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Over the past few months SaaS companies have continued to announce very large funding rounds as they are demonstrating the power of their subscription-based business platforms. Many of these firms are deciding to do large private rounds before filing to go public. Here is a quick round-up of some of these firms:
The company has raised an amazing series B round of $250 million. Dropbox is the Cloud storage company that is very popular with mobile phone and iPad users. They have about 70 employees and have secured more than 40 million customers in the past 12 months. This round put the company’s market valuation at close to $4 billion. This is probably the largest B round we have seen and may have been done as an alternative to doing an IPO. Sounds like a Facebook type of story because like Mark Zuckerberg turned down a significant acquisition offer from Google, and apparently the DropBox founders, Drew Houston and Arash Ferdowsi, turned down a nine-figure offer from Apple in 2009.
Workday or “PeopleSoft 2.0″, has been making consistent progress towards a 2012 IPO and announced at their recent Workday Rising conference in October that they had just closed an $85 million dollar round of funding. Like Dropbox, Workday has now raised about $250 million. With this lastest round, the company is now valued at $2 billion. What was interesting is that unlike most private fundings, which are usually led by venture capital firms, this round was lead almost exclusively by institutional investors like T. Rowe Price, Morgan Stanley, Janus and Fidelity. As co-CEO Aneel Bhusri put it “In some ways, it’s an early debut of an IPO.” Workday claims they are on track to do about $320 bookings during 2011, which is more than 100% CAGR from 2010.
Another major Cloud storage company, Box.net, resisted a $600 million dollar offer from Citrix and just closed an $81 million round with Bessemer Venture Partners, NEA, Salesforce.com and SAP and existing investors Draper Fisher Jurvetson and Andreesen Horowitz. After this round the company’s valuation is $600 million. The company has about 7 million users and is leveraging a very successful ‘freemium’ go-to-market model.
With competitor Eloqua already in IPO registration to raise $100 million for their Revenue Performance Management (RPM) platform business, Marketo isn’t far behind. The company announced last week that they had just raised another $50 million in a round led by Battery Ventures along with Institutional Venture Partners, InterWest, Mayfield Fund and Storm Ventures. Marketo’s estimated size of around $15 million in in 2010, should double in 2011, but they are probably a little small to do an IPO at this point. Obviously the venture community thinks this RPM area around marketing and revenue optimization for SaaS is quite hot right now.
As part of their IPO registration, Jive Software just raised another $40 million prior to their public offering. Sequoia Capital and Kleiner Perkins Caulfield & Byers purchased stock through preferred warrants. Jive is provides an enterprise social business platform. Currently the company is on a $80 million run-rate but still not profitable and has raised close to $100 million overall.
Enterprise subscription commerce and billing provider Zuora also announced a large round of funding last week. The company raised a Series D round of $35 million from Index Ventures, Greylock along with a personal investment from Workday co-CEO Dave Duffield and their existing investors. To date the company has now raised $82 million. Zuora plans to use these funds to aggressively expand their distribution activities internationally, specifically in Europe.
The common thread for all of these companies is that they have businesses that are growing rapidly and have built very scalable platforms. With the IPO window open, but the public markets are still uncertain, we will probably see more of these type of IPO-preview type of funding announcements as SaaS firms continue to gain momentum in the market.
Company: Jive Software
Started: 2001
Located: Portland, Oregon
Geography: Global
Market: Social Business Software
Products: Jive SBS, Jive Express
Key Customers: Intel, Nike, VMware, NetApp, SAP, ManTech, Embarq, and National Instruments
Website: Jive Website
Blog: Jive Blog
Recent News:
Jive Software Recognizes its Largest Sales Quarter Ever in Q2 2009
Jive Signs Agreement with SAP to Deliver Social Business Intelligence for the Enterprise
I asked Matt Tucker, one of Jive Software’s founders and Chief Technology 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?
No, actually we started about 8 years ago providing community and social software as a hybrid business, offering both on-premise and hosted solutions. Our initial products were low-cost discussion forum software.
We initially bootstrapped the company in Manhattan and it became too expensive for us and we felt that being a technology company, we needed to be on the West Coast. Our first thought was the Bay Area but it was still too expensive and we had concerns about hiring engineering talent in other West Coast cities. Finally we decided on Portland, Oregon. After the move to Portland, we rebooted the company from an operational perspective.
In 2004, we launched our new software suite based on our customer’s feedback and market changes centered around Web 2.0. Later we added in Wiki’s, blogging software, and released Clear Space 1.0 2007, which was the market’s first complete suite approach to Social business software. Our suite was true enterprise-grade software and it supported large communities.
Then about three years ago we launched our SaaS offering and recently launched our newest product suite focused exclusively on Social Business Software — Jive SBS.
Why do your customers buy from Jive?
We feel Jive SBS is the leading product in our market from a feature and function perspective. Other firms in the social software space like, IBM Lotus, and Microsoft SharePoint, offer solutions but they are not as functionally complete as Jive SBS. There are also consumer-oriented sites like Facebook but they are not enterprise-ready solutions and large customers get very nervous allowing employees to publish sensitive information where the public has access to it.
Jive Software is enterprise software, which means it needs to be really secure. Our products are so secure, that even the US Intelligence Community uses them. Compliance and security questions are common when it comes to building external communities. We find that being SAS70 Type II is helpful but is IT not ready for critical corporate data to be hosted externally in SaaS or the Cloud.
Many of our customers will use Jive to create external communities to sell and market their products and services. They like the fact that they don’t need to work with IT to get started or to maintain their communities. We definitely have some early adopters now like – Apple, Nike and CNN, but we think it might 2 or more years for social collaboration software to be widely accepted as a SaaS or Cloud solution. Keep in mind that corporate-wide communications and collaborations are more sensitive, because most companies don’t want their proprietary intellectual property freely available out on the Internet.
Jive Software enables companies need to effectively manage this valuable Social Capital, which is just like intellectual capital. Think of it as a combination of institutional knowledge and a company’s culture. Being able to manage a company’s Social Capital is increasingly important today with companies being global, with teams everywhere, less business travel and their corporate cultures that revolve around email.
What do you see as the key trend emerging in the SaaS industry?
Cloud Computing is the major trend for our market.
Jive is definitely moving towards Cloud Computing and in fact, I blogged about this topic a few months ago when we launched Jive Express, our new Cloud-based offering. We are leveraging Amazon’s EC2 infrastructure, which allows our customers to get up and running quickly – they can put up a community instance in about 4 minutes. It’s self sign-up and the security is the same as enjoyed by our SBS enterprise customers.
We think this approach to Social Business communities is cool because customers can solve very specific problems quickly, then other groups inside their enterprise get to see the product in action and then it can spread virally. Customers can try using our Cloud-based offering free for three months and then it converts over to $3/user/month subscription. We are hoping that most of these Jive Express customers will grow their instance, which should generate lots of new leads and pilots for us.
We are approaching the Cloud a little differently than those who are offering a pure multi-tenant model, because we are leveraging virtualization and more of a single tenant model, which delivers many of the benefits and a similar price point as multi-tenant.
We are now using virtualization as the backbone for our SaaS offerings and leveraging Amazon’s AWS infrastructure, so we can now manage our Jive Express Cloud as one large instance.
What is your outlook for 2009?
Jive continues to celebrate after every quarter because we keep exceeding their numbers. We believe we are in a very solid market space and Social Business Software is a critical and strategic priority for more and more companies. Because companies want to do more with less, they will continue to leverage enterprise technology like ours.
We are cautiously optimistic and building a business continues to be a lot of hard work but things seem to be going our way.
Thank you to Matt Tucker and Mike Marfise for contributing to this profile.
I had an interesting briefing with Bill Soward, CEO and Greg Schneider VP of Marketing at Adaptive Planning the other day, which I wanted to share. In the spirit of full disclosure, I will let you know that I worked with Bill years ago at Edify but I have been very impressed with what he has done at Adaptive Planning.
The original purpose of the meeting was to finalize a SaaS business profile but what I thought was even more interesting was their company’s approach to building a SaaS sales pipeline, especially in these tough economic times. I have heard many executives talk about reducing the barriers to sales but Adaptive Planning is really going to the extreme in terms of test drives and transparency for their prospects.
Having run sales, I can tell you that sales reps always have a lot of excuses why prospects aren’t buying and I know there are plenty of excuses to be had these days. What I think we can all learn from Adaptive Planning is that by addressing these potential sales objectives earlier in the sales process, you can build in more predictability and ultimately more sales into your SaaS sales process. Here’s what they have done…
The New Improved Test Drive
30 day trials are no longer new and innovative, they are table stakes for SaaS firms trying to sell their software. Adaptive Planning is no different. They offer a 30 day trial but they also offer…
- A Hosted Express version, which is easy to set up and start to use. This is managed and maintained by Adaptive Planning and is free to use. Most of their prospects have opted for this approach to their trial.
OR
- Download the software for FREE, forever. You can go to SourceForge and download the source code and the Adaptive Planning Express product. To date they have had more than 79,000 downloads. Many of whom will become future paying customers. So if someone says I am not sure that your software will do what the marketing literature claims, just tell them to download it and use it.
Over-Educating Their Prospects
Bill and Greg agree that it is important to provide their prospects with as much information as possible and allow them to select what they need as part of their sales education process. This is also part of the company’s approach to relationship transparency, more about this in a minute. So part education building blocks consist of;
- A Resource center which is a collection of information like collateral, white papers, archived webinars and case studies. Most companies provide this type of information library.
- Pre-recorded video demo where the prospect can get a guided tour of the software, which isn’t really breaking in new ground but can be helpful for busy executives.
- Live Webinar demo, where prospects can interact with Adaptive Planningt team, again this is nothing new.
- On-line Training, which allows you to go into more depth around the product, which I think is a great idea. Because you always have the deeply technical buyers who need deep domain information.
- On-line Price List, this isn’t new for some of the newer SMB SaaS applications like 37Signals or FreshBooks but I think for this type of application this is quite a different approach.
- Online Community is another great idea. Using social networking to build a strong community around not only your products but also your company. Adaptive is using the Jive Software platform to provide chat threads, videos, blogs, polls and best practice advice. They even offer private collaboration spaces where customers can share best practice ideas privately.
By combining all of these building blocks, it gives the prospective buyer almost every way to learn about and evaluate Adaptive Planning’s software.
WYSIWYG Transparency
Bill spoke about having a transparent relationship with their prospect and ultimately their customer. They feel that their open information approach provides a prospect with virutally every way to experience and learn about their products, support, pricing and company. This is a powerful differentator when buying software but more importantly when a prospect is shopping for a vendor relationship. The reality is that today’s software buyer is more sophisticated but also realizes that their relationship with a software firm is typically lasts between 5-7 years and that they really do want to ‘try before they buy’. For Adaptive Planning their transparent approach is paying off.
Lowering Customer Acquisition Costs and Building a SaaS Pipeline
A term you hear a lot about in the SaaS world is CAC or Customer Acquisition Costs. This is basically the cost of finding, qualifying and signing up new customers. In the enterprise software world, where you were getting large up-front payments, you could sell with a team of sales professionals. In the SaaS world, where you are getting paid over time, it is imperative to sell using as close to a self-service sales model as possible and I believe this is what Adaptive Planning is doing. What I like is that they are not just cutting costs, they are putting everything out there in a transparent, logical way for their prospects to make their own decisions and self-qualify. There are still people at Adaptive Planning who will sell you software but only when you are ready to buy, which saves everyone time and money.
So far their approach appears to be working because they have more than 400 customers and continue to do well even in this recessionary environment.
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