How to Build a Billion Dollar SaaS Category - Achievers Tech Talks Feb 2014

Creating the billion$ SaaS category:

Zero to IPO secrets from a serial entrepreneur

February 18th, 2014Mark Organ, Influitive, CEO@markorgan@influitive

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Cloud-basedMarketing Automation Advocate Marketing

Founded Jan 2000Nasdaq IPO

$871M - ORCL BILLION$ (TBD)

I helped build the marketing automation category at Eloqua, and the advocate marketing category at Influitive.

Founded Oct 2010

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• Vision of Eloqua: To maximize sales productivity by generating qualified leads, using the internet

• First product (2000-2001): literally a implementation of that vision, connecting prospects to reps over chat

• This product was not popular with users

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• Email engine added to drive more chat activity

• Chat product still largely a failure

• But reps enjoyed following up with prospects they web-tracked by phone or email

• Integrated web-email became our MVP

• Enabled us to be cash flow positive 20 months after founding.

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• We hit product-market fit in mid- 2004 with an integrated suite:

• program automation• email marketing• web analytics

• This integrated suite enabled companies to nurture and score leads until they were “sales ready”

• The industry around this – products and services – is worth several billion dollars today

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List, AttentionSpoilage

Deliverability

Availability ofDeep Knowledge

The success of Eloqua and its category sowed the seeds of its own challenges. The marketing automation platform is burning.

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Ideal Reality

• Ideal buying experience: confidence, education, comfort

• Too often, reality: pressure, confusion, and drowning in vendor email

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The time, cost and risk to connect to a knowledgeable peer is trending rapidly to zero

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2006 2010 2014F0%

25%

50%

75%

Dependence on knowledgeable peers in the buying process

(B2B software buyers)

3.5X increase

Increasingly, B2B buyers are completely dependent on knowledgeable peers to make their decisions

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• The most successful marketing organizations of tomorrow will mobilize their advocates to surround buyers with social proof

• At Influitive, we have developed powerful tools to do this, generating massive increases in:

• Referral leads

• Reference calls

• Success stories

• Online reviews

• Social media mentions.

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What does it mean to create a

category?

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Some B2B and B2C examples of category creators

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0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6

-20%

0%

20%

40%

60%

80%

100%

Revenue growth (2004-2005)

Salesforce.com

Oracle(incl. PeopleSoft)

SAP

Siebel

Amdocs

Note: Relative Market Share is each company’s revenue divided by the market leader; the market leader’s revenue is divided by the 2nd place company’s revenue; Precise revenue not available for Upshot and Salesnet, figures represent approximate revenue and growth estimatesSource: Gartner (http://www.gartner.com/newsroom/id/493005)

Salesforce.com’s status as a category creator enabled rapid growth several years ago

Upshot

Salesnet

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0.00 0.20 0.40 0.60 0.80 1.00 1.200%

10%

20%

30%

40%

50%

60%

70%

Salesforce.com

Oracle

SAP

Microsoft

IBM

SugarCRM

Note: Relative Market Share is each company’s revenue divided by the market leader; the market leader’srevenue is divided by the 2nd place company’s revenue. Source: Gartner (http://www.gartner.com/newsroom/id/2459015)

This led to a dominant market position today

Revenue growth (2011-2012)

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Tesla currently has tiny share vs. all luxury vehicles – similar to salesforce.com’s broader CRM market in 2002

Tesla Lexus Audi Cadillac Mercedes-Benz BMW0

50,000

100,000

150,000

200,000

250,000

300,000

Source: Business Insider (http://www.businessinsider.com/tesla-is-not-really-outselling-bmw-audi-2013-5)

US unit sales, 2012

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Tesla is already dominant in the space closer to its category of all-electric luxury high-performance cars

Tesla Model S Audi A8 BMW 7-Series Mercedes-Benz S Class0

1,000

2,000

3,000

4,000

5,000

US unit sales, Q1 2013

Source: Business Insider (http://www.businessinsider.com/tesla-is-not-really-outselling-bmw-audi-2013-5)

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Tesla’s category creator status and rapid growth drive valuation multiples far higher than other carmakers

Market capitalization per vehicle sold

* Fisker filed for chapter 11 protection in Nov 2013Source: Yahoo! Finance, Corporate filings, Analyst reports

Tesla DaimlerBenz BMW VW Ford GM Fisker$0K

$100K

$200K

$300K

$400K

$500K

$600K

$700K

$800K

$714K

$60K $39K$13K $12K $6K $0K

Fisker*

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A Transformational Experience

+

Driven By Disruptive Forces

My definition of a category:

For a distinct segment of the market,

A Revolutionary Business Model

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High-growth, cash-strapped B2B companies largely in Bay Area

Acquire and deploy good-enough CRM successfully in days instead of years

• Monthly subscription by user • Continuous deployment of upgrades

centrally for all customers

Cloud / internet delivered software

Salesforce.com: Cloud CRM, 1999-2004

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Green-conscious, technophile early adopter car enthusiasts

All-electric with equivalent/superior performance to BMW 7-series/Benz S-class

• Custom car ordering online, direct• Supercharging/battery switching stations• Continuous deployment of upgrades

• Lithium-ion battery innovation• Cloud computing

Tesla: Electric high-performance luxury cars, 2010-2013

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Eloqua: Cloud marketing automation, 2005-2013

Process and lead-gen oriented (demand gen) B2B marketers

Automatically nurture prospects, guided by their behavior, until sales-ready

• Monthly subscription, scaled by usage• Continuous deployment of upgrades centrally

for all customers

• Cloud-delivered software• Automated filtering of phone and mail

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Influitive: Advocate marketing platform, 2012 – ??

Advocate marketers and the advocates they serve

Advocate-centered, comprehensive and self-service experience

• Monthly subscription, scaled by advocate activity• Continuous deployment of upgrades centrally for

all customers

• Pervasive social web

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Missionary

Mercenary

VS

Category creators have missionary zeal about their category vision, not just their company mission.

Attract not just customers, investors and employees, but competitors too.

You need competitors! A category of one is not compelling.

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Overall (20) Category Creators (10)

Non-Category Creators (10)

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$3.40

$5.60

$1.20

Incremental market capitalization per $1.00 of revenue growth

CNN/Fortune top 20 fastest growing companies (2010)

Category creator premium

Category creators enjoy a valuation premium; grow revenue 4x and market cap 6x faster than category entrants

Source: Cambridge Partners in HBR Blog, 09/2011

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= ≠Similarities and differences between the category creation process at Eloqua and Influitive

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= ≠Hypothesis-driven, iterative approach

Vertical niche market dominance

Focus innovation on the emergent hero

Drive the company on mission, vision and values

Invest early in customer success

Iterated MVP is insufficient: emphasize design & quality

Expand your productization and monetization models

Build for the billion

Drive leads to achieve profitable, efficient growth

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= ≠

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Use a hypothesis-driven, iterative approach to quickly find

product-market fit

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Pick that niche you want to serve, document why, and test it

The goal is to build a continuously evolving model of how you generate maximum

value for users & customers.

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It’s OK if your hypothesis is wrong

If your assumptions are documented, you know where the problem is and can fix it.

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Pivot quickly!

Early on, CEO should be the

Chief Experiment Officer.

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Eloqua started with the wrong product in the wrong market

RE worked, F and I did not. So we found a new segment that had even more

extreme economics than RE.

1.0 2.0

Market

F.I.RE.(Financial, Insur-

ance, Real Estate)B2B Tech

Product

ChatMarketing automatio

n

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Vertical niche market dominance

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The narrower the better

Even the most horizontal companies today like Salesforce and Facebook

started off in a narrow niche.

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Your first job as an entrepreneur is not to die

Focus lets you economize on your learning and your product development.

Plus you can charge for your expertise.

Eloqua was bootstrapped, profitable and high growth for over 3.5 years!

I PROMISE I WILL NEVER DIE

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Focus innovation on the emergent, under-served hero

Your category is created by your users and customers, not by your marketers.

Find the under-served hero who will benefit most from disruptive innovation.

Elevate and celebrate the hero!

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Drive the company on mission, vision and values

…from day one!

Salesforce: No Software

Google: Organizing world’s information

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Drive leads to achieve profitable, efficient growth

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Treat lead gen as a

strategic imperative

Startups win because they can choose the customers that will

be most likely to advocate.

Plus, generating early revenue is pretty strategic!

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CEO must help choose customers strategically

Don’t delegate this. You need to figure out the message and

offering that attracts the best customers and can scale.

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Ensure the lead flow is increasing in quality & quantity

Once you figure out what works, you can add automation and then solve for the next segment of customers.

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Use a marketing mix of seeds, nets and spears

Inbound – real thought leadership is a hallmark of category creators.

Open minds = open wallets.

Outbound – need to target the right customers that will become advocates.

Advocate WOM – Your goal should be to generate as many referrals as possible.

Source: Aaron Ross, Predictable Revenue

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Invest early in customer success

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Build happy customers:they scale really well

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If you have $1 to spend on marketing, instead consider spending $0.75 on

customer success.

BUILD ADVOCATES

AND

MOBILIZE THEM!

Need new pic

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= ≠

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Iterated MVP is insufficient: Emphasize experience, design &

quality

The goal is to get to the right experience, not the right product.

We test designs, QA was dev hire 5, and we pair program all the time to

maximize quality.

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Expand your productization and monetization models

New, successful SaaS models emphasize monetizing the end users,

delivering value-add like benchmarking, best practices and

recommendations.

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Build for the billion

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More long-term focus:design a business with multi-billion potential.

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Raise money earlier, but use disruptive tools like AngelList fora higher shareholder count

We have 44 shareholders. That’s 44 people to help us with lead generation, filling candidate reqs and expanding our network.

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Build a more ambitious product footprint

Building network effects with our advocate users and integrating

deeply into our customers’ businesses.

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Hire a stronger executive team early…

Building the strongest, most talented team has never been a mistake as long as hires are experienced in the company stage.

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…but with room to grow!

It’s good when there is a learning gap: it keeps things interesting.

The best execs for category creators prize learning and growth over compensation.

Creating the billion$ SaaS category:

Zero to IPO secrets from a serial entrepreneur

February 18th, 2014Mark Organ, Influitive, CEO@markorgan@influitive