime. Especially amongst the more active traders of the Internet. (More on Robinhood’s valuation and historical growth here.)

However, come the start of the week, investors in American stocks had traded their furs for horns and were ready to buy. The results are historic in scale, a fact tempered by their coming instantly after historic declines. In today’s trading:

  • The Dow Jones Industrial Average rose 1,293 points, or a little over 5%
  • The S&P 500, a broader index, rose 136 points, or around 4.6%
  • The tech-heavy Nasdaq rose nearly 385 points, or 4.5%

Continue reading “After turbulent week, the stock market sees record gains”

Unpacking Procore’s S-1 filing


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

Today we’re in for a treat, as we get to dig into Procore’s S-1 filing. In case you aren’t familiar, Procore sells software that helps manage construction projects, but it offers more than a single app: Procore’s service allows other apps to plug into it, making it a platform of sorts. The company filed to go public last Friday, meaning that we have endless new numbers to delve into.

Even better for us, Procore is a SaaS company, which means we can understand its numbers.

Procore lists $100 million as its IPO placeholder raise, intends to list on the NYSE as PCOR and its debut is being underwritten by Goldman, J.P. Morgan, Barclays and Jefferies.

Why do we care about this particular IPO? A few reasons. First, Procore filed to go public after the worst week in the stock market since the 2008 crash. That’s either calculated bravery, unbridled hubris or accidental folly. We’ll see. And second, the company’s backers are well-known: Bessemer, Greater Pacific Capital, ICONIQ, Dragoneer and Tiger, according to Crunchbase.

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.

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.

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

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

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.

VCs love insurance, even if you don’t

 At first blush it may seem like insurance and venture capital make an odd couple. Venture capital is all about taking big risks for the potential of even bigger payouts down the road, while insurance is all about quantifying and mitigating risk. But make no mistake, there are vast sums of venture dollars going into insurance deals. Read More