Are consumption-based SaaS business models becoming more prevalent?

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They are, and it’s worth thinking about.

We actually sort of started there. The first big SaaS success wasn’t Salesforce, it was WebEx before that. Salesforce learned from WebEx, just like many of us learned from Salesforce.

And WebEx started off with a consumption-based model. It made sense, because back then, “minutes” had a high variable cost.

From 2003:

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$0.45 a minute for video, plus $43.20 just for the audio portion of a one-hour meeting with 6 participants! Woah!

It took falling network prices (and competitive pressures) for WebEx to gain the confidence to move to semi-consumption and then flat-rate pricing. – Read more

Winning by Design Expands to Canada and Adds Customer Success to Its Repertoire

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As Canada’s Tech Scene continues to heat up, creators of the SaaS Sales Method launch its seventh global office in Toronto with its newest partner Julie Weill Persofsky.

MENLO PARK, Calif.–(BUSINESS WIRE)–Winning By Design, the founders of the SaaS Sales Method and Sales as a Science today announce bringing on Julie Weill Persofsky as its newest partner to support continued growth.

“We are thrilled to launch our Toronto office and welcome Julie. Her passion for SaaS start-ups and strategic mind in Sales, Customer Success and Growth will be a great asset to our clients. The tech scene in Toronto is booming and we wanted to have a local office to support the growing demand,” said Jacco van Der Kooij, founder of Winning By Design.

“The Winning by Design team has proven methodologies for SaaS growth strategy and training. I am proud to be representing Winning by Design in Toronto and to continue to support the tech scene that I’ve been immersed in for so many years,” said Persofsky.

The SaaS Sales Method is a science-based approach to building out revenue teams that span the entire customer lifecycle. With it, Winning By Design is able to impact revenue and implement company-wide change in process, behavior, technology, and strategy. – Read more

Harmonic Unleashes Innovative New SaaS Features for Video Streaming and Broadcast Delivery

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SAN JOSE, Calif., Sept. 13, 2018 /PRNewswire/ — At IBC2018, Harmonic (NASDAQ : HLIT ) announced the launch of dynamic ad insertion (DAI) capabilities and will provide a sneak peek of disruptive disaster recovery scenarios enabled by its VOS®360 Video software-as-a-service (SaaS) as part of the company’s continued commitment to SaaS innovation. With these advanced capabilities available in the cloud, VOS360 Video SaaS opens up new cost savings and monetization opportunities for content owners and video service providers.

“VOS360 Video SaaS is gaining tremendous momentum globally with new deployments for live and on-demand OTT channels,” said Tim Warren, senior vice president and chief technology officer, video business at Harmonic. “Beyond managing their end-to-end OTT workflow on the cloud, broadcasters, content owners and service providers can support an expanded range of business cases using SaaS, including dynamic ad insertion and disaster recovery. These new capabilities will help our customers get the most out of VOS360 Video SaaS to increase efficiencies and reduce capex.”

VOS360 Video SaaS now enables operators to deliver advanced targeted advertisements and replace content during blackouts, increasing monetization for OTT content and improving the end-user experience. Content is replaced during blackouts based on end-user location and device, leveraging SCTE-224. This new Harmonic technology has already been successfully deployed by a major broadcaster in the U.S. for the insertion of unique station data for OTT rights management, blackouts and local ad insertion. – Read more

Zendesk expands into CRM with Base acquisition

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Zendesk has mostly confined itself to customer service scenarios, but it seems that’s not enough anymore. If you want to truly know the customer behind the interaction, you need a customer system of record to go with the customer service component. To fill that need, Zendesk  announced it was acquiring Base, a startup that has raised over $50 million.

The companies did not share the purchase price, but Zendesk did report that the acquisition should not have a significant impact on revenue.

While Base  might not be as well known as Salesforce, Microsoft or Oracle in the CRM game, it has created a sophisticated sales force automation platform, complete with its own artificial intelligence underpinnings. CEO Uzi Shmilovici claimed his company’s AI could compete with its more well-heeled competitors when it was released in 2016 to provide salespeople with meaningful prescriptive advice on how to be more successful.

Zendesk CEO Mikkel Svane  certainly sees the value of adding a company like Base to his platform. “We want to do for sales what Zendesk has already done for customer service: give salespeople tools built around them and the customers they serve,” he said in a statement.

If the core of customer data includes customer service, CRM and marketing, Base gives Zendesk one more of those missing components, says Brent Leary, owner at CRM Essentials, a firm that keeps close watch on this market. – Read more

How to Invest in Software-as-a-Service (SaaS)

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Back in 2000, if you were filing your taxes with Intuit’s TurboTax, you would buy its software on a compact disc, download the software onto your computer, and input your data into the program. With changes to the tax code every year, you had to cycle through the process annually.

The advent of cloud computing has changed all of that. These days, you can use TurboTax software without downloading anything, updates to the company’s systems are made in real time, and all of your data is stored for you on Intuit’s servers.

This is an example of software-as-a-service — or SaaS. The model has transformed the relationship between a customer and a company’s software: where once owning the software on site was key, it is now the ability to access the software that truly matters. As more companies, both new entrants and existing software providers, gravitate toward the SaaS model, it’s also becoming an increasingly popular area of focus for investors.

Below, we’ll dive into SaaS and discuss why it’s so advantageous — to companies, to their customers, and to their investors. We’ll also tackle the unique metrics that will help you measure the strength of an SaaS company’s business and discuss the risks any potential investors ought to be aware of.

What is software-as-a-service or SaaS?

Perhaps the best way to start is to define software. Put simply, it is any program that can be run on a computer. That online calculator, the Word document you’re working on, and the weather app you check daily are all examples of software. In order for those to work, someone had to create the computer code to make them function.

If that still seems fuzzy, think of it this way: software is usually juxtaposed against hardware. Hardware is the physical computer or smartphone that you own. You can hold hardware in your hands. Software includes all the programs or apps that you use on a device — no physical product to speak of.

Software-as-a-Service (SaaS) companies have taken advantage of cloud computing in order to provide access to software and stored data from any device with an Internet connection. Cloud computing, which makes SaaS possible, is the practice of using offsite servers to house and handle large computing tasks and making all of the relevant information available on demand via the internet.  – Read more

Software-As-A-Service Market Boom: A Blessing in Disguise for Salesforce

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If the history of customer relationship management (CRM) had to be revisited, Salesforce would definitely be a chapter which one cannot afford to miss. The contribution of the organization and most importantly, its CRM product amplifying the abilities of back offices in enterprises across the globe deserves a special mention. The platform can be seamlessly integrated with existing processes and can elevate their capabilities. The introduction of the product was a huge respite for payroll team members for the convenience it ushered in their routine activities. The software platform is touted as the best in the world and embraced by many organizations worldwide for their customer relationship management activities. Several media reports have stated that the CRM platform has been largely embraced by organizations looking to get rid of the inefficiencies of the age-old pen-and-paper system. The recent times have seen an increase in the adoption of Salesforce due to the rising awareness of the advantages of Software-as-a-service (SaaS) platforms. Salesforce continues to be the go-to name among organizations transitioning from a legacy environment to the cloud. In the current climate of digitization and data explosion, which has been occurring at an exponential rate, adoption of cloud infrastructure has become inevitable for most businesses. Thus, SaaS has become a term that has got techies worldwide raving today.

A report published by research giant Gartner stated that SaaS is the largest segment of the cloud market today and industry veterans and experts predict that sales are expected to rise by 22 percent to around $73.6 Billion later this year. In the past couple of years, Microsoft had a large role to play in the rapid growth of the SaaS market, with its suite of collaboration, CRM and enterprise application software contributing to this significant change. Adobe, SAP, IBM, and Cisco are other organizations that are largely responsible for this change, or rather the large fluctuation in numbers. The rising popularity of the cloud model and the SaaS approach has undoubtedly been a catalyst in enhancing the growth of Salesforce and increasing the number of users of its CRM tool. – Read more

 

Blissfully grabs $3.5 million seed investment to help companies get their SaaS in gear

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Blissfully, a New York City startup that helps companies understand their SaaS usage inside their organizations, announced it has received a $3.5 million seed round.

The investment was led by Hummer Winblad Venture Partners. Hubspot, Founder Collective, and several unnamed pre-seed investors also participated. They got a $1.5 million pre-seed investment, bringing the total so far to $5 million, according the company.

Company co-founder and CEO Ariel Diaz says Blissfully actually helped him and his co-founder solve a problem they were having tracking the SaaS usage at their previous startups. Like many companies, they were using spreadsheets to track this information and they found it was untenable as the company grew beyond 30 or 40 people. They figured there had to be a better way, so they built one.

Their product is much more than simply a database of the SaaS products in use inside an organization. It can integrate with existing company systems like single sign-on tools such as Okta and OneLogIn, financial reporting systems and G Suite login information. “We are trying to automate as much of the data collection as possible to discover what you’re using, who’s using it and how much you are spending,” he said. – Read More

Does prospecting really work?

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Across 30+ SaaS investments, I can say the answer is Always, as least in SaaS.

But how much, and when to phase it in, varies.

Prospecting and outbound is an art. What is hard is it to get outbound and prospecting going with (x) a founder with no passion for it, and/or (y) with sales reps that have only done inbound.

If you have only done in-bound, then prospecting and outbound will seem incredibly tedious, very slow, and frustrating. You’ll likely never close anything.

But I’ve yet to find a category, from contact centers to search to voice to software testing to fleet management to recruiting to training and more, where outbound didn’t work — at least once you had someone doing it with some experience and passion around it.

The next question then is, if it works, will it work enough?

Certainly, the lower your price point, the harder it is to make traditional prospecting work. With bigger deals, it’s easier to target named accounts, take the time you need to personalize the outreach, and invest what it takes to get there.

Second, the % of revenue from outbound can vary widely. In some start-ups, it’s an “extra layer”, another 10%-20% growth. In others, it’s the primary acquisition channel, at least until the brand really takes off. There’s always more revenue to be had through outbound.

But in the early days, you do need to stick to what you are good at, or at least, the least bad at. If you are scared to do prospecting and/or can’t bring yourself to it, find a way to otherwise generate demand. Then hire someone later to own it. – Read More

Facing the new build vs. buy problem in application delivery

How to make better strategic sourcing decisions for your software supply chain

The market for application components delivered in the cloud using a subscription model is exploding—it spans the software supply chain and it is growing constantly.

Given the high quality of these component services, it can be difficult to determine how to source your parts—should you use a supplier, or build it yourself? There are many different ways to cut this problem, but a valuable mental model that can help you make your decision is to look at code as a liability.

The natural inclination is to think of code as an asset to the business. It’s something you invest resources in to build, and it drives the growth of your business. But an alternate line of thinking looks at writing code as creating risk, as a necessary evil to create value for the business.

Similar to financial debt, the idea goes something like this: You take out a mortgage to buy a house, you only want the house, but not the mortgage. So you minimize the mortgage as much as possible, keeping it around only long enough to obtain the value (the house). And if you move to a new house, you don’t take the mortgage with you. The debt—the liability—is a means to value.

You can think of code the same way: You don’t actually want the code, you want the value it creates. Code has ongoing costs to understand it, to maintain it, to adapt it over time. Those costs are the same as making the interest payments on your house. The scrum master, the two-pizza teams, the agile ceremonies—all are required, but all are simply paying down the interest. And unfortunately, when you move to Version 3 of your application, that Version 1 debt will still be hanging around—you can’t get rid of the principal!

If you have come from a background as a development or technical leader where your role has been biased toward building your own software and systems, thinking about code as a liability is a great way to view your decisions from a business perspective and make good strategic decisions. Applying the model to the build-versus-buy problem, four key areas for consideration emerge. – Read More

Is it possible to build a successful SaaS B2B business in the UK/Europe, or should you move to the US to maximize your success?

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This is a more nuanced question than it was a few years back.

The vast majority of the very successful European SaaS CEOs from one SaaS generation ago will tell you coming to the U.S., and in particular, SF, was critical to their success.

I’ve also invested in a ton of SaaS companies from Europe that came to the U.S.: Algolia, Talkdesk, Pipedrive, Automile, Front, PlatoHQ, Gorgias.io, Voxeet, etc. and they have benefited tremendously from coming to SF/U.S.

Why? Talent and capital. The experienced VPs, and the big venture checks, are still centered in SF.

But it’s more nuanced now. First, venture capital is more distributed. There still is much more of it in the U.S. for SaaS, but there is probably 20x-50x more of it in European funds than just 5 years ago. So you can raise all the capital you need in Europe now, even if it’s still easier to grab it in the U.S. It used to be you almost had to come to SF after your seed round. Now? Not so much.

Talent still remains an issue. There are still far more VPs to hire from Box, Salesforce, Twilio, AppDynamics, wherever to lure into your startup if you come to SF. This is still a huge accelerator. There just aren’t as many senior SaaS veterans in Europe that were Director+ level and above with tons of core responsibility.

But the more SMB you are, the less that probably matters. If you have a $99/month product or $299/month, hopefully anyone with good training and script can sell that on the phone. And there are at least more veterans than there used to be. – Read more