Here is our updated Public Company SaaS interactive spreadsheet.  Enjoy!

After our post on January 26th we got several great comments about the cost of starting a SaaS company.  It definitely takes a commitment to build a true SaaS company, especially when you consider some the following facts about the 15 public companies that I tracked in my high level analysis:

• Average Start-up Capital Required:                                   $44M
• Average Time Required from Start-up till IPO:                 7 years
• Average Capital Required per Year till IPO (Burn):             $6.8M
• Average IPO Proceeds:                                                    $76M
• Additional Capital Raised After the IPO:                           $243M
• Average Total Capital Raised:                                          $363M
• Average Market Capitalization:                                      $1,262M
• Companies Who are Profitable:                                            8

The costs of getting a SaaS start-up off the ground are substantial but only about half of the firms we tracked actually started out as a pure SaaS company.   These other Cross-Over firms started out as either Application Service Providers (ASP’s) or were traditional On-premise ISV’s that move to SaaS through a combination of organic migration or through a series of acquisitions.  Companies like Concur, Kenexa, Taleo and Ultimate Software have all transitioned to SaaS from an on-premise heritage.

Montclair Advisors - SaaS Start Up Costs - Pre IPO

The shortest time to go from start-up phase to an IPO was 4 years and the longest was 13 years.  Most of the firms we tracked were founded between 1997 to 1999, which was prior and during the Internet Bubble.

When these firms went public they raised a range between $30M (LivePerson and Ultimate Software) to over $150M (DealerTrack and NetSuite), but on average they raised about $75M.  All the firms then went on to do additional capital raises from $32M (LivePerson) up to $750M (DealerTrack) but on average each raised $243M!   The total capital raised, when considering both pre IPO, IPO and post IPO capital raised, these firms raised between $100M (LivePerson and Ultimate Software) to close to more than $500M (DealerTrack, Salesforce.com and SuccessFactors).

Montclair Advisors - SaaS Start Up Costs - Post IPO

After going public, this SaaS market basket of companies have done well as a group.  The majority of the firms are profitable, which makes for solid cash flow performance, revenue visibility and overall stability of the company’s stock, for the real SaaS firms.

The most valuable company, based on their Market Cap is Salesforce.com at more than $8B and there are at least 4 other SaaS firms with valuations over $1B (Blackboard, Concur, NetSuite and SuccessFactors).  When comparing the amount of capital raised to the market valuation, the 5 best performing firms are Salesforce.com (.09), Ultimate Software (.13) , Concur (.19), RightNow (.22) and LivePerson (.31).

Montclair Advisors - SaaS Start Up Costs - Market Caps

This year, as the economy improves, promises to launch a few new SaaS IPOs and we will continue to track this core group as well as a larger group of Hybrids and Cross Overs and will periodically report back with our findings.

Company: RightNow
Started: 1997
Located: Bozeman, Montana
Geography: Global
Market: On-Demand Customer Relationship Management
Products: RightNow CRM Suite RightNow Service RightNow Marketing RightNow Sales
Key Customers: Drugstore.com, TomTom and Electronic Arts

Website: RightNow

Blog: Voice of the Customer

Recent News:

• RightNow Ups the Ante on SaaS with Service Level Credits
• New Product Registration Capabilities in RightNow February ’09 Drives Top Notch Customer Care
• drugstore.com Customizes Online Shopping Experience with Beauty Chat
• Good Customer Care, Not Prices, Wins Loyalty of Credit Crunched Holidaymakers

I asked Greg Gianforte, RightNow 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?

RightNow has been a pioneer of SaaS / On-Demand technology since our company inception in 1997. Our underlying services are built to dynamically scale our client’s customer service and support up or down as they need. Unlike other providers, our solution is built to deliver exceptional experiences to our customers across service, marketing and sales interactions.

Why do your customers buy from RightNow?

RightNow’s on demand hosted CRM business model delivers quick time-to-benefit and helps our clients reduce operating costs, improve customer experience, retention and advocacy, and maintain a competitive edge.

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

As Cloud Computing gains momentum, it will become even more vital for a SaaS company to stand behind its service commitments since they are responsible for system reliability and performance. Customers are expecting a high level of availability and providers are using their ability to deliver as a competitive advantage.

RightNow recently announced an ‘up-time’ commitment to our customers of 99.9%, forcing our team to take uptime seriously, and making sure the right level of attention is being paid to the issue.

No amount of “money back” will take the place of performance, but a company’s willingness to put real dollars at stake underscores the confidence they have and that their customers should have in their solution.

What is your outlook for 2009?

Times are tough, but projects are still getting done and forcing some tough decisions. The best companies are continuing to adopt CRM technologies because they have identified that CRM and superior customer experiences are the best ways to keep and expand a customer base in a weakened economic state. Customers don’t grow on trees and in tough economic times it is even harder to attract new ones.

Thank you to Greg Gianforte, Jason Mittelstaedt, Joseph Brown and Katie O’Connell for contributing to this profile.