SaaS and B2B Sales – Bessemer Venture Partner’s 10 Laws of being “SaaS-y”

I recently bumped into a compelling article on Sandhill.com about the 10 Laws of Being “SaaS-y”.

Though written in 2008, the piece is a brilliant strategic blueprint for long-term management of an SaaS company, written by Byron Deeter, a key executive with Bessemer Venture Partners.

Byron has worked in the SaaS space since it first came on the scene, and serves on the board of a number of current SaaS companies, most notably Eloqua.

The Ten Laws:

1. Key metrics are Contracted Monthly Recurring Revenue (CMRR) and cash, not “booked” sales like with premise-based software solutions.
2. Keep the sales team small (3 or fewer) until reps are consistently hitting $100k in MRR.
3. Separate “hunters” and “famers.”
4. Creating active channel sales partnerships is difficult. You’re going to have to sell direct for a long time.
5. Stay local (a.k.a., North America) until you hit $1 million in MRR.
6. Don’t use multiple data centers until you absolutely have to.
7. Tenant-based installations = a big no-no (there’s one production code base, and you control it. Period).
8. Savvy online marketing is vital for leads and sales.
9. Cash on hand vs. growth is going to be a constant trade-off.
10. SaaS generally requires a 4-year allotment of “growth capital” to get off the ground, so pace spending and expenses.

**Bonus Item: You can reasonably ignore any one of items 1-10, but if you’re missing two or more, it’s probably time to re-evaluate how you’re running your SaaS business.

This summary hardly does the post justice, so go check it out here.

The two most interesting points to me (being focused primarily on sales) were #3 and #4.

Item #3—Just as Byron describes, we’ve found that having back-end account managers to “farm” current clients and keep them up to speed is crucial. Part of it has to with the nature of SaaS itself. SaaS means constantly updating your software, and adding features that create more value, and without actively getting that information to clients, you’re losing out on potential revenue. Our dedicated account management team has meant huge dividends, and especially for the fast pace of SaaS, it’s impossible to expect a “hunter” sales team to work in both roles.

Item #4—XANT has run directly into this problem since nearly the beginning. For several years we had a channel sales VP, Troy Fullmer, who is one of the most engaging, power-packed, action-oriented executives you’ll ever meet, and one of my favorite people I’ve ever worked with—but just as Byron describes, we had a very hard time putting him to use effectively. The whole point of SaaS is that users are actively avoiding having to work with “go betweens,” and to this point in our company’s existence, channel sales partners seem to add more overhead without adding much value.

Author: Ken Krogue | Google+
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