Founded in 1998, Netsuite is worth about $7.7B, making it the sixth largest SaaS compay behind Salesforce, LinkedIn, Workday, ServiceNow and Splunk. Netsuite began developing ERP (enterprise resource planning) tools to help companies manage their finances, expenses and supply chain. Over time, Netsuite has added a few more product lines including ECommerce platform, CRM, business intelligence and a professional services management product. In the last ten years, Netsuite has grown revenue from $18M to $556M. As the company disclosed in their last annual report, Larry Ellison, the CEO of Oracle, owns 47.4% of Netsuite common stock, implying the company is strategically important to Oracle.
In response last week's post on The Fastest Growing Areas of Startup Investment in 2015, in which Bitcoin topped the list, I received many questions about the underlying dynamics of this startup segment. Which regions? Which stages? How much is going into Bitcoin companies. Using Crunchbase data, I analyzed BTC investment patterns over the past 4 years.
Founders often ask, when is the right time to expand geographically, add a second product or pursue another customer segment? Most of the time, the answer is not yet, not until the company is quite large, perhaps in the hundreds of employees and the main challenges and questions for the business have been answered well.
If there's one notion that will define the decade early 2010s in startupland, it's the Megaround, the investments of greater than $40M in private companies. Historically, startups needed to trade on public exchanges to access sums of money from $40M to several billion. But today, the private markets are providing this capital. These billions of dollars, which amount to about half of all venture investment, skew substantially towards consumer investments.
As I was researching the theory behind organizational goal-setting, I came across a letter from Hunter Thompson, at the time 20 years old, writing to a friend about goals. Yesterday's post discussed some frameworks for organizations to craft goals to maximize employee happiness and effectiveness. But Thompson's advice is for our goals as individuals.
Of late, I've been having lots of conversations with founders about setting goals. It's a really important topic for many founders, because it's the way that management teams align incentives and focus an organization on a few important areas. It’s their focus that enables startups to move quickly, one of their key competitive advantages in the market. But, what is the optimal way of setting goals?
I learned to drive a car at age 19 on a warm Santiago de Chile night, in an unusual way. A friend named Jose Pedro resolved to teach me after dinner at his apartment, suprised to learn I didn't know how. It was past two am, and without anyone on the streets, it would be safe, he assured me. As we sat in the car, he showed me how to manage the three pedals and the gear shift, and explained the how the clutch worked. Then the lesson started.
In Q2 2015, VC investment totaled $16.7B, about a 66% of the $28B deployed in Q2 2000. And the trends shows no sign of stopping. A big contributor to this growth are nontraditional investors including mutual funds and hedge funds, which now account for approximately 40% of dollars invested. and while the market is similar to the dotcom era in some regards, it is substantially different in others..
When asked why he took Zendesk public this week, CEO Mikkel Svane replied, "At some point you have to move out of your parent's basement." It's a witty quip with some truth to it. Evolving into a public company is a step for about 25-30 venture backed IT companies per year, and it can be a worthwhile, if strenuous, journey.
Earlier this week, we examined the trends in the major categories of startup investment including eCommerce, Software, Social Networking and Education. But which lesser known startup sectors are starting to raise venture dollars? Where are founders finding unique opportunities to innovate?
"People don't buy what you do, they buy why you do it." This line from Simon Sinek's TED talk captures the power of a values based marketing campaign. Simon contrasts feature-based marketing - start with *what* the company is selling continue to *how* they do it and finishes with *why* - to value based campaigns which reverse the story-telling order. Values campaigns start with the why.
In the last six months, VCs have invested more than $57B according to Mattermark data, which puts 2015 on pace to exceed 2000 as the year the most venture capital will be deployed, ever. Which sectors are benefitting from all these venture dollars?
In every sales process for every SaaS startup, there is one ultimate internal champion advocating the purchasing decision. And it's their budget that will be used to pay for it. So, which departments within customers spend most on SaaS?
According to ChiefMarTec, in 2015 there are 1875 marketing technology companies, up from 947 last year. If the number of marketing software companies is any indication, there is a huge expansion in the number of SaaS companies in almost every segment including sales tools, engineering productivity, finance, and human resources. This fragmentation trend has been happening for quite some time.
About two years ago, we examined the new Second Seed, a tactic employed by startups who raise an initial seed round, achieve a set of milestones and raise a second seed round, before raising a series A. During the two years since that analysis, this trend has continued.
This time last year, I analyzed the state of the startup acquisition market. Two key trends surfaced. First, the larger acquisitions were becoming larger. Second, that the total number of acquisitions in 2014 would achieve a 5 year high. As of mid-2015, the first trend continues while the second seems to have faltered.
Ultimately, the goal of most content marketing campaigns is email address capture. When a reader decides to receive content consistently via email, a content marketer knows they're developing a deeper relationship with that person. Whether the marketers selling software or venture capital, retaining an email address is a victory.
When startups achieve hyper-growth, many of the key internal processes begin to fail under the strain of a newer, larger organization. So they must be reinvented. One of the most important internal processes, but least considered, is scheduling meetings.
One smart SaaS entrepreneur told me last week he prefers bottoms up businesses to top-down companies because bottoms up sales and marketing efforts enable startups to pursue hundreds of paths into a company. Unlike top down sales processes which offer a startup one shot at closing an account (a meeting with a CEO or VP), for bottoms up products, each employee is a credit-card-carrying-decision-maker.
In the last 35 years, the federal funds rate has varied from as high as 16% in 1981 to as low as 0.09%. throughout those cycles, venture capital has flourished from a cottage industry into $100B per year asset class. VCs are on track to invest as much capital this year as during the height of the dot com era. But, is there any observable relationship between the federal funds rate and the startup ecosystem?
When deciding to open source software, one of the key questions teams must answer is the license under which they will distribute their software. There are a wide variety of different alternatives. But, the three most common are GPL, Apache and MIT. I was curious if there was any relationship between type of license used by startup commercializing open source software, and their ability to raise capital, and exit.
There's a "new" $4B startup today. A consumer hardware company called FitBit started trading on the Nasdaq this morning and it's an impressive success story. We've examined the tremendous revenue growth GoPro experienced in a previous post. Impressively, FitBit is growing faster.
Open Source Software started the movement in the late 1990s. Since then, open source software has transformed the software industry. Today, many infrastructure software startups employ open source strategies to market their software and win dominant market share.
Financial discipline is a hallmark of great companies. It's what enables businesses to build exceptional go to market models, weather difficult times, and ultimately succeed. Sometimes, financial discipline in startups is imposed by financial markets, like in 2008 when the total amount of venture capital investment plummeted after Lehman imploded. Other times, financial discipline is imposed by founders and management teams. The tweet above is from Lew Cirne, founder and CEO of New Relic, a $1.5B market cap company serving developers, who deliberately raised small arounds at the outset of the company to impose financial discipline on his business. In other words, Lew valued patience with unit economics.
Compensation structures are one of the most interesting questions facing customer success organizations in software startups. How should customer success leaders structure their team's compensation in order to align the objectives of individual customer success managers with those of the larger business?