David Cummings on Startups

Author: David Cummings

  • Video of the Week: Godfather of SaaS Jason Lemkin

    In honor of the SaaStr annual conference, our video of the week is Jason Calacanis interviewing the Godfather of SaaS, Jason Lemkin. Enjoy!

    From YouTube: Jason sits down with the “Godfather of Saas,” Jason Lemkin, to discuss everything from the SaaS (software as a service) industry to angel investing criteria, from Lemkin’s current venture Saastr, to what the field has in store. We learn about the history of SaaS, why we owe a huge debt to Salesforce, and why so few enterprise customers “try before they buy.” The two Jasons further discuss Microsoft’s foray into SaaS, why “lockin” is a myth, the successes of — and differences — between Slack and HipChat, Lemkin’s SaaS investments (including Talkdesk, Algolia), why founders don’t make great VCs, Lemkin’s criteria for an investment (hint: the founder has to be better than him) and Lemkin’s advice on lifetime value to budding SaaS startups. Finally, the Jasons posit what would happen if Google or Microsoft came out with a free Slack competitor (protip: do not get arrogant about your engineers), the hurdles in monetizing a free product, why an acquisition might cost nothing for a big tech company, the mistake many companies made in 2008 and 2009, why choosing the celebrity investor isn’t always the best idea, the sheer volume of startups today — and much more.

  • SaaS Success in 84 Slides

    David Skok, serial entrepreneur and venture capitalist at Matrix Partners, has an excellent slide show he put together for the SaaStr conference titled The Key Drivers for SaaS Success.

    Here are the areas of his presentation:

    • An intro to SaaS metrics
    • Unit economics
    • LTV and churn: An in-depth look
    • Variable pricing axes
    • Months to recover CAC
    • The primary unit of growth: Sales
    • Understanding public SaaS companies

    http://www.slideshare.net/DavidSkok/the-key-drivers-for-saas-success

    Every tech entrepreneur would do well to study the The Key Drivers for SaaS Success slide deck and learn the business model.

  • 5 Lessons Learned from Appcelerator

    Jeff Haynie, co-founder and CEO of Appcelerator, just published a great post titled Five things I will do different for my next startup. Less than a month ago Jeff and his board sold Appcelerator to Axway (see Axway Acquires Mobile App Development Platform Appcelerator) after raising almost $90 million in capital. I got the chance to know Jeff when he first started Appcelerator almost 10 years ago. Early on, Appcelerator was like an AngularJS/EmberJS JavaScript platform and eventually pivoted into a cross-platform mobile app development platform (e.g. write code once and have an iPhone and Android app produced).

    Here are Jeff’s five lessons learned:

    • Monetize earlier
    • Scale slower
    • Burn less
    • Automate and outsource everything
    • Measure everything

    Go read Jeff’s Five things I will do different for my next startup post and learn from his experiences.

  • Balance Quantity Metrics with Quality Metrics

    As a follow-up to 2 Metrics Startups Need to Start Tracking, the idea of measuring employee satisfaction and customer satisfaction fits in well with a section from Andy Grove’s book High Output Management. In the book he says:

    Indicators tend to direct your attention toward what they are monitoring…So because indicators direct one’s activities, you should guard against overreacting. This you can do by pairing indicators, so that together both effect and counter-effect are measured.

    The idea is that if there’s too much emphasis on purely quantitative metrics then people will optimize for that and hurt quality. Intuitively, this makes sense as we’ve all seen when the push for one thing reduces the quality of another (e.g. focusing exclusively on signing a large number of customers only to find that some didn’t meet the ideal customer profile and churned quickly).

    Whenever designing goals and their corresponding metrics, always keep in mind the balance between quantity and quality, and find pairing indicators.

    What else? What are some more thoughts on the idea of balancing quantity metrics with quality metrics?

  • Simplified One Page Strategic Plan as a Starting Point For Conversations

    After receiving another Simplified One Page Strategic Plan as a requirement prior to meeting, I couldn’t help but think that asking for this document in advance of many types of meeting would serve all parties well. Often, the entrepreneur has a tactical thing or two that they want help with, yet there are bigger picture items that need to be addressed. When being able to see the full story in the one page strategic plan, the chance for a more meaningful conversation increases.

    Here are a few types of conversations where the one page strategic plan can really help:

    • Mentors / Advisors – What better way to provide accountability than to have all the goals with metrics right there? Mentors can better help entrepreneurs with more holistic information.
    • Team Members – When employees and other team members have the strategic plan, it helps align their actions and connect what they do on a day-to-day/week-to-week with the big company goals.
    • Potential Investors – Having the strategic plan helps investors understand the big picture direction as well as the most important high-level metrics.
    • Current Investors – Many angel investors don’t get regular updates from their portfolio companies, which seems crazy but is true. Entrepreneurs would do well to share an updated strategic plan monthly with their investors and have it as a starting point for regular in-person conversations.

    The Simplified One Page Strategic Plan is a great starting point for many types of conversations and should be employed by entrepreneurs that want more accountability and alignment with everyone that helps.

    What else? What are some more types of conversations that would benefit from having a strategic plan present at the meeting?

  • 5 Favorite Super Bowl 50 Commercials

    With Super Bowl 50 in the books, the next thing to talk about is the commercials. As always, the commercials were varied from the way-out-in-left-field ones to the more mainstream brand ones. From the ones I saw, here were my five favorites:

    Congrats to Peyton Manning and the Denver Broncos for winning Super Bowl 50.

    What else? What were your favorite Super Bowl 50 commercials?

     

  • Public SaaS Valuations Hit Hard

    Clearly my post on Thursday titled SaaS Public Company Valuations Q1 2016 was bizarrely timed as less than 24 hours later the companies in the category lost $28 billion in market cap value that day. Here are a few notes from the Re/Code article:

    • Big drops on Friday:
      • LinkedIn fell 43 percent
      • Salesforce.com fell 13 percent
      • Workday fell 16 percent
      • NetSuite fell 14 percent
      • ServiceNow fell 11 percent
    • Valuations of 47 publicly traded cloud software companies have fallen $66 billion since a mid-December peak
    • As a group, these companies are trading at four times forward revenue (meaning, 4x the revenues expected in the next 12 months)

    Long term, I believe we’ll see SaaS companies trade at 4-6x revenue unless they have an exceptional growth rate (see also Quantifying the SaaS Growth Rate Multiplier). While the market likely overcorrected on SaaS valuations, I still see the long-term future of SaaS as incredibly promising.

    What else? What are some more thoughts on public SaaS valuations being hit hard?

  • Video of the Week: Ben Horowitz Of Andreessen Horowitz On What He Looks For In A Pitch

    Ben Horowitz wrote the best-selling book The Hard Thing About Hard Things and has a ton of great content on his blog. For our video of the week, hear Ben Horowitz Of Andreessen Horowitz On What He Looks For In A Pitch. Enjoy!

    From YouTube: The latest episode of Kevin Rose’s Foundation video series comes to you filmed live from the Google Ventures Founder & CEO Summit last week. Kevin sits down with Ben Horowitz, co-founder of Opsware and now General Partner at Andreessen Horowitz.

  • SaaS Public Company Valuations Q1 2016

    Eleven months ago I wrote about the SaaS Public Company Valuations Q1 2015 and times have changed. Before, SaaS companies were trading at higher multiples and now, most, but not all have come down. Let’s look at the public SaaS company valuations and compare them to last year.

    • salesforce.com (NYSE:CRM) – customer relationship management SaaS company.
      • March 9, 2015
        Market cap: $40.74 billion
        Last reported quarter’s revenues: $1,444 million
        Employees: 13,300
      • February 4, 2016
        Market cap: $43.39 billion
        Last reported quarter’s revenues: $1,711 million
        Employees: 16,000
    • NetSuite (NYSE:N) – enterprise resource planning (accounting, inventory, etc) SaaS company.
      • March 9, 2015
        Market cap: $7.26 billion
        Last reported quarter’s revenues: $157.87 million
        Employees:  3,154
      • February 4, 2016
        Market cap: $5.33 billion
        Last reported quarter’s revenues: $206.23 million
        Employees: 4,506
    • LogMeIn (NASDAQ:LOGM) – remote desktop access SaaS company.
      • March 9, 2015
        Market cap: $1.28 billion
        Last reported quarter’s revenues: $59.90 million
        Employees: 804
      • February 4, 2016
        Market cap: $1.27 billion
        Last reported quarter’s revenues: $69.57 million
        Employees: 964
    • LivePerson (NASDAQ:LPSN) – live chat SaaS company.
      • March 9, 2015
        Market cap: $614.14 million
        Last reported quarter’s revenues: $58.23 million
        Employees: 796
      • February 4, 2016
        Market cap: $315.77 million
        Last reported quarter’s revenues: $60.76 million
        Employees: 1,058
    • Demandware (NYSE:DWRE) – ecommerce SaaS company.
      • March 9, 2015
        Market cap: $2.45 billion
        Last reported quarter’s revenues: $52.50 million
        Employees:  383
      • February 4, 2016
        Market cap: $1.63 billion
        Last reported quarter’s revenues: $57.58 million
        Employees: 590
    • Marketo (NASDAQ:MKTO) – marketing automation SaaS company.
      • March 9, 2015
        Market cap: $1.09 billion
        Last reported quarter’s revenues: $42.34 million
        Employees: 519
      • February 4, 2016
        Market cap: $765.56 million
        Last reported quarter’s revenues: $54.92 million
        Employees: 715
    • ServiceNow (NYSE:NOW) – IT asset management SaaS company.
      • March 9, 2015
        Market cap: $11.15 billion
        Last reported quarter’s revenues: $198.00 million
        Employees: 2,826
      • February 4, 2016
        Market cap: $9.43 billion
        Last reported quarter’s revenues: $285.65 million
        Employees: 3,402
    • Workday (NYSE:WDAY) – HR and financial management SaaS company.
      • March 9, 2015
        Market cap: $15.45 billion
        Last reported quarter’s revenues: $226.27 million
        Employees: 3,500
      • February 4, 2016
        Market cap: $12.11 billion
        Last reported quarter’s revenues: $305.27 million
        Employees: 4,900
    • Cvent (NYSE:CVT) – Events management SaaS company.
      • March 9, 2015
        Market cap: $1.20 billion
        Last reported quarter’s revenues: $39.33 million
        Employees: 1,450
      • February 4, 2016
        Market cap: $1.04 billion
        Last reported quarter’s revenues: $48.38 million
        Employees: 1,740
    • HubSpot (NYSE:HUBS) – B2B marketing platform SaaS company.
      • March 9, 2015
        Market cap: $1.22 billion
        Last reported quarter’s revenues: $34.16 million
        Employees: 719
      • February 4, 2016
        Market cap: $1.35 billion
        Last reported quarter’s revenues: $47.71 million
        Employees: 1,091
    • Zendesk (NYSE:ZEN) – Help desk management SaaS company.
      • March 9, 2015
        Market cap: $1.76 billion
        Last reported quarter’s revenues: $38.54 million
        Employees: 806
      • February 4, 2016
        Market cap: $1.90 billion
        Last reported quarter’s revenues: $55.66 million
        Employees: 806

    Fast-growing SaaS companies still trade at solid multiples but for ones where the growth has slowed, the multiples have lowered even more.

    What else? What are some more thoughts on public SaaS company valuations?

  • The Rise of Limited/No Visual Interface App Interaction

    Over the last few months I’ve been playing with our Amazon Echo and it’s amazing. When a song pops in my head, I just ask Alexa to play it. When I need to set a timer in the kitchen, I just tell Alexa to set it. This concept of interacting with an app with no visual interface isn’t new. What is new is that it works well, very well.

    Here are a few examples of limited/no visual interface app interaction:

    • Voice – Whether it’s Siri or Alexa, voice recognition technology is getting really good. I find talking to an app and interacting with it through voice much faster and more natural than clicking/touching a screen for simple interactions (assuming the app works well).
    • Email – More apps are using email as way to interact where the system sends an email to a user and the user then responds to the email with data, content, etc. that then gets ingested and processed. Interacting over email, when done well, feels elegant and frictionless.
    • Slack / Chat Rooms – Central chat rooms like Slack are becoming two-way communication services with outside apps (check out Slackbot). Similar to replying to an email to interact with a system, Slackbots can programmed to take in certain commands and inputs.

    Look for this trend of limited/no visual interface app interaction to grow and become more commonplace.

    What else? What are some more examples of limited/no visual interface app interaction?