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7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
7 Secrets of SaaS Startup Success
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7 Secrets of SaaS Startup Success

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  • 1. 7 Secrets to SaaS Startup Success Building Your Company To Be The Next Salesforce.com Track: Force.com Entrepreneurs & ISVs
  • 2. Safe Harbor Statement “Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: This presentation may contain forward looking statements including but not limited to statements concerning the potential market for our existing service offerings and future offerings. All of our forward looking statements involve risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions proves incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. The risks and uncertainties referred to above include - but are not limited to - risks associated with possible fluctuations in our operating results and cash flows, rate of growth and anticipated revenue run rate, errors, interruptions or delays in our service or our Web hosting, our new business model, our history of operating losses, the possibility that we will not remain profitable, breach of our security measures, the emerging market in which we operate, our relatively limited operating history, our ability to hire, retain and motivate our employees and manage our growth, competition, our ability to continue to release and gain customer acceptance of new and improved versions of our service, customer and partner acceptance of the AppExchange, successful customer deployment and utilization of our services, unanticipated changes in our effective tax rate, fluctuations in the number of shares outstanding, the price of such shares, foreign currency exchange rates and interest rates. Further information on these and other factors that could affect our financial results is included in the reports on Forms 10- K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time. These documents are available on the SEC Filings section of the Investor Information section of our website at www.salesforce.com/investor. Salesforce.com, inc. assumes no obligation and does not intend to update these forward- looking statements, except as required by law. 2
  • 3. Session Agenda A New Model is Needed 60-Second SaaS Startup Test: Do You Have What it Takes? 7 Secrets to SaaS Startup Success On-Demand Startup Kit 3
  • 4. SaaS is the Future of Software Double the Opportunity in 2 Years IDC - Worldwide SaaS Revenue ($MM) $16,000 $12,000 $8,000 $4,000 $0 2006 2007 2008 2009 2010 2011 4
  • 5. Strong Momentum Across All Categories SaaS ISVs positioned for multiple opportunities Worldwide SaaS Revenue 14,000 Other Application “By 2012, more than 66% Software 12,000 of independent software Over 20% CAGR! Supply Chain Millions of Dollars vendors (ISVs) will offer 10,000 Management some of their applications 8,000 Office Suites optionally or exclusively 6,000 as SaaS.” Enterprise Resource 4,000 Planning 2,000 Customer Relationship Management 0 2005 2006 2007 2008 2009 2010 2011 Content, Years Communications and Collaboration Source: Gartner 5
  • 6. VC Investment Trends Confirm Shift to SaaS $425MM VC Invested in Salesforce.com AppExchange partners $902.6M 2007 SaaS VC 2007 Software VC -12% +27% $5.5B 6
  • 7. Software Is Failing Today’s SaaS Entrepreneurs A New Technology Model is Needed Your Real You Infrastructure Services Application Services Operations Services Business Services Business Network Security Authentication Ordering Value Storage Sharing Availability Provisioning Operating System Integration Monitoring Licensing Database Customization Patch Mgmt Billing App Server Web Services Upgrades Renewal Web Server API Backup Upgrades Data Center Multi-Language NOC Marketing Disaster Recovery Multi-Currency Sales Workflow Analytics Multi-Device Messaging Search 7
  • 8. Our Mission: Innovation. Not Infrastructure Us You Infrastructure Application Operations Business Services Services Services Services Innovation The Fun Stuff! App Server Security Authentication Ordering Web Server Sharing Availability Provisioning Data Center Integration Monitoring Licensing Disaster Recovery Customization Patch Mgmt Billing Network Web Services Upgrades Renewal Storage API Backup Upgrades OS Multi-Language NOC Marketing Database Multi-Currency Sales 8
  • 9. A Tale of Two Business Models Running a SaaS Company Also Requires New Business Thinking Traditional SaaS Model Software Model Revenue Revenue Time Time Large upfront revenue Small upfront revenue Volatile: Re-build every quarter Predictable: Recurring revenue Rewards hunting Rewards farming 9
  • 10. Operating Constants for SaaS Companies Economics of SaaS Model Changes Business Priorities Traditional Software Must Optimize: Revenue Fixed & Variable Costs SaaS Model Time Time-to-Market Realities of SaaS Model 1. Less upfront revenue Headcount: 2. Usage/transaction-based Needs to do more than 3. Renewal dependent “Keep the Lights On” 10
  • 11. A New Business Model Is Needed Old Rule Old Rule New Rule Rule Product Design Design for Complexity Design for Intuitiveness R&D Investment Portability, Multi-Platform Reliability, Security, Scalability Product Cycles 1-3 Years 3-4 Months Customer Experience Segmented / Fragmented Integrated Customer Segment Pick and Focus Go after all segments Customer Acquisition Model Outbound Inbound Customer Evaluation Model Analysts Community Marketing Investment Direct Mail Web, Branding Sales Model Field Sales 2- or 3 - Tier Sales Mix Few, Large Deals Transactional 11
  • 12. SaaS Startup Success: Do You Have What it Takes? The 60-Second Test 12
  • 13. Can you answer “Yes” to all of these? Is there a leader that owns success metrics for your SaaS business? Can you make product decisions based on real-time customer feedback? Do you offer a free trial of your solution that converts to qualified leads? Are you truly selling a service or just a product? Do you have programs that drive continual adoption of your products? Can your CFO forecast renewal rates and what their impact will be to revenues? Do you have an API or mashup strategy? 13
  • 14. Session Agenda A New Model is Needed 60-Second SaaS Startup Test: Do You Have What it Takes? 7 Secrets to SaaS Startup Success On-Demand Startup Kit 14
  • 15. Becoming a Successful SaaS Company More than just Technology; It’s the DNA of your Company Executive Management Product R&D Marketing Sales Service Finance & Accounting Partnerships 15
  • 16. 7 Secrets to SaaS Startup Success 1. “Make Leaders Accountable” 2. “Deliver Apps your Users will Love” 3. “Create a 24/7 Demand Generation Machine” 4. “Sell a Service, Not a Product” 5. “Make Customer Success a Religion” 6. “Develop Highly Disciplined Financial Processes” 7. “Take Your Place in the Mashup Universe” 16
  • 17. 1: “Make Leaders Accountable” SaaS Model Requires a New Type of Leader Clear No hedging! “no-software” On-demand is not a vision “backup strategy” “Ummmm yeah, maybe we should be Requires Metrics-driven a SaaS company.” technology AND management business model commitment 17
  • 18. 2: “Deliver Apps Your Users will Love” Adoption only dependent on your ability to delight users Which one would you use? 18
  • 19. Transforming How You Build Apps Listen to your customers’ mouseclicks! Exploit the SaaS model… Your R&D should be based on real usage metrics! Minimize reliance on anecdotal interviews and focus groups! 19
  • 20. 3: “Create a 24/7 Demand Generation Machine” What’s your strategy for lead acquisition, pipeline and loyalty? Awareness Purchase Loyalty Integrated Generating Buzz Free Trials & Reviews Campaigns 20
  • 21. PR 2.0: Build Awareness Across All Channels Traditional Analysts vs. Web 2.0 Universe OLD WORLD NEW WORLD C 21
  • 22. We Live in an Evaluation Economy How do you exploit a community of evaluators? 22
  • 23. Evaluators Demand a Free Trial 23
  • 24. There’s no such thing as a lost customer Re-Acquisition is all about the offer 24
  • 25. 4: “Sell a Service, Not a Product” What’s the difference? Traditional Must Optimize: Revenue Sales Efficiency Compressed Sales cycle On-Demand Cost of Sales team Time Sales Capacity Realities of On-Demand Model Pipeline per rep Territory coverage 1. Renewal dependent 2. Less upfront revenue 3. User/transaction-based 25
  • 26. Farming vs. Hunting Telesales call center vs. field sales army OR Sales Efficiency Sales Efficiency Inbound interest Outbound activity “One-call close” Longer sales cycles Low cost per rep High cost per rep Sales Capacity Sales Capacity Scale up easy Long on-ramp Virtual territories Patchy coverage 26
  • 27. 5: “Make Customer Success a Religion” From Adoption to Addiction Build a Customer Track Key Build Continually Success team Adoption Referenceable Evangelize (not “Customer Metrics Customers ROI Service”) "If you leave your customer's success to chance, you are giving up control over your own success." - Geoffrey Moore 27
  • 28. Turn your Customers into your Sales Army Build referral programs around your biggest fans Third-Party Customer Satisfaction Results Will continue to use 93% Would recommend to a colleague 94% Have already 77% recommended to a colleague Source: Independent survey by Customer Sat in April 2005. Percentages for “Will continue to use” and “Would recommend to a friend” reflect respondents indicating “Definitely will” or “Probably will.” 28
  • 29. 6: “Develop Highly Disciplined Financial Processes” SaaS model rewards close attention to unit economics Predictable revenues (and cash flow) Controlled expenses Strong ROMI Scalable sales team High customer loyalty 29
  • 30. The Basics of the SaaS Financial Model Previous Year’s Run Rate – This Year’s Attrition + This Year’s New Recurring Revenue (ACV or “CMRR”) = This Year’s Run Rate 30
  • 31. The Basics of the SaaS Financial Model 10 million previous year – 1 million in non-renewals + 2 million new revenue (ACV) = 11 million new run rate 31
  • 32. Scaling the SaaS Business Model 80 million previous year – 0 million in non-renewals + 20 million new revenue (ACV) = 100 million new run rate 32
  • 33. Scaling Up the SaaS Business Model GOAL: 20 million new subscriptions 20 reps closing 1 million each? 40 reps closing 500,000 each? What kind of company are you? 80 million previous year run rate 320 employees 40 quota carrying sales reps 80 person sales organization Avg Sales Price? Sales cycle? 33
  • 34. A Closer Look at Attrition Assuming a 100M run rate, what’s your growth/attrition mix? GROWTH % 100 0% 5% 10% 15% 20% 25% 0% ATTRITION % 100 105 110 115 120 125 5% 95 100 105 110 115 120 10% 90 95 100 105 110 115 15% 85 90 95 100 105 110 20% 80 85 90 95 100 105 25% 75 80 85 90 95 100 34
  • 35. Unit Economics: Single SaaS Customer Avg relationship length? 35
  • 36. SaaS Business Model: Crossing The Desert • Cash Flow vs. Top-line Growth? • Fixed Costs & Cash reserves? • Unit economics? • Renewal Rate & Attrition over time? • Outside capital infusion? 36
  • 37. 7: “Take Your Place in the Mashup Universe” What is your API strategy? Re-use, don’t re-build API-centric development Exploit API-driven channels Build Developer programs 37
  • 38. QUESTION & ANSWER SESSION 38

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