The Three Main Functional Categories for B2B SaaS Apps

When analyzing B2B SaaS opportunities, I like to think through things like nice-to-have vs must-have, market size, point on the lifecycle adoption curve, etc. There’s another area that I like to bucket SaaS apps: functional categories. Functional categories are a big, general way to think about what the app does and how it fits in with the user.

Here are the three main functional categories for B2B SaaS apps:

  • Major Job Function – This is for apps where the app is one of the top three apps used daily by the person (e.g. SalesLoft and Gmail would be the main apps for an SDR).
  • Specialized Job Function – This is for apps where the app is used at least weekly to accomplish a function but aren’t an app that the end user “lives” in daily (e.g. Calendly for automating meeting scheduling).
  • Utility – This is for apps that are always running in the background acting as a utility for a specific function (e.g. Rigor for performance monitoring).

Look at the public SaaS companies and you’ll be able to easily categorize each one into one of the three main functional categories for SaaS apps. Also of note is that the largest SaaS companies by revenue are all major job function apps (there are plenty of successful specialized job function and utility apps as well, but they aren’t nearly as large as the major job function apps).

What else? What are some more thoughts on the three main functional SaaS app categories?

Video of the Week: Stanley McChrystal – Leadership is a Choice

For our video of the week, watch Stanley McChrystal: Leadership is a Choice. Enjoy!

From YouTube: “Leadership is not a talent or a gift. It’s a choice. It’s not complex, but it’s very hard.” General Stanley McChrystal explains to a packed auditorium of 600 at Stanford Graduate School of Business. McChrystal shares his perspective on leadership and influence discussing the importance of understanding culture, leading by example, building trust, and creating a common goal within a team. McChrystal is a four-star general and former commander of U.S. and international forces in Afghanistan. He also served as the former leader of Joint Special Operations Command (JSOC).

Ask the Start, Stop, and Continue Questions

One of the techniques I picked up from the agile software development world that I apply to many things outside of software development is the concept of start, stop, and continue. Generally, the idea is to evaluate what happened and ask these three questions:

  1. What should we start doing?
    What’s something new we should add?
  2. What should we stop doing?
    What’s something we’re doing that we don’t need to do anymore?
  3. What should we continue doing?
    What are we already doing that’s going well?

The next time you have a meeting, event, or program, ask the start, stop, and continue questions at the end. This is a great process to aid with continual improvement.

What else? What are some thoughts on using the start, stop, and continue model for improvement?

How Can I Help a Startup?

Yesterday I had the chance to spend time with a top executive from a large tech company. After touring the Atlanta Tech Village, and sharing the story, he asked, “How can I help a startup?” Great question. Here are four ways to help a startup:

  1. Potential Customers – Startups are always looking for new business. Know a potential prospect? Make an intro.
  2. Potential Employees – Finding great people that believe in the mission is a key to success. Know someone that might be a good fit? Make an intro.
  3. Potential Partners – Relationships and connections are tough, especially for startups without social proof. Know a potential partner? Make an intro.
  4. Customer Discovery – Startups are always looking to better under the market and potential customer needs. Have feedback or insight? Share it with a startup.

Want to help a startup? Start with these four ideas. Startups are always looking for help.

What else? What are some other ways to help a startup?

Make Company Name and Product Name the Same

At Pardot, we originally named our product Prospect Insight, thinking we were cool with a product that was abbreviated PI (Note: You can still go to prospectinsight.com and it redirects to Pardot). Only, at the time, we didn’t understand that it was a bad idea to have a product name separate from the company name. As we started to gain traction, customers would refer to the product as Pardot, and not Prospect Insight. Eventually, we realized that to our customers the product was one and the same as the company, and we dropped the product name Prospect Insight.

The company name and product name should be the same. It’s hard enough to build one new brand, let alone two simultaneously. Make things easy and simple: keep the names the same.

What else? What are some more thoughts on making the company name and product name the same?

Notes from The Trade Desk S-1 IPO Filing

The Trade Desk, a demand side advertising platform, just filed their S-1 IPO filing to go public. Demand side advertising is where ads are purchased to be then served by supply side advertising platforms. One of the big benefits is having one system to buy ads that then integrates with dozens of other systems.

Now, let’s take a look at the S-1 from their recent filings. Here are a few notes:

  • Our platform provides access to approximately 3.2 million ad spots on average every second for our clients to bid on across millions of different scaled media sources—websites, shows, channels, stations and streams. (pg. 1)
  • In 2015, approximately $14.2 billion was transacted in the 1 Table of Contents programmatic advertising spot market via real-time marketplaces, according to Magna Global. (pg. 2)
  • Financials (pg. 2)
    • Revenue
      • 2015 – $113.8 million
      • 2014 – $44.5 million
    • Net income
      • 2016 1H – $6.6 million
      • 2015 – $15.9 million
      • 2014 – $5,000
    • Gross billings (pg. 11)
      • 2015 – $530 million
      • 2014 – $201 million
  • Trends (pg. 3)
    • Media is Becoming Digital
    • Fragmentation of Audience
    • Shift to Programmatic Advertising
    • Automation of Ad Buying
    • Increased Use of Data
  • Approximately 389 clients, including the advertising industry’s largest agencies, as of December 31, 2015 (pg. 5)
  • Clients can easily buy targeting data from over 80 sources through our platform (pg. 5)
  • Average days sales outstanding, or DSO, of 88 days, and average days payable outstanding, or DPO, of 64 days at June 30, 2016. (pg. 18)
  • Approximately 7% of our gross spend in 2015 was derived from outside of the United States. (pg. 29)
  • Access to borrow up to $125.0 million aggregate principal amount of revolver borrowings (pg. 31)
  • Accumulated deficit of $28 million (pg. 48) (Note: it’s really impressive to achieve this scale and growth rate on this relatively small accumulated deficit).
  • Between our inception in November 2009 and June 30, 2016, we generated aggregate proceeds of $88 million from the sale of convertible preferred stock (pg. 68)
  • Ownership (pg. 124):
    • VCs – 34%
    • Founder / CEO – 26.7%
    • Founder / CTO – 1.5%

Congratulations to The Trade Desk for building a great business in seven years and for heading towards an IPO as their next milestone. This IPO will be well received based on scale, growth rate, and profitability.

What else? What are some other thoughts on The Trade Desk IPO filing?

Thinking about Thinking

One of the questions I like to ask is “Where do you do your best thinking?” Of course, we do thinking all the time. Yet, when I ask that question, people immediately know what I mean. While we’re always thinking, there are certain times, locations, activities, and events that routinely deliver better thinking.

Here are a few questions to ask when thinking about your best thinking:

  • What was a recent breakthrough? What were you doing when it happened?
  • Who is a great collaborator that helps with your thinking?
  • Are there certain activities, hobbies, or sports that really help your thinking?
  • Where’s your favorite thinking spot? At home? At the lake?
  • What can you do to improve your thinking? What are some next steps?

While it’s meta, spend some time thinking about thinking and figure out how to make your time more productive and efficient.

What else? What are some more thoughts on thinking about thinking?