David Cummings on Startups

Category: SaaS

  • 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?

  • Bullish on SaaS Growth

    When talking with non-tech entrepreneurs, I always like to ask about their software stack as tech entrepreneurs typically have the same lineup: Salesforce, Pardot, SalesLoft, Terminus, Calendly, etc. For the non-tech entrepreneurs, I’m surprised how many don’t have modern, SaaS systems. This opportunity for more mainstream adoption, combined with the growth of SaaS companies I’m involved with, and the growth of public SaaS companies, makes me bullish on SaaS growth. We’re just getting started.

    Here are a few reasons I’m bullish on SaaS growth:

    SaaS as an industry has tremendous growth ahead. Look for many more years of opportunity.

    What else? What are some more reasons to be bullish on SaaS growth?

  • Annual Recurring Revenue Greater than Cash Burned

    One of the metrics I like when thinking about SaaS company efficiency is annual recurring revenue (ARR) being greater than or equal to cash burned all time. Successful SaaS startups suffer from the J-curve where things start out with steep losses while revenue begins to ramp up and eventually revenue grows much faster than losses (hopefully!).

    Here are a few thoughts on ARR being greater that cash burned:

    When considering a SaaS startup’s capital efficiency, look and see if the annual recurring revenue is greater than cash burned. If so, and there’s a good growth rate, it’s likely a sign of a potential successful outcome.

    What else? What are some more thoughts on ARR being greater than cash burned for SaaS startups?

  • 27 SaaS Products for the Marketing Department

    After the post on 35 SaaS Marketing Products @ 1 Startup, a number of people asked me what products they used. While I don’t have the exact list of apps, here’s most of the free and paid apps the marketing department of the sub 100 person company uses:

    1. Salesforce.com – CRM
    2. Pardot – Marketing automation
    3. SalesLoft – Sales development (inbound response reps on the marketing team use SalesLoft to respond to leads)
    4. Google Analytics – Web analytics
    5. Google AdWords – Ad platform
    6. LinkedIn Ads – Ad platform
    7. Facebook Ads – Ad platform
    8. DataVibe – Marketing analytics + reports
    9. Terminus – Account-based marketing
    10. Calendly – Calendar scheduling
    11. Moz – SEO analytics
    12. Buffer – Social media scheduling
    13. MeetEdgar – Social media content recycling
    14. Captora – Bulk landing page generation
    15. Optimizely – A/B testing
    16. Zapier – Cloud integration
    17. Unbounce – Landing pages
    18. WPEngine – WordPress hosting
    19. Zopim – Live chat
    20. ON24 – Webinar management
    21. GoToMeeting – Screen sharing
    22. Sigstr – Employee email signatures
    23. Intercom – Customer communication
    24. Vidyard – Video management
    25. LeanData – Campaign attribution
    26. Bizable – Marketing attribution
    27. Everstring – Predictive account discovery

    Some later additions:

    A small business marketing department using 27 products is on the high side, but not unreasonable. Look for the number of marketing department apps to grow over time as more useful point solutions come on the market.

    What else? What are some more apps you’d add to this list for a marketing department?

  • 35 SaaS Marketing Products @ 1 Startup

    Yesterday I was talking to the head of marketing at a fast-growing, <100 person SaaS startup. We were talking about the modern marketing stack and he mentioned that they pay for 35 different SaaS products. Yes, 35 different marketing apps at one small business. Some of the app categories included marketing automation, social media management, A/B testing, SEO analytics, etc.

    Here are a few questions that come to mind:

    • Is there an upper limit to how many marketing apps a small business will use?
    • When does app fatigue set in?
    • How many are apps require daily work vs ones that are set it and forget it?
    • How is reporting done across so many apps?

    SaaS is unique in that once the business has $500,000 in recurring revenue, it’s hard to kill. Thus, there’s a huge cottage industry of SaaS marketing apps that provide value. It’ll be interesting to watch the industry over time and see how it plays out. My prediction: there’s no upper limit of marketing apps and we’ll keep seeing more and more.

    What else? What are some more thoughts on the idea that there are 35 SaaS marketing products at one small business?

  • A SaaS App for Every Department and Every Business Function

    Continuing with the idea that every spreadsheet shared is another SaaS app, there’s another way I like to think about potential opportunities in the SaaS world: there’s a SaaS app for every department and every business function. Meaning, every department should have an app they use (e.g. Pardot for marketing) and every distinct business function on the team should have one or more apps (e.g. SalesLoft for the SDR function in sales).

    Here are a few questions to ask when thinking about about SaaS app opportunities:

    • Is this a function that is broadly applicable across business functions (e.g. Calendly for scheduling) or very specific to one business function (e.g. Trustfuel for customer success)?
    • Is this resegmenting an existing market or creating a completely new one?
    • Of the three options better, faster, or cheaper, which two does it represent?
    • Is this app a must-have or a nice-to-have?

    The next time you hear a pitch for another SaaS app, see if it fits in this theory that there’s a SaaS app for every department and every business function — I bet it does.

    What else? What are some more thoughts on the idea that every department and business function will have a dedicated SaaS app?

  • Two Major SaaS Exits Announced

    After last week’s Lack of SaaS Consolidation post, we just had two major SaaS exits announced in the last 24 hours:

    With relatively few SaaS exits recently, these two are huge. What to make of it? Here are a few thoughts:

    • SaaS has much more growth ahead than public markets even priced in
    • Market leaders get a serious premium
    • Consolidation will eventually happen for the category leaders
    • Plan on 10+ years for the largest of SaaS exits
    • Look for more of these huge exits over the next five years (Zendesk, Shopify, HubSpot, etc.)

    It’s a great time to be in SaaS and we have many years of growth ahead of us.

    What else? What are some more thoughts on these recent SaaS acquisition announcements?

  • Leads, Leads, Leads

    Whenever I’m talking to entrepreneurs, especially seed stage entrepreneurs, the number one challenge is customer acquisition. Drilling in, more specifically, every entrepreneur wants more leads (who wouldn’t?). In fact, Jason Lemkin argues that lead velocity rate is the most important metric in SaaS. Since leads are so important, it follows that entrepreneurs need to build internal lead generation capabilities.

    Here are a few thoughts on lead generation:

    • Use a marketing automation system as the core of the lead generation efforts
    • Pick a sales development cloud to execute outbound campaigns
    • Run the standard B2B marketing playbook (SEO, SEM, email campaigns, webinars, ebooks, etc.)
    • Ensure the marketing team has a quantitive mindset (think analytics and data — Google Analytics is your friend)
    • Establish a definition of marketing qualified lead and sales qualified lead
    • Require clear objectives and key results from the team
    • Build a repeatable process and constantly iterate

    Lead generation is significantly harder than it looks. Entrepreneurs need to build a customer acquisition machine post product/market fit, and lead generation is one of the top priorities.

    What else? What are some more thoughts on leads being so critical in building a successful startup?

  • Lack of SaaS Consolidation

    Villi Iltchev has an interesting post up titled Why SaaS Consolidation is Not Happening. As more and more money has been invested in SaaS over the past 10 years, the logical expectation is that there would be a corresponding number of exits. Only, the number of material SaaS exits has been relatively small.

    Here are a few of the challenges with SaaS consolidation as enumerated by the author:

    • Supporting and scaling multiple clouds is daunting.
    • Customer Success is the vendor’s responsibility in SaaS.
    • Distribution in SaaS is much less impactful.
    • Sales productivity does not get better.

    I agree and expect to see a number of small-to-medium SaaS companies rolled up over the next five years (see What Happens to Small SaaS Companies). Once the 10 year horizon is done for venture funds, and a number of their SaaS investments are only growing modestly, look for a number of exits to private equity firms that will roll them up and maximize cash flow.

    What else? What are some other thoughts on the lack of SaaS consolidation?