Co-written with my colleague Neeraj Agrawal
Mobile could be considered the largest technological shift in history. Many of the largest outcomes in venture capital in the past 15 years have come from mobile-consumer companies: Facebook (which was famously slow to embrace mobile but now has 82% of its ad revenue coming from mobile) is the largest public company created in this period and now has a $338 billion market cap. WhatsApp, which was purchased by Facebook for $19 billion, represents the largest-ever acquisition of a VC-backed company.
And currently, the three highest-valued private companies, according to data from CB Insights, are all purpose-built for mobile: Uber, Xiaomi, and Airbnb. It’s well-known that mobile has crossed desktop PCs in terms of number of users–2014 was the first year this was the case–and the time spent on mobile devices is dominated by apps; 86% of time spent on a smartphone is in-app. Based on the trends we are seeing, desktop web traffic is now flat or declining. Instead, growth is being driven from mobile initiated sessions.
In the B2B world, however, the mobile juggernaut hasn’t generated the same level of interest and financial activity. If you take a look at our SaaS Success Database, none of the companies listed could reasonably be described as “mobile,” with the potential exception of TOA Technologies, a field-service management company founded in 2003 that Oracle bought for $550 million.
Why is this? Consumers gravitated towards mobile-first experiences over the last decade as early apps and services allowed them to operate their lives from their pockets. Smartphones did more than just replace the PC in many cases; they also brought technology to those who could not afford a computer or Internet access. What’s more–and what intrigues us as business-software investors–is that the leading mobile-first consumer businesses were so far ahead of the curve that they were forced to build their own tools to analyze and engage with all these new users. There wasn’t a market for the segmentation, study and reactivation/re-targeting of mobile users, as there is on the non-mobile Web, because only about ten companies initially needed such solutions.
This mirrors what happened in the initial days of the Internet. Businesses like Yahoo, Ebay and Hotmail created a significant amount of value in the consumer world, but it took another decade before there were enough such companies, operating at a large scale, to support sophisticated B2B companies to help them further engage users and grow revenues. Eventually, though, B2B companies like Omniture*, ExactTarget* and Responsys stepped in to fill the void.
We feel that the same thing is now poised to happen on mobile. We’ve seen mobile really cross over to become a mainstream core competency for almost all consumer-facing businesses in the last year. Businesses across industries, from retail to consumer products to insurance and banking, have recognized that mobile needs to be a core part of their overall business strategy.
*For a full list of all Battery investments and exits, please click here.
Co-written with my colleague Neeraj Agrawal and originally appeared in Forbes.
How do you build a billion-dollar SaaS enterprise software company? For one thing, you might start with a CEO who looks less like Box’s youthful Aaron Levie and more like Salesforce’s Marc Benioff—and stick with him for the long term. The current obsession with millennials running things doesn’t pencil out when it comes to one particularly important slice of the tech economy.
We recently analyzed the people running the 65 leading public and private companies in our SaaS Success Database, a list we first published earlier this year. It includes companies with a realized exit of at least $500 million and private companies valued north of $1 billion. Some 60% of the founding CEOs at these companies—all standouts in their respective markets–started their companies while in their 30s, while nearly 20% did so while over 40. Benioff was 35 when he left Oracle to start Salesforce; only 20% of the executives on our list were in their 20s, like Levie, and college dropouts like the Box founder were even more rare.
Co-written with my colleague Neeraj Agrawal and originally appeared in TechCrunch.
What does it take to build a billion-dollar SaaS enterprise-software company? We gave a 30,000-foot answer to this complex — and fascinating — question in a recent TechCrunch post, The SaaS Adventure.
To recap: We’ve observed seven key phases in most SaaS companies’ go-to-market success. Most of the phases center around a mantra we call “triple, triple, double, double, double” (T2D3 for short), referring to a company’s annualized revenue growth.
We dubbed this journey the “SaaS Adventure,” which is broadly how we view the job of a VC: to serve as a more experienced travel guide to SaaS companies in their climb to the billion-dollar summit and, hopefully, beyond.
We got a very strong response to the SaaS Adventure post and the T2D3 concept. We were also, at the same time, impressed with fellow VC Aileen Lee’s original unicorn-company analysis, which she just updated with some new lessons last month. All this spurred us to conduct a more in-depth analysis of SaaS companies.
Sales and marketing. Marketing and sales. They are often mentioned in the same breath because of their intertwined purpose. Marketing builds the funnel and sales moves its contents along. They have grown increasingly close together in recent years with the lines of demarcation between each blurring, and yet remaining distinct. The consistent theme for both sales and marketing is that the importance of software solutions has only gone up and to the right.
Sales and marketing SaaS applications have collectively accrued over $72B in value over the last 15 years and it doesn’t seem to be slowing down(a). You can see in the chart below the split by (primary) buying decision maker(b).There are quite a few reasons for this significant value creation, but one of the main ones is that these sales and marketing applications can be directly tied to revenue with a demonstrable ROI. Before implementation and after implementation. See what it does to revenue. Revenue up. Revenue good.
What’s fascinating to me is that while these SaaS applications are actually both tied to, and integrated with, one another, and they grew up around the same time, sales and marketing software took very different initial approaches to addressing their markets and are now meeting in the middle.
Here is a copy of the webinar that I presented with the Mattermark team on April 30, 2015. Thought it might be interesting for others that couldn’t join the webinar.
Let me know any comments that you may have — and just know that if you’re looking at it through Slideshare 1. I don’t blame you as it’s a huge file and 2. You’re missing the animation from a few badass GIFs
CEO of Salesforce, Marc Benioff, and Frank Underwood discussing ways to deal with RelateIQ
Sometime in the early part of the previous decade, Salesforce went all Frank Underwood on its direct competitor, Siebel, and took the CRM market before Siebel even really knew they were in competition. It was quick and it was decisive, because it was not just a competition on product functionality and innovation, but instead Salesforce was introducing a fundamentally new delivery model and cost structure with software-as-a-service. This caused an avalanche that ultimately led to the death of the once mighty Siebel, a company that Deloitte previously recognized as the Fastest Growing Company in US History.(a)
Similar narratives have played themselves out in SaaS vs. On-Prem battles over the last decade including Workday vs. Peoplesoft, Zendesk vs. RightNow, ServiceNow vs. BMC, AppDynamics*/New Relic vs. IBM (Tivoli)/CA (Wiley).(b)
But as soon as you seize the throne, you’ve got to worry about people coming for you. Some challenges are nuisances and some are real shots at the top.
In House of Cards, Frank Underwood taught viewers that every kitten grows up to be a cat. They seem so harmless at first—small, quiet, lapping up their saucer of milk. But once their claws get long enough, they draw blood. Sometimes from the hand that feeds them. For those of us climbing to the top of the food chain, there can be no mercy. There is but one rule: hunt or be hunted. (more…)
Successful SaaS companies over the course of the last decade have made it in vogue to pray at the altar of per-user pricing. It makes sense – Salesforce, ServiceNow, Workday and Zendesk all price on a per-user basis and those are flashy public companies.
Basically, is per-using pricing Justin Bieber in 2010 and we’re headed to Justin Bieber in 2015? Like at first everyone was like “huh what is this per-user SaaS thing” and then a bunch of young kids were going nuts for it and you were like “oh hm that thing won’t go away” but you still dismissed it and then you were like “hm that’s a catchy per-user SaaS song” but now you just wish it would go back to Canada(a). Or is it more like Bruno Mars where it followed the same path(ish) but instead of wanting it to go back to Canada, you want per-user SaaS to play back-up on a song with every hip-hop artists that hasn’t been relevant since 2000? Hang with me – this is going somewhere.
Per-user pricing may actually hurt your business according to this study by McKinsey (and chart below).
So this is my “Hello, World” post trying to outline what I’m doing here. And why this is something of a hybrid male Pinterest with a blog down the center. The answer to both is — I want this to be a different than what I’ve seen from other VC blogs. I’m not sure what form factor it’ll take going forward but there’s a lot of people’s blogging style that I have a lot of respect for and that you’ll see aspects of in my writing. People like my Battery colleagues Neeraj Agrawal and Roger Lee, fellow VCs Tom Tungusz, Dave McClure, Bill Gurley and Ben Horowitz and then other humans like Bill Simmons, Amos Barshad, Jon Stewart and Chuck Klosterman.
So it’ll evolve and I’ll improve but my main focus will always be some mix of entertainment and insight, targeted at people that care about the software ecosystem (particularly current or future entrepreneurs).
And always let me know what I can do better.