Archive for the ‘SaaS+Cloud’ Category

which would you rather be?

September 5, 2011

in life, and in your startup, what would you rather be?

this earth digger?

moving earth one bucket at a time

or

    this guy, who skates almost frictionless on ice?

its kind of a loaded question.

yet, it is surprising how often in life and in business we choose the digger.

in Start-up life, as en entrepreneur or CEO, there are several ways you can make your life easier.

yet some people choose to dig a hole rather than skate.

the most common way to make life hard for you self is in your business model.

the most common mistake that is still common amongst early-stage SaaS startups is to go for direct sales:

  • it is costly.
  • it takes a long time to figure out
  • it changes the DNA of your company early. how easy is it to change later to Self-Serve after your VP sales has dedicated a year to sell direct.
  • it effects the leads you seek, and their costs
  • it gives a false sense of control
  • oh yeah, and the switch later, is really painful

most of the above applies to our bad-traits as individuals, too.

SaaS and usage, a key success factor

August 19, 2010

Do you know who is using your software?

as a provider of SaaS software, you should be concerned with who uses your software.

And how much

first, a step back

there are many advantages to the SaaS model:

  • it scales
  • it can be inexpensive in the early stages, which are very risky, to understand if there is demand for your service
  • more importantly, you can find out predictable customer acquisition costs with a reasonable investment

therefore, many VC software investments are going into SaaS and cloud oriented business models

consequently, a lot of money is spent on getting customers

digital marketing, buying keywords, diverting traffic and numerous other efforts (some in the physical world)  focusing on creating leads and converting them to customers.

but then, what is next?

as the SaaS oriented companies mature, their key challenge becomes not just cost-per-lead and optimizing conversion ratios in the funnel.

what we have given up with the SaaS model, is direct contact with end users.

so, are we all to become like 3M, a great company, without intimate knowledge of its end-users?

one of the key challenges today in SaaS companies is what is driving usage.

i always like things that get high usage. e.g. a pen that runs out of ink (where do all that other pens go?)

are your customers getting high usage out of your system?

as an investor in several SaaS companies (i think i have the largest portfolio in Israel, including CloudShare, SaasPulse, TaKaDu and Panaya) i would like to point out several key issues that i see companies run into:

who are power users?

why are some users using less of the system and its features?

which of my customers is getting best bang for the buck?

getting insights into these issues is not simple if you did not plan for it in advance.

between managing growth, operations (we need to be up 24×7), and leads, i find that usage is often neglected

yet, understanding usage has important benefits:

  • it can become a competitive advantage. the process of building a ‘usage dashboard’ also creates barriers to entry.
  • it can impact your digital lead machine: segmenting your customers and understanding where to find more happy ones through the usage model can potentially reduce marketing costs considerably
  • if you sold 10 seats, but only 3 are highly used, the likelihood of growing within an account is not high. as many SaaS models penetrate enterprises at a departmental level, or low in the organization, they are highly dependent on growth within existing accounts. increasing the ratio of power users against seats sold can increase cross-sale and up-sale ratios. this is very attractive to a SaaS based start-up
  • it affects churn. detecting unhappy customers, or ones that are not using the system to their advantage may reduce variable costs for a while. However,  company valuation is highly correlated not just to operating margins, but also to low churn rates. to get the most out of the SaaS subscription-based model, the lifetime of a customer is crucial. if a customer is a user for 18 month or 48 month, has immense impact on profitability, cash-flows, and therefore, valuation.

i therefore claim that understanding usages is crucial. it can lower marketing costs, increase revenues from existing accounts, lower churn, and increase your company’s impact on its space.

However, it is not yet mastered in many SaaS start-ups.

SaaS moving from the edge to the core

March 8, 2010

Goldman Sachs IT spending survey our yesterday

i feel these kinds of surveys are a real important indicator of what is going one

the latest one by GS suggest that

  • Ongoing spending improvement
  • Normal seasonality expected in Q1
  • Pent-up demand for staffing, IT services strengthens – hardware remains in the top spot;
  • Survey highlights PC refresh, SaaS adoption – coming corporate PC refresh in 2H2010

for us SaaS lovers, please note:

of respondents:

24% are into SaaS

23% are agnostice

34% are not in favor of Saas

19% unwilling to consider Saas

considering the fact that SaaS started with SMBs, and that SaaS applications started in the “edge” or “shallow” in the organization, these are VERY encouraging statistics. “Core” SaaS apps such as accounting and billing are now ‘legit’

cloudy today, shiny tomorrow