Posts Tagged ‘measurement’

Q3

October 4, 2010

it is that time of the year

everything that has waited since the end of july is now coming back

it is the end of the holidays

and time to loose some weight

but it is also time to realize how to budget better

i am not talking just about personal budget

talking about startup budgets:

  • q3 is just another quarter.   NOT

back in December when it was time to plan a budget q3 looked very innocent. another quarter with 20% growth above q2. does that work for you?

well, in my portfolio and especially over the last 3 years, q3 has been very weak. and this year it affected almost every single company and in a big way. why?

  • this year, the Jewish holidays were in September and all of them were in September. crucial work was lost during the build up period of the last 4 weeks

more importantly

  • August is now a vacation month in the US, and not just in europe. while it is nice that we are learning from the french to rest and enjoy our families, it is important to realize that q3 may be as weak as q1 if not weaker.

personally i feel a bit ashamed as i tool a lot of vacation time this summer (mondial in south Africa with Gil, a wedding in the Philippines). but for those of you who work harder than me, and there are quite a few out there, please remember to plan for a weak q3, and come October you will be thankful.

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

if you believe in cloud computing, which stocks should you own?

February 21, 2010

this are the ones i am thinking of:

google

rackspace

amazon

mellanox

netezza

here is their 1-Year performance

here is their 2-Year performance

quite different

would love to hear your thoughts

founders, beware

January 20, 2010

every once in a while you read an article or a book that changes the way you think.

almost like falling in love, you think of it several times a day.

a month later you are a changed person.

please read this blog post. it was published 8 weeks ago, and its comments are very interesting as well. it claims that israeli startups fail because they do not understand and do not invest enough in marketing.

steve duplessie, from my experience is:

  • smart
  • a thought leader
  • like many great people, not full of himself

a great book on a related matter is 4 steps to the epiphany, by steve blank, founder of… E.piphany, once a big company.

here is an abstract, from chapter 2 of the book

my comment to founders and management, before you start spending like crazy on marketing:

  • try to create some measurements. cost per lead is a great start
  • you will not win ‘the game’ if you do not build the best customer acquisition engine in the industry. no matter how good your product is
  • engage with customers. listen. challenge your assumptions. engage with customers some more
  • build a portfolio of marketing activities and test which ones work. start this early and slowly
  • when you spend big, which you should, ask yourself: ‘am i  in good position to know what i am getting for this?’

since you are by now doing something repeatable and scaleable, it is less entrepreneurial.

so founders, beware.

2010 budget

November 30, 2009
below is a letter from me to one of our CEOs re 2010 budget. but i think it is good general practice.
1. SLOW
go slow until your figure things out, then go fast. we are in a learning and discovery phase, the market is in motion. let’s learn before we spend big.
marketing budget at this point in time comes to mind. let’s set ROI goals for $ in marketing and leads. let’s take a phased approach. do something. analyze, learn, do again. we will win by how many cycles we have, not how hard we try in each cycle

2. STRETCH money over time
this round should last for at least 10 quarters, not 7.
if it last for only 7, you need to fundraise in 5 quarters. perhaps 6. to have an up round, say at 2x valuation,  you would need to get revenues up 8x in less than 2 years. hard to do.

3. EXPOSE your assumptions
to start communicating about the budget, start communicating about the assumptions.
there are no more than 10 main assumption that drive all else. can we start communicating about them?

end of daylight-saving time – שעון קיץ, how depressing!

September 30, 2009

we set the clock back this week here in israel.

real world leaders.

it is really depressing to see the sun set in the middle of the working day.

discussing the issue with Lior, my best friend and Carmel, my daughter, the issue of religious people and why they want שעון קיץ to end quickly, and other special interest groups came up. why do they want or do not want it?

a few more thoughts:

sunrise

  • why is it called daylight savings time. what are we saving? daylight? time?
  • i would love to save time
  • religious people want to end DST early. is it because of סליחות? or till when to fast in yom kippur?
  • what was the claim of ארגון אמהות עובדות back in  the late seventies?
  • why do we need to be special and not just align with the European system? last sunday in march till last sunday in october
  • even better, adjust to central european time CET all year

i think people argue about this topic forgetting the real considerations.

the name DST stands for saving daylight, useful in agrarian societies.
The original motivation in israel and many other countries (e.g India potentially – it was to be widely accepted in 2005 – i stand corrected and this did not occur) was to save energy.

but in advanced economies, household energy usage pattern has changed. in the past most of our use was lighting and delaying the sunset helped save energy. now, most of our usage is A/C and delaying the sunset by an hour means MORE energy usage. after asking a lot of people about this, i finally ran into this. this spicy nodes way of presenting the topic is cool, too.

pitching a VC – mistakes no one tells you about

September 21, 2009

sandy koufax the pitch

i have been a VC for over 10 years. have been in over 1000 first time meetings

the purpose of this series of posts is to share with you some thoughts about what i consider mistakes entrepreneurs make in a first time meeting.

press here for the entire series.

often, these items are not discussed and the knowledge that can be shared is lost

that is why i am writing

it seems that the gap between entrepreneurs and VCs especially in israel is growing. and it is Gemini’s role and mine to try and reduce it through blogs and events. i would like to think of the israeli hi-tech sector as a big virtualized company. i am right now in the finance department of this virtual organization. most entrepreneurs are in r+d or biz dev or product management. the fact is, this organization is under threat. it does not innovate well enough. it does not scale. who will suffer from this? our country and our kids. so this is a small attempt to help us work better together

i do not own ‘the truth’. to many of these ‘rules’ there are some very smart and experienced people who will advice you to do exactly the opposite of what is said here. i will try and present an alternative argument as part of good dialectics.

i strongly recommend a book by guy kawasaki called ‘the art of the start‘. many of my thoughts on these and other ‘VC 101’ issues are influenced by his ideas.  some have evolved, some have been polarized.

what is the purpose of ‘the pitch’?

to engage, and get interest for more meetings, a process. so if you do a good enough job presenting your idea, there will be more meetings:

happy new year

September 21, 2009

it is the start of the new year

and with it, new year’s resolutions

this is from Daniella London Dekel, well known for Chamudi

happy new year

new year resolution daniella london

if i will get requests, i will attempt translating this

can’t anyone here play this game?

October 15, 2008

quote from 1962 mets coach, Casey Stengel. lost over 120 games

NGOs are not well run

key takeaways:

organization must make path to management short. not until you are 50

subscription as a revenue source. what do they get in return? how do you make it effecient.

discussion:

too much time on governance issues.

over layered. too many committees. take too much time. 65%. time to innovate?

labor intensive approach to decisions.

boards

roles and responsibilites not defines

‘set the tone’ employees look for leadership of which they are proud.

board school.

measuring effectiveness. on projects, good job. on organization, not so

formal ceo evaluation. critical, well defined and understood

modeling behavior – non hostile behavior

are boards enabled by the staff? staff needs also to create friction. if they do not disagree, boards perpetuate their power

donors on the board? if they are experts, yes? o/w perhaps advisory board