I'm a partner at Redpoint and write daily, data-driven blog posts about key questions facing startups including how to fund raise, startup benchmarks, management best practices and team building. Join thousands of others receiving these blog posts daily by email.

Free SaaS Enabled Marketplaces - A Novel Go-To-Market for Software Startups

Traditional software was initially sold by perpetual license. Then in the mid-00s with the advent of SaaS, the market shifted to per seat per year pricing. And simultaneously, freemium marketing strategies blossomed. Freemium companies provide software for free temporarily to entice users to try and use the product. Eventually, these users cross a threshold and convert to a paid subscriber. This threshold can be based on number of people using the product (Expensify), number of documents signed in a month (HelloSign), or additional product features needed by users (Yammer). Today, we're seeing a new segment of the SaaS ecosystem move to free - the SaaS Enabled Marketplace (SEM).

Read More...


A Very Unusual Book about Startup Culture

Orbiting the Giant Hairball is one of the most unusual business books I've read. It's irreverent, full of drawings, and completely chaotic in the most wonderful way. Gordon MacKenzie, the author of the book, worked at Hallmark cards for 30 years to the day. He started initially in the creative department imagining greeting cards and ultimately found himself with the title Creative Paradox. In his book, he described the way he injected creativity into his working life. I thought it was a great book with three salient themes.

Read More...


The First Generation of the Talent Software Wars

In the late 1990s, two of the dominant talent management platforms were founded. Taleo and SuccessFactors grew very quickly after they entered the market, bringing novel delivery to the human capital market. Both companies eventually offered talent acquisition, performance management, and learning tools for human resources teams. But they started in different places. Taleo initially focused on recruiting tools and SuccessFactors on performance management.

Read More...


The 4 Teams Within Customer Success Organizations

At Gainsight's Pulse Conference on Customer Success, Mike McKee of Rapid7 spoke about the structure of his customer success team. He projected a slide, which I've copied in the image above, that depicts the way Rapid7 sells a contract, deploys its software, engenders adoption and expands accounts. It's the best visualization I've seen to describe the sales and customer success process and the inter-team collaboration required to be successful.

Read More...


From $800k to $274M in 4 Years - The Story of Ariba

Ariba went public in 1999 three years after having been founded. In its first year of selling, the company generated $800,000 in revenue. Then it ramped. $8 million, then $45 million, then $274M. In a three-year period, the company had grown 33x and achieved an astounding CAGR of 224% over the same period.

Read More...


The Optimal Compensation Plan for Customer Success Teams

At the Gainsight Pulse conference yesterday, I moderated a panel with Boaz Maor, VP of customer success at Mashery and Mike McKee, SVP of customer success and services at Rapid7. During the panel, both men described their path to building substantial customer success organizations at their respective companies. Boaz's team numbers 60 people, and Mike's exceeds 160. Over the course of the panel, we discussed the ways to recruit, structure, and manage vibrant customer success teams.

Read More...


The Decreasing Follow On Financing Success of Startups

The rate at which startups are raising follow-on rounds is decreasing, and has decreased steadily from 2003 through 2013. Between 2003 and 2006, post-Series A startups raised series Bs about 57% of the time. However from 2011-2014, that figure fell to 28%. The same trend is true in series C rounds, where success rates fell from 43% to 35%.

Read More...


The First Mobile-Only SaaS Company

Mobile visits account for more than 50% of all e-commerce]. During the holiday season in 2014, that figure exceeded 70% for Walmart. In India, mobile usage dominates traffic to such an extent that Myntra, the largest retailer, is shutting down their web application to focus exclusively on their mobile apps. Instagram launched a website only after the mobile app reached more than 100M users. If the consumer world is any indication of the future, we should expect to see a massively successful mobile-only SaaS company in the next few years.

Read More...


How Great Unit Economics Enables Startups to Weather the Storm - The Story of WebEx

In the late 90s, one company changed its name five times before they settled on one which today is a well-known brand. The business started as Silver Computing in 1995, then Stellar Computing in June 1997. Six months later, the company would rebrand as next ActiveTouch Systems, then six months later to ActiveTouch Inc., and finally, six months before IPO to WebEx.

Read More...


Startup Best Practices #11 - Practice Negotiations Before the Meeting

Read More...


Which is a More Efficient Way to Build a SaaS Startup - Bottoms Up or Top Down?

An entrepreneur last week asked me if bottoms up businesses are more efficient software companies than top down sales processes. Because the bottoms up processes tend to rely on seemingly less expensive customer acquisition techniques like content marketing and in-product up-sell initially, this founder suggested, quite reasonably I thought, that bottoms up companies are more efficient.

Read More...


How to Make Pretty Charts

When I first started writing, I wondered how I could make charts like those in the Economist or in the New York Times, the beautifully formatted ones. After some research, I figured out how. And this post explains how you can do it, too.

Read More...


What an Acquisition of Salesforce Means for Startups

Rumors swirled yesterday that Salesforce, the $40B SaaS behemoth, had been approached by an acquirer. Dan Primack speculated this morning that Oracle and Microsoft are the likely candidates. If Salesforce were to be acquired, the SaaS ecosystem would change substantially.

Read More...


A SaaS History Lesson – The First SaaS Company's Exceptional Journey

The first SaaS startup started as a packaged software company. After selling floppy disks and CD-ROMs of expense software in computer software stores, the company changed models for the first time, and sold software licenses directly to enterprises. The company went public on this model in 1998. But soon after the crash of 2001, the startup's market cap totaled only $8M. So the business evolved again and became a pure SaaS business, selling software accessible to anyone with a browser. Thirteen years later, the company generated more than $600M in annual revenue in 2014 and sold to SAP for $8.3B, and it is one of the very few SaaS companies ever to achieve both positive revenue and cash flow break-even

Read More...


How Important Is It For a SaaS Startup to be Profitable?

The Information reported last week that in 2014, only 11% of tech IPOs in 2014 were profitable when they became publicly traded companies, an all time low stretching back to 1980, when the figure was 88%. This raises the seemingly absurd question, how important is it to be profitable for a startup? After all, growth is the largest determinant of valuation at IPO, not profitability.

Read More...


Measuring Bookings, MRR, Revenue and Cash for Your SaaS Startup

Yesterday, I met with a bright entrepreneur who asked me to clarify four numbers for SaaS companies: bookings, monthly recurring revenue, recognized revenue and cash collections. These four numbers are critical to understanding the health of a SaaS startup, so it's important to have a strong grasp on the distinctions between them.

Read More...


Why the Bubble Question Doesn't Matter

"Is there a bubble?" is a question that seems to be asked every day. But it's the wrong question. Maybe there is a bubble. Maybe there isn't. Instead of asking the question, let's just presume we are in a bubble. Then, the far more important debate surfaces: given the bubble, how should a team manage a startup differently?

Read More...


The Innovator's Solution for SaaS Startups - The Flywheel SaaS Company

In the Innovator's Dilemma for SaaS Startups, I outlined the path of many software companies, which disrupt incumbents by first serving the small-to-medium business and then move up-market by transitioning to serve larger enterprises with outbound sales teams. I argued this transition is largely due to the more attractive characteristics of larger customers, namely higher sales efficiency and reduced churn rates. This is the "traditional" way of disrupting. But, as Kenny van Zant of Asana and Mike Cannon-Brookes Atlassian told me, there's another way, a novel way of building companies that still isn't very well understood: the Flywheel SaaS Company.

Read More...


How Faster Sales Cycles Become a Competitive Advantage

Sales cycles, the time from acquiring a lead to closing an account, vary quite a bit by industry, product type, and price point. But universally speaking for startups, shorter sales cycles are better. Maintaining a short sales cycle is a competitive advantage for several important reasons.

Read More...


How Many Unicorns Sell Each Year?

How many companies sell each year for $1B or more? In the last ten years, on average, 2.5 US venture backed IT companies are acquired for $1B+. In the last ten years, a total of 20 companies have sold themselves for greater than $1B. Over the past 20 years, that trend has been relatively constant, with the exception of the euphoria in 1999 and 2000.

Read More...


Hacking the Performance Evaluation

Performance reviews tax organizations, managers and employees to such an extent that some companies have abolished them outright. Reviews are emotionally complex conversations. Positive and negative feedback are intertwined with conversations about career progression, raises and equity grants. These meetings are emotional powder kegs; and it's no wonder they stress us.

Read More...


The Gamble of the Private IPO

In a post earlier this week, Josh Kopelman coined the term Private IPO to describe patterns in the runaway late stage financing market. In addition to the points Josh makes about the dangers of stale valuations, there is another important and related implication for founders.

Read More...


The Innovator's Dilemma for SaaS Startups

here's a familiar path now to SaaS companies that start in the SMB (small-to-medium business) part of the market. Over time, they seem to inevitably begin serving larger customers. Box, Hubspot, Zendesk and among many others have exhibited this pattern. Why does this happen?

Read More...


One Great Adventure After the Next

Yesterday, Redpoint announced something amazing: Andy Rubin, the creator of Android is joining Redpoint. I remember reading about Google's Android acquisition in 2005 and wondering what would become of the technology; and then later at Google seeing some of the first versions of the G1, the first Android phone. Since then, Android has become a standard, and powers 81% of phone shipped last year. My partner, Jeff, has worked with Andy for about 20 years. Jeff and Andy's relationship is an example of one of the special things that struck me about Redpoint when I joined seven years ago: the importance Redpoint places on long term relationships.

Read More...


Are SaaS Startups Today Worth More than Ten Years Ago?

In the Runaway Train of Late Stage Fundraising, I analyzed the growing disparity of the public and private markets. Ten years ago, we saw 2-10x as many IPOs as $40M+ rounds. Today, we see 16x as many $40M+ growth rounds as IPOs. There's no question that companies are waiting longer to go public, fueled by late stage private investment. I was wondering if as a consequence, we might see bigger IPOs. Surprisingly, the answer so far is no.

Read More...