Every SaaS business needs to know who their most valuable customers are

Every SaaS business needs to know who their most valuable customers are if they are to sustain high growth. To find out they need to be able to join revenue with sales, pipeline data, marketing, and product usage metrics.

Dublin’s CloudKPI is helping fast-growing software firms make sense of their data

image description
BY JONATHAN KEANEREPORTER, FORA
MAEVE KNEAFSEY HAS seen her fair share of challenges in the world of business.She’s the chief executive of Dublin’s CloudKPI, working alongside co-founder Brenda Jordan.

It is her fourth company, having previously run digital marketing agencies and a marketing software firm called MarketFinder. Kneafsey is also a former chair of the Irish Internet Association.

However the latest business, a data analytics platform that measures client firms’ metrics, was borne out of common frustrations she encountered in her various enterprises.

“We did a lot of work in using analytics to help people to drive decisions, and we were using (business analytics software) tools, for building visualisations and metrics, like Klipfolio and Tableau,” Kneafsey tells Fora.

“An awful lot of work falls back on the user in terms of formulating the metrics and understanding how to do them correctly. There has to be a better way of doing this.”

Her co-founder, whose background is in accountancy, was in a similar boat, Kneafsey says.

“She had been looking at automating and generating financial metrics and also realised that you’ve got to get the right audience for the product.”

The duo felt that companies needed a “360-view of sales, marketing and revenue metrics”.

The result was CloudKPI, which gathers data from companies’ various software systems and generates insights on how the company is performing.

Maeve Kneafsey and Brenda Jordan Co-Founders CloudKPIMaeve Kneafsey & Brenda Jordan
Source: CloudKPI

Kneafsey identified that software startups that are beginning to scale, especially those operating on a software-as-a-service (SaaS) model, could benefit from a better platform for working with data.

“We have a version of our product that anybody can use because we’re pure analytics, sitting on top of systems that businesses are using to drive the business,” she says, adding that understanding all the data was vital in helping firms to make the right decisions.

Clients

According to Kneafsey, CloudKPI had a good idea of the issues that software firms face, but it needed to get closer to potential clients.

While there are plenty of possible customers this side of the Atlantic, CloudKPI was keen to dip its toe into the US market as quickly as possible.

The company was incorporated in 2012, but it wasn’t until two years ago that it joined the Access Silicon Valley programme with Enterprise Ireland to get the ball rolling on its first product.

The State-supported scheme helps Irish startups to access mentoring networks in the US.

With her experience in building a software business, Kneafsey knew some of the pitfalls that could await CloudKPI but she and Jordan were keen to explore the US market as soon as possible.

“We both knew that to get it right in the early stages, you really do have to know your audience,” she says.

“If we build a product in the UK or an Irish product initially, it’ll possibly be for companies that aren’t the leaders in SaaS, so why don’t we go to where the leaders are and understand what are they doing at the moment?”

The experience was eye-opening for CloudKPI. Through the Enterprise Ireland trip, it found that many scaling SaaS companies were having trouble with keeping track of their metrics and analytics.

Companies were often using ineffective manual tools or were trying to build their own software, which was distracting from work on their main products.

“What the programme gave us was access to the right people. What we learned very quickly was that there was a problem, but you have to pick the company at the right stage in their growth,” she adds.

This opportunity lies with companies that are growing and scaling. For a newborn startup, the metric problem doesn’t quite exist yet, Kneafsey explains, as the metrics are basic and relatively easy to monitor.

It’s when a company starts generating significant revenues, signing partnerships and launching multiple marketing campaigns that things get complicated.

maeve-kneafsey
Maeve Kneafsey Co Founder CloudKPI

This is the sweet spot for CloudKPI – companies that have revenues of €4 million all the way up to €50 million.

“It’s when you start to grow really quickly that it becomes hard work to try and manage your metrics and you need them fast because you’ve got to make some decisions,” Kneafsey says.

“You have investors and everybody else that expects you to grow really fast.”

MVP to full product

After the Silicon Valley experience in the summer of 2016, CloudKPI got its first minimum viable product together and, in June of this year, released the first full version of the product.

To date, it has four paying customers and is in the middle of hammering out a partnership with another organisation that “would give us fast access to a lot of SaaS companies in this space”.

CloudKPI is not without its competitors – including legacy systems in firms that hadn’t moved far beyond Excel sheets, Kneafsey says.

However established tools like Tableau and PowerBI are targeted at a much wider, general pool of users, she adds, while other tools may only focus on sales analytics.

“The customer knows that they need to look at not just revenue, but they need to be able to join revenue with sales, pipeline data, marketing activity and activity in the product to find out who are their most valuable customers,” she says.

“You can’t get that just by looking at revenue, and you can’t get that just looking at sales.”

CloudKPI has ambitions to leverage artificial intelligence and machine learning to help give its product an intuitive edge.

To achieve that, it is raising an investment round of €1 million to hire more developers as well as expand its sales teams. It has already raised around €125,000, according to company filings.

“We’re doing a seed round at the moment to allow us to get that (artificial intelligence) functionality built into the product. We started off building our predictive models, and now we need to actually incorporate them into the product.”

There are three developers currently on the Sandyford-based team with Kneafsey and Jordan.

“The developers are here in Ireland and that will probably always be the way, the development will be focused here.”

That said, the company will continue to make its big sales push in the US, Kneafsey says.

“It is of course really important because there are so many (companies) there and a concentration of SaaS companies.”

https://fora.ie/cloudkpi-metrics-4230472-Sep2018/?utm_source=more

Building your SaaS startup? Forget about comfort zones

Visiting Airbnb San Francisco with Erin Anderson and Women’s Startup Lab 

The minute you start to grow a SaaS business, particularly where you are moving into a new previously uncharted market, you’re out of your comfort zone. Susan Hayes and her Savvy Women podcast interviews are full of great insights from lots of brilliant business women. So CloudKPI was thrilled to get a chance to share our experience of moving into the US market with our SaaS Insight Engine via San Francisco.

Fresh from two weeks intense incubation with the Women’s Startup Lab we know the benefit of being helped by people like Ari Horie, Joff Redfern, Mari Baker, Andie Rhyis, Matt Cameron, Chris Yeh, Andrea Persily, Bill Joos, Erin Anderson and many more sharing their expereince and insights. So we hope our slice of advice about breaking into Silicon Valley helps others.

 

Should your SaaS company be taking growth supplements?

Grow baby grow

Anyone who knows the SaaS sector knows how erratic company growth rates can be.  Growth rates also vary enormously depending on the stage your company is at in its lifecycle. Growth rate expectations also differ depending on who you talk to: investors, industry practitioners and entrepreneurs or subject matter guru’s! As a result we can’t give you a black and white answer, but we can provide some insights to allow you set realistic targets that reflect where you are in your growth trajectory.

Eyewatering

Very early stage start-ups can have extremely volatile growth rates. The lucky ones, and believe us they are in the minority, hit their product market fit early and can experience very high growth rates in the first couple of years. Two female founded SaaS that more recently hit the ground running are Frontapp and Meet Edgar. They reached almost $3m in under 2 years and $4m in 3 years respectively.

 

TwilioWorkday, and Zendesk managed to get to $100M in ARR in 6-7 years. They also kept growing at a rate of approx. 50-70% year-over-year after reaching $100m ARR. Outliers like Slack, reached $100M in ARR in just 2.5 years and Dropbox founded in 2007 reached $15m in 3 years and $116m in just 5 years.

Planet earth calling

Let’s bring things back down to earth. The reality is that the bulk of SaaS companies will never reach the growth rates and scale experienced by the Slacks of this world. But hey that does not mean a SaaS company will fail. Far from it, there are lots of cases where lower rates of growth and scale result in very profitable, successful SaaS businesses run by the original founders. Founders who manage to hold onto a good chunk of their companies equity, enjoy personal wealth and more than satisfy their investors.

Early stage

Ehtan Latka’s podcast interviews with early stage SaaS start-ups illustrate how growth rates after 3 years can be as high as 275%, but the medians are in the 40-60 percentile.

Scaling SaaS

But then can comes the good news. Scaling SaaS where the sales model has been established, particularly with ARR’s between $7m and $15m (median 65%), can experience explosive growth.

 

Source: David Skok Pacific Crest Survey 2016

That level of growth is great news, but can be very difficult indeed to manage. Of course, that pace of growth for the majority of SaaS businesses is unsustainable (unfortunately!) but many of the larger companies we have studied are still showing growth of between 25% and 34%.

Outliers

And before you say it we know that there are always the outliers – companies that almost defy gravity. Some of the more mature SaaS companies like Xero (founded 2006) and Shopify (founded 2004) continue to grow at 41% and 48% respectively.

So what’s the new normal?

Calculating your Net MRR Growth Rate is critical not only for your team to know where you really are in terms of revenues and growth and what to aim for, but it is one of the most important metrics for investors. A poll carried out by Profitwell found that 40% of SaaS companies were excluding or including incorrect metrics when they calculated their MRR.

0 – 100 in 7 years

The growth expectations are growing. From what we learnt at Jason Lemkin’s Saastr in Feb 2017 companies going from $1m ($83k MRR) to $100m ($8.3m MRR) growth rates look like this:

  • For the top 25% the expectation is they reach $100m in just 5.3 years
  • For the middle tier (50%) the time it takes to reach $100m is 7.3 years
  • For the bottom tier (25%) the period extends to 10.6 years to reach $100m ARR.

According to Pacific Crest 2016 survey of Private SaaS companies (with outside investment) growth rates are as follows:

  • $417k MRR ($5m ARR) on average takes 3 years
  • $830k MRR ($10m ARR) on average takes 4 years
  • $1.6m MRR ($20m ARR) on average takes 6 years
  • $3.3m MRR ($40m ARR) on average takes 8 years

 Benchmarks

VC’s as we know are more demanding when it comes to benchmarking growth rates. It’s in their interest/DNA to demand the businesses they invest in scale fast. They need a quick return on investment. BVP growth benchmark categorizes SaaS ARR as Good, Better and Best. Despite their high expectations the benchmarks they suggest for “Good” SaaS growth rates are more or less in line with actual growth rates reported by the private SaaS with investment.

Good = $83k MRR ($1m ARR) – $830k MRR ($10m ARR) in 4 years

Good = $83k MRR ($1m ARR) – $8m MRR ($100m ARR) in 10 years

 

Better = $83k MRR ($1m ARR) – $830 MRR ($10m ARR) in 3 years

Better = $83k MRR ($1m ARR) – $8m MRR ($100m ARR) in 7 years

 

Best = $83k MRR ($1m ARR) – $830 MRR ($10m ARR) in 2 years

Best = $83k MRR ($1m ARR) – $8m MRR ($100m ARR) in 3 years

Conclusion

The rate at which you grow your Net MRR is always going to be based on your growth stage. However, the benchmarks provided should give you some parameters to work within and of course to allow you to set realistic goals for your internal teams. As well as enabling you to back-up your position with outside stakeholders.

Subscribe to our blog for more information on growing your SaaS business.

Saastr 7 – 9 Feb San Francisco

We’re off to Saastr San Francisco on 7 Feb 2017 to launch CloudKPI Trinity giving Saas teams a 360° view of their core business metrics. Say hello to the team who made it happen.

L-R Caitriona Harvey, Eva Keyes and Ailbhe Conway + Maeve Scully (not pictured)