Podcasts Business SaaS Interviews with CEOs, Startups, Founders 778: SaaS: With $80M Raised, He Left Salesforce to Bring Finance Departments to The Cloud

778: SaaS: With $80M Raised, He Left Salesforce to Bring Finance Departments to The Cloud

Published: Sept. 10, 2017, 9 a.m.

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Dave Kellogg.\\xa0 Dave has more than 20 years of experience in high growth companies. Dave has been CEO of MarkLogic, CMO of Business Objects and member of Aster Data board of directors. Dave steered MarkLogic to $80 million in revenues. Business Objects witnessed equally impressive growth as it reached a revenue of billion dollars under his able guidance. Tune in and listen to Dave as he discusses various financial metrics of Hostanalytics. Targeting small businesses and enterprise level businesses, this company has grown 4x over the past 3 years. Read on and find out what makes this SAAS business tick.

Famous Five:

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Time Stamped Show Notes:

  • 02:14 \\u2013 Nathan introduces Dave to the show
  • 03:19 \\u2013 Host Analytics is a SAAS company that is disrupting the space for enterprise performance management
  • 03:58 \\u2013 Not dabbling in premise products at all
  • 04:28 \\u2013 Corporate finance does not scale up with growing company size; number of users for such a software is dependent on the centralization philosophy
  • 04:42 \\u2013 A big company might be heavily centralized with only a sprinkling of users, whereas a little company might have hundreds of users
  • 04:52 \\u2013 Pricing model is a combination of a fixed based fee and a user fee
  • 05:00 \\u2013 Fixed fee varies from 25k to 50k\\u2014both fixed fee and user fee are recurring
  • 05:25 \\u2013 User fee depends on the user type and to which extent the software features are being used
  • 05:45 \\u2013 Fixed fee per user per month may vary from a couple of hundred dollars to a thousand dollars
  • 06:10 \\u2013 Re-entered the startup world once he quit Salesforce and joined Hostanalytics
  • 06:24 \\u2013 Passed on the reigns at Mark Logic to Gary Bloom\\u2014Mark Logic is still doing very well
  • 07:05 \\u2013 Best strategy to exit a startup is to exercise 83B options
  • 08:00 \\u2013 Exercising all options results in FMP (Fair Market Value) equaling strike price
  • 08:07 \\u2013 You lose the optionality\\u2014shares might not increase in value at a later date
  • 09:00 \\u2013 Met VC\\u2019s, entrepreneurs and angels while looking for a new opportunity after quitting MarkLogic
  • 09:16 \\u2013 Dave\\u2019s buddies coaxed him to join Salesforce as CMO
  • 09:39 \\u2013 Learnt a lot about SAAS at Salesforce. However, he found out that he was more comfortable running smaller companies
  • 09:58 \\u2013 Dave met the founders of Host Analytics through a common friend who was on their board
  • 10:31 \\u2013 HostAnalytics was clocking revenues of $10 million when Dave joined them in 2014; a great board and a proven SAAS model are the other factors which compelled Dave to join the firm
  • 11:20 \\u2013 Revenues have grown 4x since 2014
  • 11:42 \\u2013 Founded in 2001, HostAnalytics grew via bootstrapping for seven years. They finally secured VC funding in 2008
  • 12:01 \\u2013 Raised $85 million to date
  • 12:32 \\u2013 Used 75 cent \\u201cI love EBITA\\u201d stickers and funnily enough, won customers due to that
  • 13:47 \\u2013 Servicing 700 customers, as of today
  • 13:50 \\u2013 Pareto\\u2019s 80/20 principle is not applicable to them; they are bimodal with a dual focus on smaller businesses as well as enterprise businesses
  • 14:20 \\u2013 Both of them are run as different cohorts by different salesforces; revenues are split equally between small business and enterprise
  • 14:50 \\u2013 Each client is aggregating revenues of $70,000 per annum
  • 15:13 \\u2013 Payment terms are a tricky issue in SAAS
  • 15:18 \\u2013 While other SAAS players go for monthly and quarterly payments, HostAnalytics opts for annual payment
  • 15:34 \\u2013 If you are giving a discount smaller than your churn rate, then everybody wins
  • 16:15 \\u2013 Customer churn and revenue churn are surprisingly equal
  • 16:25 \\u2013 Spending on an average $1.5 to $ 2 for a dollar of AR to acquire a customer
  • 17:16 \\u2013 A team of 300 people out of which 100 are located in India, entire sales force of 60 is located in the US
  • 17:23 \\u2013 Company co-founded in US and India
  • 18:10 \\u2013 Average lifetime value of a client varies from 6x to 7x or half a million dollars
  • 19:39 \\u2013 Cloud penetration of this market is just 5%
  • 19:57 \\u2013 Finance department is 10 to 15 years behind sales in adoption of cloud
  • 20:17 \\u2013 9.5 out of 10 people would say \\u201cNot now\\u201d
  • 20:56 \\u2013 Blended Gross Margin is lower since they have a slightly bigger services business than most SAAS companies
  • 21:10 \\u2013 ERP is a heart transplant. EPM is a knee transplant
  • 21:20 \\u2013 Services business helps reduce churn and create cash flow
  • 22:57 \\u2013 The Famous Five

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3 Key Points:

  1. A big company might be heavily centralized with few SAAS users, whereas a small company might have hundreds of SAAS users.
  2. Focusing on services reduces churn and creates cash flow; however, gross margins are less compared to other SAAS companies due to this.
  3. Focusing on small businesses as well as enterprise businesses is important\\u2014at HostAnalytics, revenue is split equally between these two models.

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Resources Mentioned:

  • Simplero \\u2013 The easiest way to launch your own membership course like the big influencers do but at 1/10th the cost.
  • The Top Inbox \\u2013 The site Nathan uses to schedule emails to be sent later, set reminders in inbox, track opens, and follow-up with email sequences
  • GetLatka - Database of all B2B SaaS companies who have been on my show including their revenue, CAC, churn, ARPU and more
  • Klipfolio \\u2013 Track your business performance across all departments for FREE
  • Hotjar \\u2013 Nathan uses Hotjar to track what you\\u2019re doing on this site. He gets a video of each user visit like where they clicked and scrolled to make the site a better experience
  • Acuity Scheduling \\u2013 Nathan uses Acuity to schedule his podcast interviews and appointments
  • Host Gator\\u2013 The site Nathan uses to buy his domain names and hosting for the cheapest price possible
  • Audible\\u2013 Nathan uses Audible when he\\u2019s driving from Austin to San Antonio (1.5-hour drive) to listen to audio books

Show Notes provided by Mallard Creatives

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