2
By Kevin Dobbs
Montclair Advisors, LLC
When thinking about your transition to SaaS, there are many questions to consider including target customers, value propositions, packaging, pricing and how best to build customer relationships.
After conducting more than 50 Smart SaaS business profiles of all different types including pure SaaS, Hybrids and Cross-Overs, all of these companies would probably answer many of these types of questions differently depending on their type of customer, functionality, geography, vertical markets and the only way they can get useful answers is to continually test everything. Best in class SaaS firms are always trying different pricing, packages, messages in order to optimize their businesses, like a recent firm we profiled - Clarizen.
Some resources when thinking about these types of considerations include:
Software Pricing Partners - Jim Geisman
Chaotic Flow - Joel York
Sixteen Ventures - Lincoln Murphy
4 Pillars of SaaS - Phil Wainewright, ZDNet
In addition to testing, it is a good idea to measure everything including website traffic, marketing campaigns, product usage, customer satisfaction and a myriad of other SaaS and business metrics. Again, the best firms track and monitor all the key business metrics in order to improve their ability to generate revenues, build market share and reduce unnecessary customer churn. SaaS requires a very tight operational model and has moved business an art to a science and now there are an entire new class to tools to improve revenue performance and reduce costs. Some of these next generation of tools include:
Sales Automation
EchoSign - Provides electronic signature and contract management.
InsideView - Sales business intelligence and social media platform.
JigSaw - Business information and data services.
NetSuite - CRM and ERP suite.
RightNow - CRM, call center and social platform.
Salesforce.com - Salesforce is not only a solid Customer Relationship Management system but also a great system of record for all types of sales, marketing and service information and applications. Also offers a application marketplace that provides value added extensions. Salesforce also offers Chatter a collaboration platform to improve internal communications.
SugarCRM - Open source based CRM that provides a robust no cost solution.
Marketing Automation
Eloqua - Marketing automation platform.
Genius.com - Sales and lead automation.
MarketBright - Marketing and lead generation management.
Marketo - Marketing and revenue management.
Pardot - Business to Business lead automation.
SaaS Analytics
Birst - On demand business intelligence product.
Cloud9 Analytics - SaaS performance management.
GoodData - SaaS business intelligence product.
PivotLink - On demand business intelligence product.
Using many of these tools companies can help a SaaS firm track their business, sales and marketing performance. The question that I often get is ‘what should I be tracking?’ There are an emerging set of SaaS-based business metrics that include Monthly Recurring Revenues (MRR), Churn, Customer Acquisition Costs (CAC), The Magic Number (MN) and others that provide very precise views into how a SaaS business is performing. Here is a chart that details some of the more common SaaS business metrics by functional area:
Other resources to learn about SaaS metrics;
5 C’s of SaaS Finance - Bessemer Ventures
Chaotic Flow - Joel York
For Entrepreneaurs - David Skok, Matrix Partners
Haut Tech - Michael Dunham at Scio Development
My opinion about the SaaS business model is that there are a lot of new considerations about building a profitable subscription business today. The buyers are different, there are many robust low-cost tools available, Cloud technology that can radically change your cost model and time to market as well as many other business factors, so the only real way to really tune your business for SaaS is to continually test everything!
I would be interested in your comments and hearing about what you are testing.
Stay tuned for Tip #4 Sales & Marketing on a Budget
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:
|
Financial |
Human Capital |
CRM + |
|
Kenexa (KNXA) |
||
|
Intuit (INTU) |
RightNow (RNOW) |
|
|
Mint.com (Acquired by Intuit) |
||
|
SuccessFactors (SFSF) |
|
|
|
Taleo (TLEO) |
|
|
|
|
||
|
|
|
|
|
Collaboration |
Infrastructure |
Other |
|
|
||
|
i365 – Seagate (STX) |
|
|
|
|
||
|
QuickArrow (Acquired by Netsuite) |
|
|
|
|
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.
|
Public |
|
Amount Raised |
|
SuccessFactors (SFSF) |
|
|
|
Taleo (TLEO) |
|
|
|
|
|
|
|
Private |
Lead Investor(s) |
Amount Raised |
|
|
|
|
|
Bill.com |
August Capital, Emergence |
|
|
Genius.com |
Deep Fork Capital |
|
|
Host Analytics |
StarVest |
$8.6M |
|
InsideView |
Emergence and Rembrandt |
|
|
Jive Software |
Sequoia Capital |
|
|
Lithium Technologies |
|
$18M |
|
M-Factor |
Bay Partners |
$10M |
|
OpSource |
NTT |
|
|
Workday |
NEA |
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: Genius.com
Started: 2004
Located: San Mateo, California
Geography: Global
Market: Marketing Automation
Products: Genius Pro and Genius Enterprise
Key Customers: Aruba Networks, BT, Intuit, Jigsaw, Miller Heiman, PivotLink, WebEx Cisco
Website: Genius.com
Recent News:
Genius.com Adds Website Analytics Capabilities to Genius Enterprise Marketing Automation Solution
Genius.com Launches Definitive Resource Destination for B2B Sales and Marketing Professionals
I asked David Satterwhite, an EVP at Genius 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?
Founders David Thompson, Genius.com’s CEO and Scott Mercy, both came out of WebEx and really understand the SaaS business model. They started the company because they had a better way of managing sales and marketing collaboration. So they started the company based on what they had learned at WebEx and built a native SaaS platform. Just like Salesforce.com, it scales and can handle large volumes of email. So the company can definitely leverage a ‘land and expand’ type of SaaS business strategy.
Our CTO and co-founder, Robert Seidl, founded PageMill, the visual website editor, and he really understands how to make the complex, really simple. The Genius.com platform quickly determines who are the best and most qualified opportunities and delivers them to the appropriate sales rep, quickly. Our user interface is really easy to use and very inviting. We have some new capabilities that we are patenting related to being able to track leads and activities at various social media sites, which is exciting.
Why do your customers buy from Genius.com?
I used to be a satisified Genius.com customer and liked the product so much, I actually was one of their customer spokespersons, and now have come to work here. The power of Genius is the importance the product puts on time, and how quickly it gets qualified leads into the hands of the right sales rep. Time really matters because the faster you can capture a lead while it is hot and deliver it to a ready sales person, it dramatically increases your chances to make a sale.
This alignment of marketing and sales is critical because both of these organizations need to work together and not just be silos. As John Neeson, the CEO at Sirius Solutions states, marketing needs to enable a sales result from all the prospect conversations they are generating. In fact, the entire organization needs to be selling and should to be aligned around revenue results, not just the number of inquiries that are generated.
Our main differentiators for our customers are that we provide deep sales domain expertise, the product’s ease of use, the incredible time-to-value because you can get the product up and running in just a day, as well as our Salesforce.com integration.
What do you see as the key trend emerging in the SaaS industry?
We think that social networking and media are the next big trend in SaaS. Marketing is under pressure to track and manage all types of social media. Because these conversations are affecting every company’s brand and you need be able to tie these conversations back to a potential sales events. We are currently working on a new product that will allow us to generate real leads from social media such as Twitter by tracing URL’s in real time. There are a lot of conversations being had outside of marketing’s view and Genius.com will soon be able to better manage this Tweet-to-Deal process.
What is your outlook for 2009?
With so many companies struggling and ‘flat’ being the new up, Genius.com is still experiencing strong growth and hitting our numbers. Our pipeline continues to grow and we are having really solid customer wins, so the balance of 2009 looks great for us.
Thank you to David Satterwhite and Parker Trewin for contributing to this profile.
Back to top