The document discusses how the software-as-a-service (SaaS) model is disruptive and changes the game for customers, investors, and vendors. It provides examples of how the SaaS model improves economics for each group by offering recurring revenue, increased visibility, and lower costs. The SaaS model requires significant capital to fund high growth, and companies must focus on retaining customers and cross-selling to fully capture lifetime customer value in order to attract investors. Emerging trends like merging with social media and leveraging cloud platforms provide new opportunities for SaaS companies.

2. SaaS: The Investment Playbook Glenn Solomon Partner GGV Capital

3. The SaaS Disruption – Changing the Game for all Stakeholders Customer Investor Vendor Source: Morgan Stanley

4. The SaaS Disruption – Changing the Game for all Stakeholders Customer Investor Vendor Source: Morgan Stanley

5. The SaaS Disruption – Changing the Game for all Stakeholders Improves Customer Economics Reduces upfront cost Lowers operational risk Faster go live and payback Reduces upgrade costs More customizable and flexible solutions Customer Investor Vendor Source: Morgan Stanley

6. The SaaS Disruption – Changing the Game for all Stakeholders Improves Vendor Economics Leverage single instance of code/ multi-tenancy Selling efficiency (upfront and cross-sell) Operational leverage (hosting, support) Ability to economically address SOHOto enterprise Intimate knowledge of customer activity Longer-term profitability should exceed traditional software Customer Investor Vendor Source: Morgan Stanley

7. The SaaS Disruption – Changing the Game for all Stakeholders Improves Investor Economics Increased visibility and predictability Recurring revenue Attractive cash flow yields New valuation paradigm? Customer Investor Vendor Source: Morgan Stanley

9. Financials

11. Virtual Conferencing

13. Retailer

15. Driving Customer Lifetime Value: Do You Have These? High annual customer retention? Strong collections? Cost of customer acquisition (CAC) in acceptable range? Attractive contribution margins? If you do, you will have great customer lifetime values If yes, you will have great customer lifetime values

17. 90%+ annual customer retention rate

18. 100%+ annual renewal on a dollar basis3.9 ($MM) 69% Contribution Marginin 2007 YTD 1.1 Negative Contribution Margin 2004 2007 (YTD) Expenses Revenue Source: Company Documents and Morgan Stanley

19. Example: Omniture Source: Company roadshow presentation, 2008

20. Example: Constant Contact Source: Company presentation, January 2009

21. The Downside of Growth – Cash Burn Year 1 Year 2 Year 3 Year 4

22. How Much Capital Does it Take to Build a SaaS Company? $30 to $100M Source: Wachovia Securities, May 2008 Report

23. The Three Stages of High Growth SaaS High Growth /Unprofitable Growth / Emerging Profits (GEM) Low Growth / MatureProfit Margins Profitability/Growth Rate Extending the GEM phase is key to building value

24. Going CF+ Impact on SaaSStocks: SuccessFactors Non - GaaP+ CF+

25. Going CF+ Impact on SaaSStocks: Omniture Non - GaaP+ CF+

26. What do $30m SaaS Companies Look Like? Source: Steve Klei SaaS Insights

27. How Does the Operating Model Evolve Over Time Source: Steve Klei SaaS Insights

28. How Fast do SaaS Companies Grow in 5 years? Source: Steve Klei SaaS Insights

29. SaaS Growth Trajectory Benchmark Represents the revenue in the 3rd year after a $30M year Median is $85M Mean is $95M Source: Steve KleiSaaS Insights

30. Public SaaS Company Revenue Per Employee Source: Steve Klei SaaS Insights

31. SaaS Forward Revenue Multiples Source: Steve Klei SaaS Insights

32. SaaS Forward Revenue Trading Multiples Source: Steve Klei SaaS Insights

33. A Few of Many – Emerging SaaS

34. The Next Big Trends in SaaS Merging of SaaS and the Social Web Cloud computing efficiencies The existing customer bonanza

35. Merging of SaaS and Social Web Leverage enterprise social networking: Chatter, Employee Central Harnessing the crowd to add value and build competitive advantage

36. Cloud Computing Big players are embracing the cloud and trying to consolidate activity around their platforms Salesforce.com force.com and AppExchange Google App Engine Microsoft Azure Leveraging these ecosystems without becoming too dependent? Costs keep coming down as AWS, Rackspace and others push into the market “Our only server is the coffee maker”

37. The Existing Customer Bonanza In SaaS, you need to deliver value to your customer every day Good news – you have an ongoing relationship The Opportunity – Cross-sell & Up-sell The Challenge – Can you innovate and create new products with adjacency to your existing solution? Winning here will produce big returns

38. Summary The SaaS model is disruptive and there is more value yet to be created High growth SaaS demands capital To build value, elongate the GEM phase Watch for innovation around social web, cloud platforms and mining existing customers Come see GGV Capital with your promising SaaS Company!