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Disrupting Multi-billion Dollar Markets
 

Disrupting Multi-billion Dollar Markets

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Learn the 5 characteristics of a disruptive company.

Learn the 5 characteristics of a disruptive company.

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    Disrupting Multi-billion Dollar Markets Disrupting Multi-billion Dollar Markets Presentation Transcript

    • Disrupting multi-billion dollar markets Shawn Price President, Zuora Email: Shawn.Price@Zuora.com Twitter: @ZuoraPrice1
    • Characteristics of Disruptive Companies?2 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • The World Has Shifted Why Buy Products? When You Can Subscribe to Services?3 Copyright 2012 Zuora Inc. | Confidential & Proprietary 3
    • Recurring Revenue Model is Being Rewarded IPO Acquisition 12x 9x 9x Recurring Transaction 6x 10x 6x 5x 3x 4x Valuations (Revenue Multiples)4 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Observation 1: Business and Operating Model is Different5 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Disruption Requires a Fundamentally Different Business Model Subscription Commerce Monetizing Customer Relationships Sell Units Why? Customer in the middle. Pay-as-you-Go Pricing Plans Price Per Unit Why? Flexibility, Editions, Try before Buy. Multiple Orders Over a Lifetime One-Time Orders Why? Add-ons, Upgrades, Renewals. Forced to Pick a Sell to Consumers & Businesses Customer Why? Support B2C, B2B and B2Any. Segment Simple Complex, Interrelated Bookings, Financial Billings, & Revenue Metrics Why? All metrics are connected.6 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • The Three Metrics that Matter Retention Rate Recurring Profit Margin Growth Efficiency How much of your ARR less Churn How much does it ARR you keep less Non-Growth cost you to acquire every year. Spend $1 of ACV The metrics for Cloud computing is fairly different from traditional enterprise software. Top 10 Laws for Cloud Computing7 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • The Three Key Metrics in Action Annual Recurring Revenue $100 Churn (10) Retention Rate Net ARR 90 COGS (20) G&A (10) R&D (20) Recurring Profit Recurring Profit 40 Margin Growth (40) Growth Efficiency Index Net New ARR 40 Ending ARR $1308
    • Three Examples 2001 2002 2003 2004 Ending ARR $37 M $70 M $129 M $231 M Growth Efficiency 0.93:1 0.80:1 0.75:1 0.76:1 Renewals 83% 83% 83% 83% Recurring Profit 3% 41% 58% 61% Margin9 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • 2001 2002 2003 2004 Ending ARR $22 M $43 M $71 M $105 M Growth Efficiency 2.02:1 1.65:1 1.28:1 1.26:1 Renewals 86% 86% 86% 86% Recurring Profit (27%) 6% 35% 47% Margin10 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • 2001 2002 2003 2004 Ending ARR $40 M $73 M $108 M $147 M Growth Efficiency 1.41:1 1.90:1 2.15:1 1.62:1 Renewals 92% 92% 92% 92% Recurring Profit (29%) (16%) 19% 43% Margin11 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Best Practice Model Growth Efficiency 0.75:1 1.26:1 2.15:1 1:1 Renewals 83% 86% 92% 90% Recurring Profit 58% 47% 19% 50% Margin12 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Observation 2: Churn Must Be Managed From The Start13 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • The Impact of Churn 100.0 90.0 80.0 Revenue in Millions 70.0 Churn Rate 60.0 5% 50.0 10% 15% 40.0 20% 30.0 20.0 10.0 0.0 1 2 3 4 5 6 7 8 9 10 Years14 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Observation 3: Meet Market Demand to Maximize ACV and ARR15 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Match Buyer Preferences SaaS Cloud Earned loyalty, Try before buy Non reservation, elastic capacity, monetize usage Digital Media Consumer Ad model, Own end-Point, Buy now, subscribe now Direct monetization Telecom No longer a captive market, Acquire content16 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Compare Disruptors and Incumbents EMC vs. Box Old World New World Is EMC engaging anyone under age 35?17 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • BMC vs. Zendesk Old World New World18 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Observation 4: Monetization and Customer Acquisition Strategies are Different19 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Monetization Strategies Strategy 1. Promos Revenue 2. Billing frequency Growth Churn 3. Upgrades Lower Customer Defense 4. Add-ons Acquisition 5. Usage Costs Competitive 6. Volume/Tiered Advantage Market 7. Regional Differentiation20 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Observation 5: Relentless Focus on Customer Success21 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Growth or Customer Success?22 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Disruptive Companies Answer 3 Questions How Do We Help You Grow? Do We Make Your Processes Better? Do You Use Our Data to Make Decisions?23 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Disruptive Companies Are Built to Continuously Service Customers Instrumentation Free Trial Upgrade to Paid Renew Subscription Add New Service Upgrade to Premium24 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Parting Words25 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • Innovation = Experimentation Experimentation Implies Failure Viable to Valuable26 Copyright 2012 Zuora Inc. | Confidential & Proprietary
    • You miss 100% of the shots you don’t take. Wayne Gretzky Shawn Price Shawn.Price@Zuora.com27 Copyright 2012 Zuora Inc. | Confidential & Proprietary