So HootSuite just raised a $165 million Series B
(led by Insight Venture Partners
, with participation from Accel Partners
and existing investor, OMERS Ventures
). To put it in context, $165m is an IPO-sized financing (Marketo raised $80m in theirs
; Tableau $254m). This is huge validation not only for HootSuite
, but also for marketing technologies as a whole
. The space has been hot for quite some time, starting with a spate of acquisitions in the social listening / widget / ads space --
Buddy Media (Salesforce), Radian6 (Salesforce), Context Optional (Adobe)--and continuing with recent activity in marketing automation and analytics: Eloqua (Oracle), ExactTarget/Pardot (Salesforce), Marketo (IPO), Tableau (IPO), EdgeSpring (Salesforce) and Neolane (Adobe). So HootSuite's continued growth and success must also be understood in light of the continued Marketing Cloud Wars between Salesforce, Oracle and Adobe. So what's going on here?
Simply put, customer-facing technologies are changing rapidly (the Internet, mobile and social), which is causing buying behavior to change, enabling and necessitating the need for a new marketing technology stack
. HootSuite -- if it continues to dominate its space -- might well be a kingmaker in the battle to consolidate this stack. (From personal observation, it seems the majority of CMOs we've talked to at BrightFunnel are using HootSuite; there is tremendous value in this #1 market share rank).
What's mind-boggling about HootSuite's meteoric rise
is that it only just celebrated its 4th birthday
. As an entrepreneur, it's certainly an inspiring and humbling success story. It appears that next, they've got their eyes set on world domination: “This capital gives us additional resources to expand quickly and strategically into new markets, innovate rapidly, and deliver on our vision around the world” - Ryan Holmes, CEO of HootSuite
Too often, it's said that B2B marketers aren't good at being creative. That we can't be funny and effective at the same time. To those critics, I say: boo! And I want to present a brilliant counterpoint. No, not my alma mater Salesforce. Sure, Marc Benioff is a genius enterprise marketer -- unlike, say, his sporting-event management-challenged mentor -- but that example is tired.
I wanted to give the example of an emerging technology company, BlueJeans (aka Blue Jeans Network)
that's made 3 exemplary moves for an enterprise tech company. This is a great case study for any emerging enterprise company:(1) "Roominator" video - TechCrunch ran an interesting story profiling their latest marketing campaign. You have to watch the video to understand. I LOL'd (at the Blue Rhino moment, to be precise). I almost cried (at the baby). I was afraid for the protagonist (choosing between The Wife and The Boss). Why is it brilliant? Because it hits the technology buyer with EMOTION. Instead of talking about boring video conferencing technology, it gets at the universal trade-off between Work and Life we all face. It's memorable. It's funny. Just watch it. I'm not saying every CMO should go hire professional actors and writers to create a similarly slick video. But learn from its smart messaging. (Sell whiter teeth, not peroxide-laced toothpaste. Don't make your premium sushi sound like dead fish).(2) Work From Home Positioning (and subsequent Yahoo trend-surfing) - BlueJeans Network has positioned themselves as a Work From Home solution, which everyone can relate to (and is a secular, growing trend); vs. another player in a crowded-sounding space like "video-conferencing." Not only that, they effectively and tastefully trend-surfed the minor scandal at Yahoo related to Marissa Mayer's comments on WFH.(3) Company name - The company name itself is a smart play on the value of the product. It's not "RemoteVid" networks. It's BlueJeans. Love it or hate it as a name, you know what it stands for. What this suggests is that even the technical founders of the company were savvy about marketing and positioning from inception.Any emerging enterprise technology or SaaS company can learn from their example. Great example of creative and effective B2B marketing. Let's celebrate it.
TechCrunch just published an interesting post, "Rating the Venture Capitalists,"
which rates the top VCs, based not on LP returns, but instead, based on how successful their portfolio companies are in raising the next round of funding. Not a perfect measure, to be sure, but something that adds to the conversation (anything that adds more data/transparency is a good thing).
The piece rates a number of top venture capitalists and angels highly, including the following as their top ten:
- Foundation Capital
- InterWest Partners
- Flybridge Capital
- Marc Andreesen
- Naval Ravikant
- Atlas Venture
- Flagship Ventures
- Jeff Clavier
- Andreesen Horowitz
- Foundry Group
My response to the post is generally positive. Any data that brings transparency to evaluating VC performance (from an entrepreneur's perspective, not LP) is a great thing. Too often, the only metrics used to evaluate investors are returns, which is at best loosely correlated with founder-friendliness and at worst orthogonal to it (i.e. if they make their returns "buying low" or getting 40% of your company). A couple of challenges I see with the author's analysis:
(1) Series A/B is not standard b/w VCs
. Some VCs are making it a practice to cherry pick earlier Series A deals as a matter of survival/competitive advantage. I.e., betting on the company to "grow into" a $15m Pre, let's say vs. investing at a time other VCs would agree to that valuation (I bet some of your Top 10 VCs above fall in that category.
(2) Series A/B bar is a moving target
. Since Series A is fast becoming the new Series B, what you really need to compare is 2 years ago Series A with this year's Seed rounds etc. Obviously not possible/ lots of conflating factors, but something to think about.
(3) Less hyped investors can be better value
. My personal learning (from successfully raising a seed round for BrightFunnel
) is that just as with candidates, or anything else, finding unheralded jewels-in-the-rough is the way to go. I like value, not overhyped brands. So why not find that super value added newer fund, or that up-and-coming hungry Principal, vs. buying last decade's track record. Sure it's work, but it's probably worth it. So many of the 100k-twitter-follower investors are all fluff, no substance. Or they have substance, but they're scaling their investing by spending very little time with angel/seed investments. In other words, by getting a greater Share of Time from an investor, you are essentially getting more value, but they are almost certainly getting worse returns, because they can place fewer bets. But with the best angels, and some VCs, that's ok, because they're acting like quasi-founders: believing in the vision, wanting to create something new, vs. just looking to return more money and raise a bigger fund, and get rich off the management fee.
, best known as the founder of startup incubator YCombinator
, just published yet another epic essay
, this time on Startup Investing Trends
. As an entrepreneur who has recently fundraised, this piece really resonated with me. It seems to me that this essay -- taken alongside another fantastic post
this weekend, "A Venture SLA"
, by Naval Ravikant
-- summarizes a lot of what I think can be improved in the startup fundraising ecosystem. In fact, as I read Paul's essay with breathless exuberance, I tweeted out
several quotes-- 13, to be exact, sometimes with a word or two of editorial -- that I thought were particularly on point. (Avid readers of this here artisan blog will remember that I've performed similar services for lazy would-be readers of long form essays before, most notably my 16 Tweet Summary of Time Magazine's Bitter Pill
Begun, the Marketing Cloud wars have.Today, Salesforce.com announced the acquisition of ExactTarget for $2.5 billion. SALESFORCE EXACTTARGET ACQUISITION FAQ:Why is Salesforce.com buying ExactTarget?
Marc Benioff has publicly stated
that the marketing cloud is a big priority for him. Just over 90 days ago, he said: “We need to buy more marketing companies. We want to be the company you turn to for sales, service, marketing and the platform.”
Well for once, you can't blame him for talking too far into his roadmap. Why Does Salesforce.com Care About Marketing?
Marketing matters to Salesforce because they want to get the massive dollars that brands and retailers spend on marketing. There is simply a much larger addressable market if you solve the needs of marketers versus merely focusing on sales people. As we know, the CMO IT stack is a mess
, and Salesforce intends to help sort it all out (and make a buck or two in the process).
Salesforce is specifically focusing on B2C marketing, because that's where they are weak -- Salesforce CRM is not used by brands. In fact, Salesforce established Retail as a target segment a few years ago. And it's no secret that it wants to go after brand marketers -- it acquired Radian6
and subsequently bought BuddyMedia
for that exact purpose.Who is Salesforce at War With?
The answer that question always starts with Oracle. Besides Salesforce, Oracle is a prominent proponent of their own Marketing Cloud
. They acquired Eloqua
in December 2012, of course. Additionally, Adobe is the third horse in the race. Arguably, they have the most fleshed-out marketing cloud -- thanks to acquisitions such as Omniture
and Efficient Frontie
r -- but paradoxically they're the most quiet about their aspirations.But You Said Salesforce Would Buy Marketo?!
I was wrong. The nice thing for Salesforce in this acquisition is that ExactTarget has already bought Pardo
t, a Marketo and Eloqua competitor. So they are getting a two-for-one deal.Author: Nadim Hossain is CEO of BrightFunnel, and formerly the chief marketing officer of PowerReviews (acquired by Bazaarvoice).
I ran across an interesting post on the rise of inside sales teams in startups
, by Scott Irwin
, a General Partner at SaaS and enterprise-savvy VC Rembrandt Venture Partners
. He notes that "inside sales jobs are growing at 15X the rate of outside sales roles."
That's an eye-opening data point, and if you like at job openings in the software industry, seems to pass reality check.
In a nutshell, inside sales is high-velocity sales: no travel, shorter sales cycles (<90 days), and lower price points (<$100k/year). Inside sales has given rise to successful companies Salesforce.com
, and new challengers such as Box
and even the aptly named InsideSales.com
. But What Does Inside Sales Mean for Marketing?
A common mistake is to draw a parallel between inside sales and inbound marketing
. It's not that simple. Inbound marketing -- by itself -- is poor man's marketing. Pure inbound marketing is a great concept for a corner florist or neighborhood butcher. If you've come to this blog, that's not you. For marketing professionals growing high value (i.e. high multiple of sales) enterprises, time is money. Waiting patiently for leads to trickle in isn't -- by itself -- a smart approach, especially if you're a venture-backed company. What's needed, instead, is what I call High Velocity Marketing (HVM), which is expressed, simply as follows: HVM = Inbound Marketing + Outbound Demand Generation
Thinking of marketing as high-velocity, rather than inbound, is a lot healthier -- and effective -- approach to marketing for inside sales-driven companies.
In other words, rather than creating a high quality webinar, with a name brand customer advocate, let's say, and waiting for people to find it through search and word of mouth alone, what a high-velocity marketer needs to do is to quickly get that content promoted to the right people.
Ironically, this is a consumer marketing problem -- "how do I get a person to see my media?" B2C companies, of course, are generally all high-velocity in nature (unless you're buying a Gulfstream
, but that's high velocity of an entirely different kind). For a B2B marketer, the idea isn't to engage someone and serve an ad to them, but instead, it's to get them to take a high-value action, such as a meeting with an inside sales rep.
Purely inbound marketing is an awful way to to solve that problem
. It would be like throwing a party and only relying on people to stumble upon it, without making the effort to promote it through emailed invitations. Likewise, promoting B2B marketing content through paid channels is critical to High-Velocity Marketing. The distinction is as follows:Inbound Marketing = blog posts, downloadable assets, etc. Outbound Demand Gen = distribution via newsletters, display ads, etc.
Note that unlike penny wise, pound foolish inbound marketing approaches, the distinction isn't about paid vs. unpaid. Ultimately, you pay for your inbound marketing (whether it's done by an employee or an outside professional), same as you do for outbound marketing (whether you rent a list, or spend time/money building one over the course of years).
I, for one, welcome the new era of High-Velocity Marketing. It makes B2B marketers more of a revenue function, and therefore more critical to the organization. And it's also more fun.
I recently sat down with Dave Hersh
, former CEO of Jive Software
(NASDAQ: JIVE). Dave grew the company from its inception as a small open source project with no revenue to a $55M, pre-IPO company (and a $1.1B market cap
as of today).NH: What lessons can we take away from Jive's success?
DH: With Jive, it wasn't until 5 years into the company (2006) that things started taking off. We hit the sweetspot - with the product, with sales, with Facebook emerging. We thought: "this is a new category that's emerging, and we're not going to lose it." That's the benefit of bootstrapping. You can be patient for the right opportunity.
"That's the cool part about B2B - there's lots of room for serendipity"
NH: What advice do you have for b2b/SaaS entrepreneurs?
DH: Find your hook -- what's your hook of value? Something that's unique to your product. For example, Demandbase
's hook was "target specific companies" (vs. people). You have to have a unique hook to succeed -- it's noisy out there. The other thing to ask yourself is: "is it a platform?" It's always an issue: can it be useful out of the gate for enough people?NH: Should startups be worried about competition during the early days?
DH: A lot of it comes down to solid execution. It really doesn't matter if two companies are starting in the same space at the same time.NH: What can you tell us about Crushpath, which you co-founded after Jive?
DH: I co-founded Crushpath
with Jive's former CMO, and currently serve on the board. Crushpath is doing really well
, and offers an interesting lesson. The entire original premise of the company was wrong. Customers said they wanted one thing, but after we built the initial product, they didn't use it. But they really liked this one feature, which became the whole company. That's the cool part about B2B -- there's lots of room for serendipity and you can keep trying, keep trying, keep trying. And eventually, find the right fit. But if you raise too much money, you might not be able to do that.
I can think of a number of reasons why startups might look suspiciously on MBAs:
1. Sense of Entitlement
- Some MBAs have a sense of entitlement about how much responsibility and status they should get. When joining a large organization, there is some (limited) basis for truth in that high self-regard. But in a startup context, this is laughable. This also translates to salary expectations, as John points out
Top MBA programs are expensive and their graduates have astronomical salary expectations.
2. Enron - We all hate crooks and people without moral compasses. Unfortunately, too many of those people also have MBAs, sullying the reputation of the degree. 3. VCs -
startups resent VCs for all the obvious reasons. Many top VCs are MBAs. Therefore, startups resent MBAs. It's not just that they possess the degree, but also that many of them are a different "breed": the business-type. As a result of this negative sentiment, look for VCs loudly -- and sometimes inauthentically --proclaiming themselves as geeks, entrepreneurs and CS majors (even if they can't write a line of code anymore). 4. Lack of Product Orientation
- Startups have to be product and engineering oriented at the outset. Many MBAs don't have technology backgrounds and are making a career switch, and are therefore not a good fit.5. Risk-Aversion / Un-Contrarian-ness -
Startup people are a bit crazy, believing something many sensible people don't. Some MBAs are perceived to be conventional thinkers, and come from a background of high and steady achievement, without huge spikes with creativity and risk-taking. Stanford MBAs, for example, are diverse in many incredible ways, but not so much in undergraduate academic institutions - almost 1/3 of my class came from Stanford, Harvard, Princeton, Yale and Dartmouth (of course, founders of Facebook, Quora and many other sites also came from those same schools).
Needless to say, none of this is to say hatred or prejudice against MBAs is justified. Indeed, many of Silicon Valley's most highly respected entrepreneurs are MBAs, such as Scott Cook
and Vinod Khosla
of Sun Microsystems
. But that is a topic for another blog post.
"Don't take [seed] money from a later stage VC. If they don't follow on, it sends a bad signal."
NH: What is Emergence Capital's investment focus?
SJ: We focus on companies between $500K - $5M ARR, which we we think will get to $100M ARR within 4-5 years. We partner with our portfolio companies on go-to-market and team building. NH: How many investments does Emergence Capital make per year?
SJ: We make about 5-6 investments a year, which allows us time to be a value-added partner. Out of our new $250M fund, we expect to make a total of 20 investments.
We have quite a ways to go since we've only done 3 investments in this fund. NH: What fundraising advice do you have for earlier stage SaaS companies?
SJ: Focus on stage-specific firms. A few exclusively focused on SaaS include Cervin, Illuminate
. To start, you may also want to draw upon friends and family. If you're just starting out, get a Minimum Viable Product created and get a couple of paying customers. Investors almost expect that, because it's so easy to do. NH: What mistakes do SaaS companies make in raising VC funds?
SJ: Don't focus too much on the valuation for the first round of funding. If you raise $1M, it's unlikely to be the last capital you put into the business. If you're successful, you'll need more capital, and if you're unsuccessful you'll need more capital. You have to consider the challenges of getting a follow-on round. NH: What about raising seed capital from a later-stage VC?
SJ: I highly recommend that you don't take money from a later stage VC at a seed round. If they don't follow on, it sends a bad signal. We see it all the time -- where a company with VCs provided seed capital, but choose not to lead the later round. There's more than enough early stage money out there. And the early stage guys will be more focused and give the necessary support. In the rare case the later stage firm wants to lead your next round they likely will want an insider's discount. NH: How many firms should a company approach?
SJ: My advice is, be focused. People talk. If word gets out that you've been fundraising for awhile, you might appear stale. Also keep in mind that when you have a meeting, you probably only have one shot. Only a small percentage of firms will get a second look.
The secret vs stealthy thing is a bit of a making-a-mountain-out-of-a-mole-hill situation. Entrepreneurs aren't lied to; they're more protected from signalling risks; VCs still get to deploy capital (ahem "spray and pray") and angels get to feel important. Everyone gets what they want. As to the would-be-Series A-crunchees- they know the rules and have only themselves to blame if they don't keep enough tank in the gas to get to the next milestone (e.g. $2-4m ARR run-rate for a SaaS company Series A).
Perhaps I'm naive, but it strikes me that no one's any worse off as a result of this development, and it's quite likely that almost everyone is better off. It used to be that entrepreneurs went from bootstrapping or taking small angel investments to much larger VCs rounds (and much later). Now there are more gradations in investment, and VCs seem to be happily ceding the lower-tier (and higher risk) territory to seed funds. This raises the tricky situation that an entrepreneur can feel like they've passed the high quality threshold of an institutional investment, but still not be set up for success to get to a VC round. And that's exactly why this conversation is now taking place. My view is that it's ultimately good for the ecosystem, and merely a symptom of increasing market efficiencies.
What do you think? Please comment below.