Posts Tagged ‘SaaS’

The billion dollar CEOs – lessons in SaaS.

February 18, 2018

IMG_0778Last week I attended SaaStr Annual 2018 in San Francisco, the world’s largest SaaS industry event, with over 10,000 SaaS founders, VCs and executives in attendance.

The presentations were given by a selection of very successful founders, CEO’s, executives and investors from around the global SaaS industry.  I found myself referring to many of the CEO/founders who had achieved business valuations in excess of $1B as the “Billion dollar CEOs”.

SaaStr spanned three days, and I attended on behalf of my company Datagate Innovation as part of a 100 person delegation of SaaS entrepreneurs from New Zealand, organised by Callaghan Innovation and NZ Trade & Enterprise.  Our delegation also attended some excellent presentations from New Zealand SaaS business founders that have physically moved to North America and were generous in sharing their experiences of doing so.

For me, the value of participating in this delegation and attending this type of SaaS industry event, covered three main areas;

  1. Recognizing the common patterns, challenges, ups and downs of starting up a SaaS business. Despite my own experiences, it’s still good to hear of the billion dollar CEOs going through the same or similar challenges and reaching a massively successful outcome.  The value of this kind of psychological reinforcement cannot be overstated. In any industry it’s important to know what is normal and what is not, on the path to success. It also helps to know that you’re not alone and others face the same challenges as you on a daily basis.
  2. Learning new concepts, strategies, common metrics, KPIs and how the SaaS industry operates internationally.  It’s easy to get caught up in your own business, in your own locality without seeing the bigger, wider picture.
  3. Making new industry contacts.  I was fortunate to gain new American contacts at SaaStr and New Zealand contacts from within the Kiwi delegation itself.  Conferences like this are ideal to widen your business network, because you have so many people with a common interest from all over the world, in one place, at one time.
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The New Zealand SaaStr delegation, meeting at the Nasdaq Entrepreneurial Center, prior to SaaStr.

 

A few of my favorite take-outs from SaaStr and the American-based NZ SaaS businesses (that happen to apply to my business Datagate) are as follows;

“Nail It before you Scale It” 

The short concise sentence above sums up how SaaS companies should transition from their start-up stage to their growth stage.  I think in many ways it encapsulates the essence of SaaS.

During the “Nail It” stage, the focus should be on understanding your customer, building your minimum viable product (MVP) that addresses the needs and wants of your customer, determining your unique selling points, your messaging and your sales strategy.  Ideally you should work with a small set of early-adopter customers to refine your offering based on their real-world feedback.  Focus on understanding and maximizing the value you are creating for your customers, aim for minimum churn, maximum customer satisfaction – before you even start focus on major revenue growth.

Setting aggressive revenue targets too early will drive the wrong behavior from your team.  You don’t want to cut corners to get on to the next sale until you’ve nailed your product and your service offering.  Once your offering has reached “nailed it” stage, there should be no need to cut corners when you get to “scale it”.

Aggressive revenue targets should be applied only when you reach the “Scale It” stage, once you’ve nailed your product or service offering.  If you scale too early, you are effectively damaging your reputation and your future potential.

This “Nail It before you Scale It” approach illustrates why SaaS start-ups require such strong support from their investors in the early stages.

Notes from several of the Billion Dollar SaaS CEOs

It’s extremely important to “know your customer” and ensure that the messages you are putting out in sales & marketing resonate well with them.  One very successful serial CEO said that when he moved into a new business, one of the first things he would do is personally spend time with customers and end users to get a better understanding their needs and what value they were (or weren’t) getting out of his company’s product.

A lot of the on-line sales processes today are heavily automated. There are tools to track the on-line activity of prospects and keep them updated regularly with a stream of sales & marketing material so they won’t forget you! The amount and depth of research that can be done on prospects automatically on-line is staggering.

Sales & Marketing work differently in the SaaS world than in the conventional scenario. In SaaS, marketing operates more in parallel with the sales team.  Prospects bounce between marketing and sales throughout their buying journey.  The two functions, sales and marketing must work tightly together with a common unified message and strategy.

Your team dynamic, your culture and your brand are extremely important to the success of your business.  Don’t retain people who damage your team dynamic or harm your culture, regardless of how well they might perform on their own.  You will find it easy to attract good people to your business if you have a good culture, reputation and brand.

Diverse teams work better than mono-cultural, single-gender teams. Research has proven that on average, businesses with more diverse teams perform better. The top performing companies seem to have the highest diversity.  SaaStr themselves have their own diversity and inclusion program and claimed to have 45%+ women speakers at SaaStr this year and over 60% women + multicultural speakers.

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Entering the US Market from another country (such as NZ)

Seek to partner with a larger, established American business that targets the same customers as you do, but has a complementary product to yours (definitely not a competing product!). Make your product work well alongside their product and attend their trade shows to meet their customer base.  This is the quickest, easiest and most cost effective way to get direct access to a lot of your target customers.

Americanize your offering by working with your first early-adopter American customers to ensure your offering works well and is valuable for them. Every country has subtle (and not so subtle) requirements that differ from other countries (in the case of my business Datagate, we’ve had to do a lot of work with taxation and regulatory requirements for the American market).  Publish case studies of American customers using your product.  Testimonials from customers outside America are not as effective as American ones.

You need to build an American credit history by working through American banks and/or other institutions.  Credit ratings from outside America don’t count inside America.  Opening a bank account for your NZ-owned company can be difficult without an American credit history. It was suggested that it’s easier to open a personal bank account and use that first, to build up some history, allowing you to open a business account later on.

Due to the larger market size, you can be more focused on a narrower vertical market in America than you than you need to in a smaller economy such as New Zealand, where you tend to have to go wider to get enough sales volume.

It’s almost essential that the CEO of an American-focused business is located in America, in order to be taken more seriously by American customers, investors and banks.

American work visas can take a lot of time and effort to obtain, even if you are providing your own employment and employment to American citizens.  Don’t leave this until the last minute!

There might be challenges in getting into America, but it’s a huge market and well worth the effort.

Why “owning” the customer relationship is so important for service re-sellers

November 15, 2017

Sales and billing models have been top of mind for me recently, particularly as Datagate is in the process of expanding into the North American market and getting an understanding the dynamics of the service re-sellers and vendors who operate there.

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In the ICT industry – in particular, business computing and communications – we have seen a huge shift towards the “as-a-Service” model and a shift away from the earlier model of selling hardware and desktop software solutions.  This has brought about what we refer to as the age of the service re-seller.  Service re-sellers are everywhere at this time – you just need to know how to recognize them.

Service Re-sellers

Within the ICT industry, service re-sellers are businesses that sell on-line services that are built, owned and supplied by another another party – a service vendor.  Typically in the ICT Industry,  service re-seller are Managed Service Providers (MSPs), Business Solution Providers, Value-Added Re-sellers (VARs) and Telecommunications specialists.

Often, service re-sellers have the advantage of being able to offer a closer, more personalized service than what the large service vendors can offer. MSPs can often position themselves as a single point of contact for all ICT services to their end-customers. Service re-sellers will often combine and bundle services together from different vendors to create unique value offerings – which are more difficult for competitors to displace.

With any online service sold by re-sellers, such as cloud solutions, telecommunication and data services there are a number of different marketing, sales, billing and support models that are possible.  Each is model is significant as to who “owns” the customer relationship.

Who “owns” the customer relationship?

Any relationship has at least two parties and obviously the customer owns one side of the relationship.  But on the the other side, the ongoing supplier relationship; who “owns” it will depend on who controls it and who is more visible to and engaged with the customer.  Most important is the flow of money; who bills the customer and under what brand?

If the re-seller sells, bills and supports the service under the re-seller’s brand and also holds the supply agreement with the customer, then clearly the re-seller fronts and owns the supplier side of the customer relationship.  If the re-seller allows the service vendor to perform any of these functions under the vendor’s brand (particularly billing and the flow of money), then it cannot be said that the re-seller owns the relationship.  If the service vendor performs all or nearly all of these functions under their brand, then the service vendor owns the relationship.

Why is owning the customer relationship so important?

The “owner” ultimately gets the most business value from customer relationship, in terms of control of the service and also the boost in valuation of their own business.

If the re-seller is the relationship owner, then the re-seller has more power in negotiations with service vendors and is often able to change or re-negotiate service contracts or change vendors in the background to the customer relationship.

Business valuations are most often calculated on multiples of revenue.  Locked-in monthly recurring revenue  (MRR), such as what you have with contracted on-line services, is valued significantly higher than other types of revenue.  This is because MRR is the best quality revenue – in that it is regular, ongoing and largely predictable – a solid cash platform for building valuable businesses on.

How to own customer relationships in the service re-selling model

For a service re-seller to “own” a service relationship (such as telecoms, Cloud software & services etc), those services must be named, billed and supported under the re-seller’s name and/or brand.

This typically requires a white-label service-billing solution, such as Datagate that can plug into usage data supplied by service vendors, apply pricing plans created by the re-seller and the automatically create & distribute re-seller-branded bills to the end-customers.  Datagate also provides re-seller branded portals where the end-customer can view invoices, reports and analysis of their service consumption.

Datagate’s mission is to enable service re-sellers (who are typically MSPs in the ICT industry) to maximize the value of their business and “own” their customer relationships in the areas of telephony and other on-line utility services.

We are also committed to helping service vendors maximize their sales channel growth through service re-sellers.

 

 

The World as a Service

April 6, 2016

The “as-a-service” approach to business is gaining more and more traction across many industry sectors. Consumers are developing a preference for subscribing to services as opposed to buying things.

The Internet, Cloud Computing and mobile apps have been high-profile influencers on people’s buying patterns, which have promoted an “as-a-service” mentality. XaaS (anything as a service) is regarded as a new “disruptive” approach to satisfying consumer demand, even though the subscription business model itself has been alive and kicking for centuries in industries such as newspapers, magazines, telephony, insurance and leasing, to name a few.

XaaS_globe

We are now seeing professional service businesses that traditionally charged by the hour start to charge by fixed subscription instead. This is shown to greatly improve productivity and effectiveness in delivering value to customers. Customers are more inclined to engage and use their subscribed services, rather than hold back to avoid hourly charges. Questions and arguments about billing are significantly reduced. The subscribed model invokes an on-going partnership instead of a series of one-off transactions or interactions.

I.T. businesses that used to sell servers and other hardware items have moved to selling on-line subscriptions to hosting services and have extended their businesses to sell subscribed telephony and data services. They have learned that subscribed business is regular predictable business that they can rely on, so long as they look after their customers. Subscribed business is the best kind of business for the customer and the supplier!

At Datagate, our specialty is enabling service re-sellers to efficiently process, report and bill measurable subscription services, such as telephony, data circuits, hosting, Cloud & mobile apps, electricity, water, gas etc. All of these billing models include a combination of monthly fixed and variable billing. The variable component of the bill is normally derived from a data feed from the supplier of the service that details the service consumption quantities.

I find it interesting that we are encountering many new “as-a-service” businesses that fit Datagate’s fixed and variable subscription model. Some of these are “traditional” as-a-service businesses and others are revolutionary and disruptive approaches to markets formerly served by product or time sales.

At the coal face we see the shift to an “as-a-service” world is very real.

  • SaaS – Software as a Service
  • TaaS – Telephony as a Service
  • IaaS – Infrastructure as a Service
  • PaaS – Platform as a Service
  • MaaS – Monitoring as a Service
  • DBaaS – Database as a Service
  • XaaS – Anything as a Service

Introducing Datasquirt

March 25, 2010

I have to be careful about what I say about Datasquirt because it’s a publicly listed company on the Australian stock exchange (ASX:DSQ) and being a non-executive director and chairman, there are strict rules about what I can and cannot say, without making an announcement to the ASX.

What I can say is as follows; 🙂

Firstly, I have to say that Datasquirt is a cool company, made up of people who are passionate about what they do. Datasquirt’s product is called CONTACT and it’s a SaaS, Web deployed Communications Console for Corporate Businesses to enable their Contact Centers (formerly Call Centers) to interact with their customers, suppliers or staff using SMS text, Instant Messaging, email, fax etc.

I was one of the founders of Datasquirt and so my involvement dates back to when the company started up in 2001. This was soon after I (and some of the other Datasquirt founders) sold our previous business, Exonet.

In the early days we did a lot of experimenting to see how SMS Texts could be used for business purposes. After several years of building custom SMS applications for various industry verticals, we started to see what common functionality everyone wanted and realized that all the big customers had Contact Centers – so we designed and built CONTACT as a product to satisfy this market need.

Being web deployed, CONTACT can be run from any browser on the Internet, so requires minimal effort by the customers’ IT departments to get it up and running. The product integrates with the customer’s internal databases such as CRM, ERP etc and has advanced logic algorithms to pre-process messages automatically and/or distribute them to applicable call center operators. Templates and automation facilitate a speedy response to incoming messages and advanced reporting functions enable all types of reports and analysis – including the types of reporting normally expected in corporate contact centers.

In today’s world of advanced and instant world-wide communications, it is more important than ever for businesses to engage with the new communication technologies and new social media types like Twitter, Linked-In, Facebook etc. Accordingly, these are exciting times for Datasquirt and its product CONTACT which empowers corporate business customers to communicate directly, instantly and intimately in the new communications age!

Watch this company this year!

www.datasquirt.com