8/09/2013
Home >> Cloud Computing Revolution >> Learn from the Big Time Cloud Investors Who Got The Cloud Right
By Kyle Brown, Curator
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Bessemer Venture Partners is THE oldest VC fund in the world...started in 1911 from the Bessemer Steam engine family.
They were in the cloud space when it was still called Application Service Providers—remember that phrase?
Each of these ten lessons are important...and we will break each one down and comment on each rule.
BUT if you want to improve your Cloud business strategy or Cloud investing results...I have NOT found a better base of strategic understanding than this report.
We first presented Bessemer’s Top 10 Laws for Being “SaaS-y” at our annual Cloud CEO Conference almost five years ago, and were overwhelmed by requests to share the content more broadly. This update is the most extensive we have ever undertaken, and is the result of literally thousands of conversations that we've had with cloud executives, including our past and current portfolio companies, as well as other leading public and private cloud companies.
Drink Your Own Champagne. Use your own product and that of your customers, partners, and peers. To understand the cloud revolution, you have to be a part of it.
Build for the DOer, Build Employee Software. We’re witnessing the “Consumerization of Software” so focus on ease of use for SaaS and “Developer Citizenry” for PaaS and IaaS.
Death to the Suite; Long Live Best-of-Breed and Even Best-of-Feature. For most of the last two decades, major software vendors have pushed the concept of an “integrated” software suite on the market. With cloud computing, the pendulum is swinging back forcefully in favor of best-of-breed applications.
Grow or Die. Investors, employees and partners aren’t buying into your current company as they are investing into some future version of your business, and growth rate determines the size of the business, at that future period.
Play Moneyball in the Cloud and Check the Scoreboard with the 5 C’s of Cloud Finance. Related to growth are many more detailed metrics that you’ll want to understand including areas of acceleration and deceleration in the business and cohort performance over time. We recommend EVERY cloud business track and report on these.
Build the Revenue Engine, And Only Invest If You Have a Short CAC Payback Period. If hyper-growth is the goal of most aggressive cloud CEO’s, how do you know if your sales and marketing investments are ultimately “profitable?” Measure your Customer Acquisition Costs and benchmark your CAC Payback.
Make Online Sales and Marketing a Core Competency. You’re a cloud business, so by definition, your sales prospects are all online. This is a clear example where business-to-business (B2B) marketers need to learn from their business-to-consumer (B2C) counterparts.
The most important part of Software-as-a-Service isn’t “Software” it’s “Service.” The only acceptable reason to lose a customer is death (bankruptcy) or marriage (acquisition). Every cloud company is in the service business, and therefore your customer service can be the difference between failure (churn) and huge success via high retention and up sells.
Culture is key as you build your Dream Team. Bessemer has enjoyed the privilege of backing hundreds of companies throughout our rich history, and the one single determinant of success above all else is the quality of the team and how well they work together.
Cash is (still) king. Cloudonomics requires that you focus on cash flow above operating profit, and plan your fuel stops very carefully. Understanding the cash flows of your business – including gross and net burn rate – is critically important to survival in the early days, and to your dominance in the long term.
BONUS LAW:
You can ignore one or two of these rules, but not more. Great companies innovate, but pick your battles!
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About the Author
Kyle Brown lives in the heart of Silicon Valley, Palo Alto, California. He is the Executive Director of Curation and an active reporter for Cloud Investor.com. Email him at [email protected] If you know of a start-up in the cloud space looking for financial, management, or other support, let Kyle know.
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