SaaS

The Importance of Customer Success

At Pardot, one of the areas where we really excelled was customer success. Back then, we referred to customer success as client advocacy, but the idea was the same: proactively help our customers have a great experience. Customer success is one of the most important functions, yet not as well understood as other functions.

Here are a few thoughts on customer success:

  • Implement a customer success platform to ensure consistent and efficient customer interaction as well as customer analytics (Need a product? Check out Trustfuel)
  • Develop a cadence around on-boarding, regular outreach, and renewal period
  • Build a pipeline for the customer success team through sales development reps that are a great culture fit but choose not to go in sales as well as support reps that want to proactively help customers
  • Decide who’s going to handle up-selling and cross-selling as it’s not usually the same skill set as a customer success manager
  • Scale the customer success team as the number of customers grows (depending on the type of customer, one benchmark is one customer success manager (CSM) for every $1 million in annual recurring revenue)

Remember that with Software-as-a-Service, the “service” is just as important as the “software.” Customer success is critically important.

What else? What are some more thoughts on the importance of customer success?

Agile vs. Burndown Software Development

Matt Bilotti has a great post titled How We Build Products at Drift. The crux of the article is that there’s a new, and better, way to do software development: burndown. Today, in the startup world, agile is the most common software development methodology. Only, it’s centered around the two week sprint, and the reality is that the customer feedback loop is much faster than two weeks.

Here’s the breakdown on agile vs. burndown from the post:

  • Measure of success
    • Agile – Thoroughness of story, agile points and velocity
    • Burndown – End user feature adoption & retention
  • Means of determining prioritization
    • Agile – Product backlogs and sprint planning
    • Burndown – End user validated design mockups and prototypes.
  • Speed
    • Agile – Story-based sprints (weeks)
    • Burndown – Micro-sprints (days)
  • Release focus
    • Agile – Multiple features grouped into a single release version
    • Burndown – A single version of a single feature per release
  • Flexibility
    • Agile – 2-week sprints are planned, executed & generally inflexible once agreed upon
    • Burndown – Every day priorities change and so do the current and upcoming sprints

Feel like the agile software development methodology isn’t quite right for your team? Consider trying out some of these burndown concepts.

What else? What are some more thoughts on agile vs. burndown methodologies?

Notes from the Coupa S-1 IPO Filing

Coupa, a SaaS spend management platform, just published their S-1 IPO filing to go public. Seeing the filing makes me sentimental as I first learned about them in 2009 when they become one of our early Pardot customers and we were at similar stages with our respective startups. Now, with over $100 million in recurring revenue and a strong growth rate, Coupa is positioned for a solid IPO.

Here are a few notes from the Coupa S-1 IPO filing:

  • Mission – Our mission is to deliver “Value as a Service” by helping our customers maximize their spend under management, achieve significant cost savings and drive profitability. (pg. 1)
  • 460 customers, 1.5 million users, and 2 million suppliers (pg. 1)
  • We refer to the process companies use to purchase goods and services as spend management (pg. 1)
  • Revenues and net losses: (pg. 2)
    • Revenues
      • 2014 – $50.8 million
      • 2015 – $83.7 million
      • 1H 2016 – $60.3 million ($120.6 million annualized divided by 460 customers makes for an average of $262,000/customer/year)
    • Net losses
      • 2014 – $27.3 million
      • 2015 – $46.2 million
      • 1H 2016 – $24.3 million
  • Competitive strengths: (pg. 7)
    • Easy and Intuitive User Interface that Enables Widespread Employee Adoption.
    • Unified Platform With Powerful Functionality.
    • Independence and Interoperability.
    • Powerful Network Effects.
    • Cloud Platform.
    • Rich Partner Ecosystem.
    • Results-Driven Culture.
    • Higher Supplier Adoption.
    • Proprietary Data Enables Superior Insights.
  •  Accumulated deficit of $147.2 million at July 31, 2016 (pg. 16)
  • In general, the upfront costs associated with new customers are higher in the first year than the aggregate revenues we recognize from those new customers in the first year. (pg. 19)
  • We have funded our operations since inception primarily through equity financings and prepayments by customers. (pg. 30)
  • Equity (pg. 121)
    • CEO/Chairman (non-founder): 5.8%
    • VCs – 59%
    • Mutual Funds – 5.1%

Congrats to the Coupa team on building a meaningful, fast-growing SaaS company. My guess is that Coupa has a strong IPO and gets acquired by someone like Salesforce.com, Oracle, or Microsoft in the next 24 months as they look to expand their SaaS portfolio.

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 (Workflow) – 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?

5 Choice Quotes in From Impossible to Inevitable

Aaron Ross and Jason Lemkin have a great book out titled From Impossible to Inevitable: How Hyper-Growth Companies Create Predictable Revenue. Now, it’s a mixture of the good stuff from the book Predictable Revenue and the site SaaStr, which are both must-reads for entrepreneurs.

Here are five choice quotes from the book:

  1. It’s always better to “show” rather than “tell” (stop talking and prove it).
  2. It takes three to six months to go from scratch to consistent pipeline generation — and longer for revenue. Stick it out!
  3. When you do something new, hire two. With one person, you can’t tell if what is working is due to the person or to the process.
  4. You’ll fail in SaaS if you don’t commit to spending 24 months to achieve initial traction.
  5. When you’re pursuing anything vitally important to you, you can figure it out when you embrace the challenge and growth rather than avoid it.

Haven’t read the book? Head over to Amazon.com and purchase From Impossible to Inevitable: How Hyper-Growth Companies Create Predictable Revenue.

What else? What are some more great quotes from the book?

Startup Review: Teamworks

Teamworks, a sports team management and operations SaaS application, was started 10+ years ago by Duke football player Zach Maurides (disclosure: I’m a recent investor). The original problem: how to manage all aspects of 85 scholarship players on a football team. Today, Teamworks has over 850 teams from all major sports including the majority of D1 football teams.

Here are a few notes on Teamworks:

  • Vertical SaaS is a big growth market, and team sports is no different
  • SaaS takes time to build, and Teamworks is an overnight success 10 years in the making
  • Growth opportunities exist in a variety of sports markets including college, pro, semi-pro, club, and others
  • Functionality like messaging and scheduling is the core with a number of supporting modules like academics, compliance, and equipment

Teamworks is the typical SaaS success story: a product that solves a real business problem, a great customer base built slowly over time, and plenty of room to expand. Look for continued growth from Teamworks.

What else? What are some more thoughts on Teamworks?

HESaaS: Hardware Enabled SaaS

Last week I heard a new term: HESaaS. HESaaS stands for Hardware Enabled Software as a Service and the idea is that there are new SaaS opportunities that come from the addition of specialized hardware. Put another way, the Internet of Things (IoT) is going to enable a variety of new HESaaS opportunities.

A local Atlanta Tech Village HeSaaS startup is Gimme Vending (disclosure: I’m an investor). Gimme makes a device that transmits vending machine data to the cloud for more efficient inventory management and product merchandising analytics. Without the hardware to send the data to the cloud, there’s no SaaS business.

Add HeSaaS to the list of reasons to be Bullish on SaaS Growth.

What else? What are some other hardware enabled SaaS opportunities?