Happy New Year!

In February Montclair Advisors launched our SaaS Business Profile Series and have been focused on covering as many SaaS companies as possible during 2009. As it turns out we were able to profile more than 30 SaaS companies of all types including pure SaaS firms, Cross-Overs and Hybrids!

We would like to thank all of the executives and companies that participated during 2009 and we look forward to continuing to follow their progress during 2010.

What we learned from these thirty-four profiles:

• SaaS is an evolving business model - It is still a new concept and few firms are running a pure subscription software models. Beware that there is still a lot of “Fake SaaS” out in the market overall.
• There are many variations of SaaS - these variations are based on the company’s starting point, the market they serve and the types of products they sell. Interestingly, Salesforce.com is actually not a very representative SaaS business model for the broader market.
• It takes time to build a real SaaS company - For many SaaS firms it takes up to 7 years to reach breakeven and nearly 10 years to ultimately gain scale with their business model.
• Cross-over providers will still need to hold onto their on-premise legacy for the foreseeable future, because it is hard to switch customers to SaaS all at once.  It is also difficult to upset your maintenance revenue streams, especially during tough economic times.
• The Great Recession has permanently changed the Software buyer’s behavior towards SaaS due to the lack of available capital. When you see SAP and Oracle and many of these profiled ISV’s moving their businesses to SaaS, you know it isn’t a fad.
• Penetrate and Radiate. The successful SaaS firms have started small, with easy to sell, easy to consume solutions.  They then develop additional software, services and content solutions to sell back into their installed base.

Here is an overview of the thirty-four companies Montclair Advisors covered in 2009:

Profiles by SaaS Category

Pure SaaS:        15     Started out and only offer SaaS subscription services

Cross-Overs:    11      Started out as on-premise, but have fully transitioned to SaaS

Hybrids:             8      Continue to offer SaaS services AND on-premise software

Public vs. Private

Public:               6

Private:             28

Profiles by Age of Company

0-5 Years:         9

5-8 Years:        10

8+ Years:         15

M&A by Companies

Sell-side:            2    Mint.com by Intuit for $170M and QuickArrow by NetSuite for $20M

Buy-side:           4    Lithium Technologies (Keibi Technologies), RightNow (HiveLive), Taleo

(Worldwide Comp), Xactly (Centive)

Fundraising Public & Private

What was also interesting to see is that even in the toughest economic climate since the Dot Com meltdown, that many firms that were profiled were able to raise capital in both the private and public market places.   The big winners were SuccessFactors who raised more than $200M in a public offering and Workday, raised an impressive $75M private round that was led by New Enterprise Associates.  As the economy begins to turn in 2010, expect to see more SaaS firms going back out to raise growth capital.

We hope these profiles have been helpful to our readers and we will continue to profile interesting SaaS firms in 2010, because we learn a lot about our emerging industry and we will continue to build back into the Montclair Advisors advisory services that help our clients become successful SaaS companies.

Please let us know what you think, because we would welcome any ideas on how to improve the Saas Business Profile Series for 2010.  Just drop me an email at kevin@montclairadvisors.com.

Company:        Bill.com
Started:            2003
Located:           Palo Alto, California
Geography:      Global
Market:            On-Demand Accounts Payable
Products:         Accounts Payable Management

                         Bill Payment

Key Customers:

Website:           Bill.com

Blog:                Bills 2.0

Recent News:

Bill.com CEO René Lacerte Named to List of Accounting Industry People to Watch in 2009

Bill.com Wins ‘Awesome Add-on’ Award for QuickBooks

Bill.com and Intacct Get Together on Financials

I asked Rene’ Lacerte, Bill.com’s Chief Executive Officer a few questions about his business and his view of the SaaS market in 2009.

Did you start out as a Software-as-a-Service company?   

We built Bill.com as a SaaS solution from day 1.  I have been a huge believer in software as a service model since my days at Intuit, well before the term was even used.  When I left Intuit, I started PayCycle, the first and largest SaaS payroll company.  With the huge customer satisfaction we enjoyed at PayCycle, it became clear to me that there is no better way to build software.  Once you go SaaS you never go back.  As such, I designed Bill.com from the beginning to take advantage of “Cloud Computing” both for our customers and for us—Bill.com operates 100% SaaS for our internal systems. 

Why do your customers buy from Bill.com?   

Our customers buy from us because we are the easiest and most affordable way for businesses to streamline the entire bill management process from bill receipt through payment and reconciliation. We call it collaborative online bill payment, and it drives huge efficiencies both within organizations and between accountants/bookkeepers and their clients.  Our paperless workflow approach combined with online payments allows our customers to save over 50% of the time and money they currently spend on A/P.

What do you see as the key trend emerging in the SaaS industry?

I think a key trend is the need for SaaS companies to deliver on the “Service” part of the name.  Software in the cloud is great but it is just software.  To me the power of the cloud is that it creates an unprecedented opportunity to “service” your clients.  At Bill.com that not only means creating a “WOW” experience when customers call, but it means leveraging the data our customers entrust to us to constantly provide them with services they couldn’t otherwise easily (or affordably) get, such as connectivity to banking and payment systems (both online and offline), fraud protection, and unlimited digital financial document management. 

 What is your outlook for 2009? 

Even in these tough times we are gaining speed and momentum, so I am optimistic about 2009.  More than ever, businesses need ways to become more efficient and save money, but they need to be able to do it quickly, inexpensively, and without long term commitments. That bodes well for SaaS applications that are laser-focused on improving real world business processes.  Once you try SaaS, it becomes clear that it is the only way to build and use software.  In fact, I don’t think anyone will be buying retail applications to run their business in 5 – 10 years.  That means there is a lot of growth for SaaS this year and for the next decade to come.

Thank you to Rene’ Lacerte and Jeff Schultz for contributing to this profile.