What percentage of SaaS IPOs in the last four years have the founding CEOs of the business been CEO at the time of IPO?
62.5%. In about two thirds of SaaS IPOs from 2011-2014, the founding CEO is the current CEO.
Is there a meaningful difference between the equity stake of a founder who is CEO at IPO, and a founder who is no longer CEO?
One of the most important forces in SaaS today is the Consumerization of IT. Instead of a centralized IT organization deciding which products to buy, product managers and marketers and engineers and data scientists determine which products they think would serve them best and buy them directly, often using a credit card.
This movement is transformative and its impact is immediate. The chart above plots the median Average Revenue per Customer by Year of IPO for the 50 SaaS companies that have gone public in the past five years.
Each year, I do a retrospective analysis of this blog. This year, I found something unexpected. Like many other content sites, just a handful of posts on this blog generate the majority of the traffic. I’ve plotted the distribution of traffic by post above; it’s clearly governed by a power law. The top 2% of posts generated 19% of traffic, the top 10% account for 48% and the top 20% attracted 69% (Pareto would be vindicated).
Thanks to Bill Macaitis, current CMO at Slack and former CMO of Zendesk, who inspired and co-authored this post
When discussing customer success for SaaS startups, the conversation focuses mostly on retaining customers and reducing churn. These are two fantastic benefits with meaningful return-on-investment. But great customer success organizations can meaningfully impact another critical part of the customer lifecycle, customer acquisition, by catalyzing evangelists to refer new customers.
Let’s examine a hypothetical SaaS company that acquires 1,000 customers though sales and marketing. Assume a standard 15 month payback period implying a CAC of $1250 per customer or $1.5M in aggregate. Each customer pays $1k annually to use the product. If customer success can convert 1 in 10 of those customers to evangelists, each of whom refers only one other customer that year, the company’s CAC drops by a third.
Are startups growing much faster than they have in the past? The chart above plots the time required for startups to raise rounds at $1B or greater valuation, over the past ten years. The blue line is a logarithmic regression demonstrating the decrease from about 7.5 years to less than 2.5 years. The answer seems to be an unequivocal yes.
Are you a Barry, Jill, Buzz, Angel or a Devil? This is the question Best Buy store managers posed each time a potential customer walked into one of its stores when the company decided to segment its customer base in 2005. Barrys are high-income family men. Jills are soccer moms. Buzzes are gadget lovers. Angels are the best, most-profitable, customers and buy new products at full price. Devils, on the other hand, erode Best Buys’ profits because they use coupons, find the best deals and return products frequently. After launching this segmentation, restructuring its stores to meet the needs of these segments, and focusing on the profitable segments, Best Buy’s revenue increased 8%, an impressive figure for a retailer.
Yesterday, SAP announced it would acquire Concur for $8.3B, the single largest SaaS acquisition in history in dollar terms.
To put this acquisition in context, I looked at six other public-to-public acquisitions, where one publicly traded company acquired another. Because the acquired target is public, much of their financial information is readily available. As the chart above shows, the Enterprise Value/Trailing 12 Month Revenue (EV/TTM Rev) multiple SAP paid for Concur is tied for the highest among any public-to-public SaaS acquisitions.
Crisis in startups is inevitable. Products break, deadlines are missed, legal issues arise, customers raise issue, employees quit, bad press circulates. To survive, founders and management teams have to respond well and quickly. In Managing the Unexpected, two University of Michigan Professors examine the characteristics and behaviors of great teams during crisis. Factory workers, miners, fire fighters, aircraft carrier flight deck hands, railroad operators and many others.
The authors call these teams HROs for High Reliability Organizations. HROs are distinguished by an ability to handle novel, risky situations. HROs combine distinct values and a certain type of leadership.
This post is part of a continuing series evaluating the S-1s of publicly traded SaaS companies in order to better understand the core business and build a library of benchmarks that might be useful to founders.
Box is a 1000+ person company providing collaboration and document sharing software. We had previously analyzed the business when the company filed their first S-1. Yesterday, the company filed an updated version of their S-1. In the past two quarters, some of the key financial characteristics trajectory have improved materially.
Growth is king in today’s public markets. Most of the SaaS IPOs we’ve analyzed have traded growth for profitability and they have been rewarded handsomely for it. For the large tech companies, this trend is no different. The public market prizes growth.
Some public tech companies sustain growth through internal efforts, but many use their cash reserves to acquire fast-growing startups. These public market cash reserves total $430B or so across the top 250 or so public tech companies, a massive war chest that will fuel startup M&A in 2015.