The SaaS Success Database
What does it take to construct a billion-dollar SaaS enterprise-software firm? We gave a 30,000-foot reply to this complicated — and interesting — query in a latest TechCrunch publish, The SaaS Journey.
To recap: We’ve noticed seven key phases in most SaaS firms’ go-to-market success. Many of the phases focus on a mantra we name “triple, triple, double, double, double” (T2D3 for brief), referring to an organization’s annualized income development.
We dubbed this journey the “SaaS Adventure,” which is broadly how we view the job of a VC: to function a extra skilled journey information to SaaS firms of their climb to the billion-dollar summit and, hopefully, past.
We acquired a really robust response to the SaaS Journey publish and the T2D3 idea. We have been additionally, on the identical time, impressed with fellow VC Aileen Lee’s authentic unicorn-company evaluation, which she simply up to date with some new classes final month. All this spurred us to conduct a extra in-depth evaluation of SaaS firms.
Our new evaluation, which is featured partly right here, supplies high-level takeaways, in addition to a extra nuanced image of the climb to SaaS success — all of which we hope will assist new entrepreneurs style their very own profitable climbs.
Consider this as an expedition map; what mountaineers prefer to name “beta”: worthwhile recommendation to newcomers making an attempt a specific climb. We plan on refreshing this information set periodically with accompanying evaluation.
So right here we introduce the SaaS Success Database: a round-up of 66 main SaaS firms, public and non-public, which have outlined the business. The database encompasses firms with a realized exit of greater than $500 million (both within the public markets or through an M&A transaction, as of June 30) and personal firms valued at $1 billion or greater.
The SaaS Success Database traces SaaS firms’ evolution again to their early days, after they have been often called Software Service Suppliers (ASPs). It consists of eight firms by which Battery was fortunate sufficient to speculate.
Twenty p.c of the businesses on our record have been based previous to 1997, however most have been established after that and earlier than the 2008 crash; 36.three p.c began up between 1998 and 2002 and 30.three p.c between 2003 and 2007.
These based on or after 2008 — AppDynamics*, Castlight Well being, Domo, Hootsuite, New Relic, Slack, Sprinklr* and Yammer — fired forward on all cylinders regardless of the robust economic system, reinforcing that it’s not often the market circumstances, however as a substitute the group and the product-market match that may result in success.
In future posts, we’ll deal with essential points surrounding every section of the journey, and speak to CEOs of a few of the firms on this database who’ve made the climb themselves. (We’ve already spoken to 2 of those profitable executives on video: Phil Fernandez of Marketo* and Jyoti Bansal of AppDynamics*.)
When it comes to who’s beginning these profitable firms, our evaluation suggests they’re largely based by groups: Two founders (comprising 34.9 p.c of the overall) was the most typical configuration for firms in our database, with 33.three p.c of firms based by three or extra individuals (as much as seven in our database). Surprisingly, these founding groups have been usually strangers: 60.zero p.c had no prior historical past of working collectively. Solely 31.eight p.c of SaaS firms on the record had a solo founder.
What sort of schooling and work expertise did they carry to the job? Did these founding CEOs stick round for the IPO or different exits? If not, what traits differentiated the brand new CEO at every of these exit levels? These are all factors we’ll dive into.
Subsequent, we’ll look at the businesses’ origins, addressing questions like geography, enterprise mannequin and promoting technique.
SaaS success seems to be much less Silicon Valley-centric than different areas of tech: practically 41 p.c of our firms have been Valley-based, adopted by near 20 p.c within the Northeast, 9.1 p.c within the Midwest, and a fairly even sprinkling between Texas, the Mid-Atlantic area, the Rocky Mountains and the Northwest. (Solely 5 firms hailed from Canada or different factors outdoors the U.S.)
Our prime SaaS gamers are likely to promote broadly throughout many industries (82 p.c), with the shopping for decision-maker for the product being both the CMO (27.2 p.c) or CIO (27.three p.c).
The remaining 18 p.c of the businesses we studied goal a selected vertical, like pharma (Medidata, Section Ahead, Veeva), healthcare (athenahealth), actual property (RealPage) and even super-specific verticals (Dealertrack for auto-dealership administration, Fleetmatics for fleet administration, OpenTable for eating places, or Q2 Holdings* for regional and neighborhood banks).
In future posts we’ll handle different questions from this section, equivalent to: Did these firms change to SaaS supply or begin off that manner, and the way does such a shift usually influence an organization’s future success?
Amongst public SaaS firms, is there a “sweet spot” for income per buyer? Ought to your SaaS firm goal to land a couple of whales or many smaller fish — and the way does every method influence subsequent development?
At base camp resulting in the ascent or exit, we questioned: Given a comparatively very long time to liquidity — 36.5 p.c of our firms which have both gone public or been acquired took greater than 10 years from founding to liquidity — does an extended (or shorter) climb correlate to different success metrics? What’s the everyday monetary profile of a profitable SaaS firm on the verge of a public exit? How does IPO day often go for prime SaaS firms? All are subjects we’ll handle quickly.
And what are the expansion prospects for the newly public firms on our record? Early evaluation exhibits it’s very robust, with solely 6.7 p.c of firms displaying year-over-year income development beneath 25 p.c on the time of IPO; 42.2 p.c, the most important group, have been firms roaring forward with greater than 100 p.c income development on IPO day.
The SaaS climb is arduous and stuffed with the surprising. No map can totally put together you for the improvisations essential alongside the best way, or provide the guts for the climb itself. However we hope the SaaS Success Database supplies worthwhile insights into constructing a profitable SaaS enterprise-software firm — together with all the weather of that trek.