This document summarizes an analysis of founding CEO versus professional CEO performance in the software as a service industry. It analyzes data from 48 SaaS companies that had exits from 1998-2009, comparing metrics like total investment, time to exit, and exit valuation between companies led by founding CEOs versus those led by professional CEOs hired later. It finds that companies led by founding CEOs generally had better performance on these metrics, even when accounting for biases. Possible reasons discussed include higher equity stakes and ownership mentality among founding CEOs.

1. Founding vs. Professional CEO Performance
Analysis in the Software as a Service Industry
Yujin Chung, Wharton School of Business, MBA’10
Professor David Wessels, Department of Finance @
Frank Chen, Partner @
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

2. Founding vs. Professional CEO performance analysis is a
well researched question…
• Founder-CEOs, Investment Decisions, and Stock Market Performance – Fahlenbrach, 2007
• “An equal-weighted investment strategy that had invested in founder-CEO firms from 1993-2002 would have
earned a benchmark-adjusted return of 8.3% annually. The excess return is robust; after controlling for a
wide variety of firm characteristics, CEO characteristics, and industry affiliation, the abnormal return is still
4.4% annually.”
• “[Founder-CEO firms] invest more in R&D, have higher capital expenditures, and make more focused mergers
and acquisitions
• …”founder-CEO firms spend up to 22% more on R&D and up to 38% more on capital expenditures than
non-founder firms”
• Factors Influencing the Choice Between Founder Versus Non-Founder CEO’s For IPO Firms – Jain, Tabak, 2005
• “Overall, our results are consistent with the notion that growth oriented IPO investors are more favorably
inclined toward founder CEOs whose career experiences have adequately prepared them to envision and
pursue innovation and growth strategies.”
• “The demand for equity financing is significantly lower for founder CEO firms. 34% of founder CEO IPO firms
issued additional equity within three years of the IPO compared to 45% of non-founder CEO IPO firms and the
difference is statistically significant.”
• “”…We find that founders with output-based career experiences are more likely to retain the CEO position at
IPO compared to founders with throughput-based career experiences.”
• “…”our results indicate that founders with experiences in product R&D are more likely to retain the CEO
position at IPO compared to founders with career experiences in other functional tracks.”
• “Not surprisingly, the median percentage CEO ownership in founder led firms is 18.96% compared to 3.60% for
non-founder led firms and the difference is statistically significant.”
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

3. …and we wanted to test the performance question in the
Software as a Service (SaaS) industry
• Analyzed historical funding and exit data of 48 firms in the Software as a Service Industry
with exits from 1998-2009
• 18 firms with Initial Public Offering exit, including Omniture (initially IPO, then
acquired by Adobe)
• 15 firms with Founding CEO’s; 3 firms with Professional CEO’s at time of IPO
• 30 firms with merger / acquisition exits
• 20 firms with Founding CEO’s; 10 firms with Professional CEO’s at time of exit
• Data sourced from publicly available investment and exit data
• Key assumptions
• Estimated valuation of first round of funding based on average valuation data across
all startups
• Estimated valuation at time of hiring of Professional CEO’s
• Survivorship bias: dataset ignores bankruptcies / failures
• Primary data sources
• Ventureexpert
• Capital IQ M&A screening
• Company 10-K’s, S-1’s
• Company press releases
• LinkedIn (CEO tenures)
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

4. Two types of analyses
Full Company Tenure Analysis Professional CEO Performance Analysis
Description • Analyzed metrics and performance for each • Based on CEO hiring date, company
company in dataset valuation estimated on nearest funding round
• Estimated first round valuation by assuming to CEO hiring date
first round funding represents 1/3 of valuation • For first round, funding represents 1/3
• Tagged “Founding CEO” vs. “Professional of valuation
CEO” for each company based on CEO • For second round, funding represents
history at time of exit 1/5 of valuation
• Calculated median performance for each • For third rounds and beyond, funding
separate data set represents 1/10 of valuation
• Valuation at CEO hiring date is then
extrapolated by assuming company value
grows or declines linearly between last
funding round and exit
• Based on updated valuation calculations for
Professional CEO’s, determined median
performance
Advantages • Straightforward performance comparison • More accurate performance comparison
between founding vs. Professional CEO
tenure
Disadvantages • Selection bias given actual hiring of CEO • Requires assumptions around estimating
signals inherently weaker firm company valuation at nearest funding date
and hiring date
• Professional CEO tenure inherently biased
toward slower growth given late stage of
company at time of hiring
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

5. Based on full company tenure analysis, Founding CEO’s
outperform Professional CEO’s on capital efficiency, exit
time to exit, and exit valuation
Total Investment Years betw First Exit Valuation
$39.0 $38.3
Investment & Exit $200.0 $178.0
$38.0 9.0 $180.0
7.9
$37.0 8.0 $160.0
Median Median
$36.0 7.0 Median $140.0
6.0 5.6 $120.0
$35.0
5.0 $100.0
$34.0 $33.4
4.0 $80.0
$33.0 $60.0 $48.1
3.0
$32.0 2.0 $40.0
$31.0 1.0 $20.0
$30.0 - $-
Founding CEO Professional CEO Founding CEO Professional CEO Founding CEO Professional
CEO
• Founding CEO’s have higher • Founding CEO’s are more • Founding CEO’s have strong
equity stakes and are more aggressive in finding product/market ownership identification and so
mindful of dilution fit and scaling business their initial desire high exit value
businesses
• Founding CEO’s have better • Higher equity stake implies greater
understanding true capital needs • Founding CEO’s have stronger incentive to negotiate more
regarding product cycle and incentive to exit effectively given aggressively
therefore manage more higher equity stakes
effectively • Founding CEO’s may have better
sense of market timing for exit
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

6. Based on full company tenure analysis, Founding CEO’s
outperform Professional CEO’s on value created and return
on investment
Exit Valuation / Total Exit Valuation / First ROI betw First
Investment Investment Valuation Investment & Exit
7.0 11 10.1 Median 75%
5.9 10
6.0 9
Median 52.0%
5.0 8
7 50% Median
4.0 6 5.3
3.1
3.0 5
4 23.5%
25%
2.0 3
1.0 2
1
- 0 0%
Founding CEO Professional CEO Founding CEO Professional CEO Founding CEO Professional CEO
• As mentioned before, equity stake and ownership mentality may • Taking into account first round
contribute effective value creation by Founding CEO’s investment, time to exit, and exit
valuation, Founding CEO’s run
firms which are better for early
investors relative to Professional
CEO’s
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

7. Founding CEO’s outperform Professional CEO’s taking
into account situation bias
Years betw Hiring / Last Exit Valuation / Implied ROI betw Last
Funding and Exit Valuation at CEO Hiring Investment & Exit
7.0 12.0 75%
6.2
10.1
6.0 10.0
52.0%
5.0 50%
8.0
4.0 3.7
6.0
3.0
4.0 25%
2.0
1.0 2.0 1.2
3.0%
- - 0%
Founding CEO Professional CEO Founding CEO Professional CEO Founding CEO Professional CEO
• Professional CEO tenure likely • Estimated valuation of startup at last • For founding CEO, ROI based on
shorter due to late stage of investment round closest to new first investment valuation and exit
company at time of hiring CEO hiring
• For professional CEO, ROI based
• Lower exit valuation relative to • Extrapolated valuation when CEO on valuation at time of hiring and
implied valuation at was hired based on linear growth / exit
decline between estimated valuation
and exit valuation • Ability of Professional CEO to
create value function of ability and
also inherited difficult state of firm
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

8. Last Thoughts
• Performance uplift by Founding CEO’s prevalent despite assumptions and
criteria for analysis (first vs. second method)
• Choosing right CEO from beginning extremely significant regarding
management and eventual outcome of startup
• Additional questions to be considered
• Founder vs. Professional equity stake impact?
• Founder vs. Professional background (e.g. technical vs. non-technical)
impact?
• Other specific characteristic considerations? E.g. previous startup /
corporate success, age, board composition, etc.
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

9. Appendix
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

10. Median Performance Metrics
Total Investment Years betw First Exit Valuation
$41.0
Investment & Exit $300.0 $273.6
$40.1
6.7 6.6
$40.0 $250.0
6.6
$39.0
6.5 $200.0
$38.0 6.4 $150.5
$150.0
$37.0 6.3
$36.1 6.2
6.2 $100.0
$36.0
6.1
$35.0 $50.0
6.0
$34.0 5.9 $-
Median Mean Median Mean Median Mean
Exit Value / Exit Valuation / First ROI betw First
Total Funding Investment Valuation Investment & Exit
9.0 70.0 80.0% 73.2%
7.8 58.1
8.0 60.0 70.0%
7.0 60.0%
50.0
6.0 5.0 50.0% 46.1%
5.0 40.0
40.0%
4.0 30.0
3.0 30.0%
20.0 20.0%
2.0 10.1
1.0 10.0 10.0%
- - 0.0%
Median Mean Median Mean Median Mean
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

11. SaaS Public Companies Study (18 firms)
Name Vertical Application
AthenaHealth Healthcare Business services for physician practices
BlackBoard Education Online teaching / learning system
Concur Human Resources Employee spend mgmt solns
Constant Contact Marketing Email marketing / online survey solns
DealerTrack Automotive - retail Data solns
Demandtec Retailers Consumer demand mgmt solns
Kenexa Human Resources Recruitment sw & services
Liveperson Marketing Online ecommerce interaction
LogMeIn Information Technology Remote connectivity solns
NetSuite General Integrated business mgmt application suites
Omniture Marketing Business optimization sw
RightNow CRM Customer relationship mgmt
Salary.com Employee Performance Mgmt Performance & talent mgmt, sw solns
Salesforce.om CRM Customer relationship mgmt
SuccessFactors Human Resources Performance & talent mgmt, sw solns
Taleo Human Resources Talent mgmt sw solns
Ultimate Software Human Resources Human resources, payroll, & talent mgmt
Vocus Contact Management Sw for public relations mgmt
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

12. SaaS M&A Study: 30 firms (1 of 3)
CT Name Industry Business Description
Description
1 Automotive Lease Transportation Provides residual values, analytical data products and consultation to the Automotive Industry. ALG (Automotive Lease Guide) has
Guide (ALG) Info/Content developed a web-based software product that provides power users with the ability to access the ALG residual-setting model, edit the
assumptions and generate new results. In essence the RV Model gives a user the ability to understand ALG's forecasting methodology
with the added flexibility of tailoring the final residuals to suit a particular portfolio or mix of vehicles. The Company has expertised in
Custom Residual Guides, Portfolio Risk Analysis / Portfolio Securitization Valuations, Consulting / Special Studies, Data Analysis
Products and Basis for Residual Value Insurance.
2 BladeLogic, Inc. Database & Develops and provides data center automation software. The Company offers a product that is designed to manage information
File technology infrastructure by helping in the administration of servers. Its Configuration Manager software modules provision, analyze and
Management manage networked servers from a secure console. The software automates configuration processes that normally are handled
manually, such as the application of patches or the collection of inventory information.
3 Captura Software, Business and Provides automated expense-management system software for high volume, transaction-oriented businesses. The Company's product,
Inc. Office SoftwareIntelligent Decision Processing (IDP), allows corporations to analyze data throughout their organization. The Company also offers
Captura Expense Wireless for mobile users, as well as training, deployment, maintenance, and support services. On July 31, 2002 the
Company was acquired by Concur Technologies.
4 Chrome Systems Transportation Supplies manufacturer's prices and specifications used in more than 40 percent of new U.S. auto industry sales, and 51 percent of
Corporation Services leasing transactions. The Company provides vehicle content, vehicle ordering and inventory management tools, configuration
technology and professional services to deliver complete enterprise solutions to all segments of the retail automotive industry. These
segments include manufacturers, fleet companies, dealers, Internet sites, supply chain providers, and financial institutions.
5 Danger, Inc. (AKA: Wireless Provides wireless communication software and services. The Company's solution consists of a back-end service, a platform that uses
Danger Research, Communicatio standard development tools and hardware production designs. Its products include instant messaging, email, HyperText Markup
Inc.) ns Services Language (HTML) browsing, voice, personal information management, and entertainment applications.
6 ECNet, Ltd. (FKA: ERP/Inventory Provides e-commerce solutions to Asian manufacturing communities. The Company enables inter-company commerce across the
Advanced Software highly fragmented global manufacturing industry by providing collaborative supply chain solutions and management services. ECNet is
Manufacturing a subsidiary of R Systems, Inc. and is also a member of Asia Supply Chain Alliance.
Online, Ltd.)
7 FirePond, Inc. (FKA: Ecommerce Provides e-business, sales and marketing solutions that inform and sell items online. The Company also provides professional services,
FP Technology, Inc.) Services which include consulting, implementation, and training services. It also provides technical support services, such as data maintenance,
enhancement, and end-user support services. The Company serves high technology, transportation, construction machinery,
agricultural equipment, and service companies.
8 Genesys Software Database & Develops and distributes a fully integrated human resource management system (HRMS). The system is an integrated payroll
Systems, Inc. File accounting, benefits management and personnel management system package designed for IBM mainframes. The Company can
Management produce custom systems and show end-users how to tailor on-line screens. The packages are also available as stand-alone systems.
The Company offers an on-line information/decision system which allows human resource professionals to access all data in system.
9 Gomez, Inc. Operating Provides on-demand web application experience management solutions. The Company's solutions monitor the performance of Internet
Systems & applications of its clients. Gomez provides a solution for managing the web application experience from development ,deployment and
Utilities the entire application life cycle, featuring visual, functional and load testing, actual end-user website monitoring & benchmarking.
10 Hostworks Limited Other Internet Provides managed internet hosting, equipment, data centre facility, internet connectivity and management systems to host internet sites
and Online and applications. The Company provides all hardware, software, data centre and services including ecommerce sites, ERP, CRM, Web,
Services NEC Email and a range of other enterprise applications. 12
This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

13. SaaS M&A Study: 30 firms (2 of 3)
CT Name Industry Business Description
Description
11 InfoBasis, Ltd. Business and Office Provides skills management software. The Company provides skills management software that is designed to allow organizations to
Software assess, develop and deploy people throughout the organization. InfoBasis' software incorporates learning skills requirements,
workforce asset planning, and skills management. Its solutions can be applied to the defense, finance, health, retail, IT Services and
software industries.
12 InfraVio, Inc. (FKA: Artificial Intel. Develops solutions using XML technologies. The Company's flagship product - the InfraVio Web Services Management System
GooBoo.com) Programming Aids (WSMS) - equips companies with foundation architecture for Web Services development, deployment and management. InfraVio's
unique architecture supports a single Web Service project or the design and implementation of a complete Service Oriented
Architecture (SOA) for customers' enterprises.
13 Instranet, Inc. Database & File Develops software for Enterprise Information Exchange (EIX) applications. The Company develops content management software to
Management address the operational publishing needs of large enterprises. InStranet offers its Content-Based Applications Suite that is designed
to help large corporations create, manage and deploy critical sales and marketing content for enterprise channels, and then analyze
the results to identify key successes or areas for improvement.
14 JobFlash, Inc. Business and Office Offers Phone-Based automated recruiting software and services. JobFlash is Phone-Based automated recruiting software and
service for instant fulfillment of hourly workers. JobFlashs patent-pending voice-web solution facilitates real-time supply of labor to
meet actual demand.
15 Kintera, Inc. Business and Office Provides fundraising solutions and services for nonprofit organizations. The Company's Knowledge Interaction technology
Services strengthens an organization's community by providing volunteers, members, donors and staff web-based tools to efficiently fulfill
their tasks and share real-time data and information. The Company's product, Kintera Sphere, is built on a unified database to
manage contacts, distribute communications, create content, drive commerce, build communities and run reports.
16 Mercado Software, Ecommerce Provides e-commerce search, navigation, and merchandising solutions. The Company's product is a search and browse solution for
Inc. Enabling Software large-scale e-commerce applications.
17 Offermatica Ecommerce Develops and provides consulting and E-commerce systems using its E-Selling business practices. The Company offers services
Corporation (FKA: Services that provide online marketing and merchandising.
Fort Point Partners,
Inc.)
18 OpenAir, Inc. (FKA: Business and Office Develops Professional Services Automation (PSA) software. The Company's suite of Web-native software applications provides
TimeBills.com, Inc.) Services solution for the client's key operational and financial metrics, status of projects, portfolios and resources. OpenAir provides services
to internal professional services groups, IT and management consulting firms, law firms, accounting firms, advertising and PR
agencies, Internet Services firms and internal IT groups.
19 Procuri, Inc. Ecommerce Develops strategic sourcing, contract and supplier management software applications and services for procurement departments
Enabling Software within a corporation. The Company's web-based platform offers a range of collaboration, automation and negotiation features. The
Company's solutions allow organizations to streamline their entire strategic sourcing process and institutionalize best sourcing
practices enterprise-wide.
20 Proficient Systems, Business and Office Creates multi-channel sales software to aid large organizations in selling products and services. The Company's solution efficiently
Inc. Software matches qualified sales associates with consumers and provides the sales associates with the necessary sales collateral to
effectively sell. Their software can operate solely with an ebusiness application or can integrate and leverage existing systems to
collect and present internally and externally generated sales collateral information to the sales associate's desktop.
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.

14. SaaS M&A Study: 30 firms (3 of 3)
CT Name Industry Business Description
Description
21 Salesnet, Inc. (FKA: Business and Office Provides business-to-business customer relationship management (CRM), sales force automation (SFA) and application service
MyNetSales.com) Services provider (ASP) services for small businesses. The Company's services allow sales managers to view progress on accounts
across the company and formulate sales forecasting and planning.
22 ScanSafe, Inc. Security/Firewalls,EnDevelops web security software solutions. The Company offers a managed service which intends to protect businesses by
cryption software scanning the web for threats when Internet users search for downloaded programs, and to eliminate viruses and inappropriate
content before they reach company networks. ScanSafe's web security applications are powered by Outbreak Intelligence (OI),
a security platform that detects zero-hour and known malware threats.
23 Sendia Corporation Business and Office Develops software solutions for wireless enterprise communications. The Company is building software solutions providing
Software corporate users wireless access to the information and applications necessary for success while on the go. Sendia provides the
wireless infrastructure to deliver wireless applications to mobile workers such as sales, service, and supervisory personnel. With
the Company's software, the wireless personal digital assistant (PDA) and smartphone join the cell phone and laptop as
necessary communications tools in the corporate business arsenal.
24 Touch Clarity Ltd. Site Development Develops electronic customer relationship management software to improve the commercial efficiency of websites by enabling
and Administration them to present users with personalized content. The Company provides onsite content targeting, an essential capability for
Software online companies looking to maximize visitor engagement, conversion and acquisition rates through their web channels.
25 Visual Sciences, Inc. Data Warehousing Provides on-demand Web analytics. The Company's services collect data from Web browsers, process that data and deliver
(FKA: WebSideStory, Services reports of online behavior to its customers on demand.
Inc.)
26 Vurv Technology, Inc. Business and Office Develops and provides human resources software and services, which allow companies to attract, hire, retain, and manage
(FKA: Recruitmax Software their workforces. The Company's web-based products gives a real-time analysis of the workforce.
Software, Inc.)
27 WebCT, Inc. Education Services Provides Web-based teaching and learning solutions for the higher education marketplace. The Company's WebCT Campus
Edition course management system provides instructors with a set of online, customizable teaching tools for tracking student
performance and managing course content. The Company's WebCT Vista application is an e-learning system that enables
institutions to manage educational content and student performance data.
28 WebHire Inc. Other Internet and Provides Internet recruiting services to corporations and employers. The Company enables employers to use the Web to post
Online Services jobs, attract and evaluate talent and manage the hiring process. The Company also develops client/server human resources
NEC management software. The software is used by corporations for employment tracking and recruiting.
29 White Amber, Inc. Business and Office Provides web-enabled human capital procurement and management solutions through software applications. The Company is a
(FKA: Services leading provider of vendor-neutral Services Procurement and Management Solutions enabling large corporations to interface
VirtualEmploy.com, more collaboratively with its network of suppliers and key internal decision makers. The Company's unique approach provides
Inc.) companies a highly integrated solution based on managed services and superior technology. The Company's customers realize
an immediate return through the creation of a secure, private marketplace between their company and its chosen suppliers. The
Company's solution brings efficiency to managing customer's contingent workforce by significantly improving the visibility,
accountability and costs related to a corporation's services spend.
30 Xythos Software, Inc. WebServer Software Develops Internet file management software for secure file access and sharing. The Company's WebDAV compliant WebFile
Server and WebFile Client products help enterprise customers find and share information from any Internet location.
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This information is confidential and was prepared by Yujin Chung and Andreessen Horowitz. It is not to be referenced, published, or presented without Mr. Chung’s or Andreessen Horowitz’s prior written consent.