When I started in the venture business and met software companies, I never heard the words customer success during pitches or throughout diligence or in board meetings. A few years later, customer success has become equal in importance to sales and marketing and engineering and product within SaaS companies. The steady increasing drumbeat of the Customer Success mantra is reflected in Google search traffic, whose volumes have tripled since 2009 . So, why now?
More than 100B mobile applications have been downloaded since the launch of the Apple iOS and Google Play stores. As the number of users, downloads and apps have exploded, the dynamics of the app store have also changed. During the past 18 months, the competitive behavior within the Free Apps section of these app stores has evolved substantially in four meaningful ways:
First, the Android Play store has become substantially more welcoming to startups/new entrants than 18 months ago. The chart above compares the competition in the Play store in early 2013 and in mid-2014. On the x-axis, I’ve plotted plots the rank volatility[1], how much a typical app moves in ranking in 30 days on the x-axis. On the y-axis, the chart shows the percent of applications that exhibit that volatility. I’m using rank volatility as a proxy for competitiveness: more changes in rankings in the app store implies more competition and a more efficient marketplace, which should help the best apps rise to the top, even if they are new to the app store.
When starting a company, founders often decide between two structures: the S-Corp and the LLC. But, as James Surowiecki writes in “Companies with Benefits,” there is a new option called the B-Corporation, the Benefit Corporation.
The Benefit Corporation became an option in 2010 when Maryland’s legislature signed it into law. Subsequently, nearly twenty states have followed suit including California and Delaware. In the past four years, more than 1,000 companies have become B-Corporations including some very well known brands in technology and consumer goods: Warby Parker, Patagonia, Seventh Generation, Method Soaps, Etsy, New Belgium Brewery, Ben & Jerry’s, among others.
For consumer products, the power of mobile distribution is hard to overstate. Facebook serves more than 1B mobile users each month. Angry Birds reached 50M users in 35 days, a feat that took Instagram 18 months and Facebook more than 3 years.
But the distribution advantages of mobile app stores hasn’t been observed as powerfully in SaaS or enterprise software for driving revenue. The majority of the top 20 slots of the Business Apps Category in the iTunes store aren’t occupied by startups. Nor has the story of a 3 year-to-10M user story been written about an enterprise application, yet.
Through last week, 80% of fast-growing technology companies who reported Q2 earnings had met or exceeded expectations, on average by 4%. As the earnings season has progressed, the tech sector is showing impressive signs of strength and predictability in the underlying companies’ business. Startups benefit from a booming public market for three reasons.
First, strong earnings buoy public technology share prices which drives M&A. The chart above shows the relationship between beating earnings and Enterprise Value to Trailing-Twelve Month Revenue Multiple (EV/TTM Rev). The correlation exceeds 0.53, indicating a moderately strong connection. As a consequence of higher stock prices, stock increases in value and cash becomes easier to raise and relatively less expensive, both of which entice tech publics to acquire startups, extending the current vibrant M&A market.
I’ve listened to thousands of fundraising pitches in my six years so far at Redpoint. Some with demos, some without. Some with hockey-stick charts, and others just an idea. I’ll never forget one meeting when the founders presented an entirely hand-drawn deck on 12 pieces of paper. The extent of founders’ creativity is hard to over-state.
Most founders do cover the essentials of a pitch in their presentations. But what distinguishes the best pitches? It’s a question I hear all the time from founders looking to polish their pitch.
Customer Success is a relatively new discipline in the Software-as-a-Service world. Consequently, there are many unanswered questions about how best to build and manage great Customer Success teams for SaaS companies. Because the financial impact of a great CS team is compounded monthly and can meaningfully increase the growth and decrease the cash needs of SaaS startups, it’s critical for CS leaders to get it right.
Last night, I attended a dinner with many heads of Customer Success from prominent valley SaaS companies. We spoke for quite a while about the best way to structure and motivate Customer Success teams to balance customer care and account growth. One VP of Customer Success described an innovative approach to managing this balancing act.
One of the most important changes is the workplace in the last 20 years is the notion that most employees are free agents. We are hired and fired and resign at will. It’s a markedly different era than the career salarymen of IBM’s heyday who remained with the company for decades from college graduation through retirement. In this highly-competitive talent market, where every employee is a free agent, hiring and retaining talent has become a key strategic advantage.
I’ve never paid much attention to earnings reports in the past. But as I’ve been analyzing the tech industry more and more, and the stock market has begun to surpass record highs, I’ve been wondering whether the persistent bull market in tech is healthy. Or at the very least, whether the companies pushing the industry forward are able to understand the environment and their businesses well enough to meet the commitments they make to public market investors.
“Advice is one person’s experience generalized”, an entrepreneur told me once. “It’s a single point of view with all kinds of survivorship and attribution bias. Advice can be a terribly dangerous thing, because it can be used as a shortcut for thinking.”
When I asked how he responded to requests for advice, because as a successful entrepreneur he was often solicited for it, he replied that he first shared the structure and the framework he used to look at the problem. Only after discussing that, did he reveal the details about he and his team had arrived at a decision.