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Startup Genome Report: ESSENTIAL Reading for Internet Startups

I’m just absorbing the wealth of information contained in the recently published Startup Genome Report from the folks at Blackbox. This group’s stated aim is to increase the success rate of
startups and accelerate pace of innovation around the world by turning entrepreneurship into a science
: or put more simply, to distil the culture and ambient knowledge of the world’s most successful internet companies and Bring Silicon Valley To The Rest Of The World.

Take a look at the infographic below, and then I highly recommend you download the report. Anyone doing an internet startup needs to read this, whatever their stage or experience: the accumulated “secret sauce” of the Valley is starting to be codified. Jeez this world we’re in is accelerating…

Startup Genome Report

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Microsoft Release Windows 8 Preview

Last week Microsoft released the first preview of the Windows 8 user experience last week: see 5-min video on YouTube at: http://www.youtube.com/watch?v=p92QfWOw88I

Summary: Major changes from  the Windows 7 UI, designed primarily for a touch-based UI but borrowing and extending the “tiles” metaphor from Windows Phone 7. The UI is mainly built in open-standard web technologies: HTML5 and Javascript – which has brought into question to future of proprietary Silverlight and .NET UI components (WPF).

(True to form, from the comment at the end MS still seem intent on swimming against the tide and talking about “Slates” rather than “Tablets” for touchscreen devices).

See also: http://www.pcworld.com/businesscenter/article/229519/microsoft_windows_8_demos_spur_developer_worry.html for commentary on how this has been received for the MS developer community.

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SaaS Business Model Fundamentals – notes from AATC Session

Feet just about back on the ground after San Fran the week before last. Useful conference to benchmark where the industry (and Silicon Valley) is at currently, and also great networking – met people from all around the world who are pushing forward in the SaaS industry.

The most valuable session from the conference for me was “SaaS Business Fundamentals” featuring the CFOs of three leading SaaS businesses: Marc Linden, CFO, Intacct, Tyler Sloat, CFO, Zuora and Mark Symonds, President and CEO, Plex Systems, and moderated by Robert Hull, CFO of Adaptive Planning.

(Slides and videos from the conference can be found at http://siia.net/aatc/2011/presentations.asp)

My (sketch!) notes from the session are below.

Key Metrics:

  • ACV (Actual Cash Value)
  • Run rate
  • Churn by revenue
  • Churn by customer numbers
  • Pipeline size
  • Gross margin (not ebitda)
  • CAC (Customer Acquisition Cost)
  • Customer lifecyle value over expected life (assume 7 years was the consensus)

Given all of the above, you can then calculate Payback Ratio – see commentary from Josh James, CEO of Omniture about the “magic number” . Fundamentally: if you can get payback period < 1 year => no limit on sales & marketing spend.

Generally keep prof services numbers separate from SaaS licence revenues.

Growth rates: does CAC change as business ramps? Keep an eye on this.

Get a handle on sales cycle:

  • Total pipeline time
  • Total close time
  • Note that investment in marketing will often yield results next quarter or beyond

Sales Strategies / Channel:

Channel vs sales team vs direct? Obviously depends on the product, but still unclear – interesting session on the growing field of RPM (Revenue Performance Management) from companies like Eloqua and Marketo indicated.

  • Align with channel – understand economics of the whole chain.
  • Think about implementation support for partner.
  • Who owns the customer?!
  • Suitability of Channel depends on deal size and product complexity.

How to internationalize?

  • Localize first, get reference accounts then scale.
  • Localized support in same language /timezone
  • Data sovereignty issues
  • Speed / performance issues
  • Big costs ahead of curve to invest in new geography
  • Get strong local implementation partners.

Then some Q&A:

Q: When evaluating CLV do you measure full value (eg referrals?)

A: No

Q: How do you increase licence fees?

A: Managing increases in licence fees are important: eg add ons. Best strategy is to sell to installed base at special rate.

Q: What are the inputs to forecasting models?

  • drivers to sales model
  • cost model
  • build up quota attainment
  • forecast at point of measurement

Q: What proportion of ongoing spend goes to product development?

A: Varies by stage of lifecycle of the company. See Opexengine for reports. % of revenue is one that is used. Depends on what kind of product you’re selling.