Browsing articles from "December, 2009"

Where’s Marc?

The importance of the entrepreneur to the success of a technology company cannot be over-stated.

The holiday season is a terrific time to reflect back on the year, and looking back on 2009, if I can say one thing about the enterprise software pitches we’ve seen, it’s that many if not all started out with, “We’re like Saleforce.com…”

A lot of these businesses do, in fact, look a lot like Salesforce.com, from a growth perspective. There are, however, a few differences, the most important of which is, none of them include Marc Benioff as part of the pitch!

Some might minimize the impact of this missing factor on the potential success of their business. But if you look at the most successful tech companies of the last 20 or 30 years, there are almost always one or two key people you can point to who made the company. The list comes easily to mind: Steve Jobs, Bill Gates, Larry Ellison, Larry and Sergei, Marc Benioff, and Jeff Bezos, to name a few.

So when someone comes in with an incredible idea and the pitch starts with, “We’re like Salesforce.com,” the #1 question in everyone’s mind in the room is not, “Does this revenue ramp look like that of Salesforce.com?” It is: “Where’s Marc?”

Because without Benioff, I would argue, Salesforce.com would not have become the SaaS category creator and market defining company that it did.

There are a lot of differences one can look to when a company pitches itself as analogous to another. Two easily quantifiable factors are capital and revenue. Salesforce.com, no doubt in part due to the market conditions of the time, was able to raise a whopping $64M of funding in its first two years in business. I have argued in the past that the cost of building and delivering product to market has markedly decreased in recent years – due to the very existence of companies like Salesforce.com. Certainly software companies today should require far less capital than Salesforce or NetSuite from creation to liquidity. But the point remains that Salesforce.com had a significant amount of capital to work with to get the fly-wheel spinning — a lot of which it could apply to fund the cost of customer acquisition. The other measurable factor, as shown in the chart below, is Salesforce.com’s revenue growth ramp from 2001 to 2004: from less than $10M to greater than $90M.

Salesforce.com

More subjective, however, is measuring the entrepreneur whose vision it was to create Salesforce.com to begin with. That factor is a much harder one to quantify, and certainly is more easily measured with the benefit of hindsight. The real challenge of course, is convincing potential investors, as Jobs, Gates, and Benioff were able to, that you are going to be hugely successful as an entrepreneur before you are. When it comes to pitching your own company, the benefit of comparing yourself to Salesforce.com – or any other wildly successful public company for that matter – may be vastly diminished unless you are in fact the next Marc Benioff, Steve Jobs, or Bill Gates. And if you are, then compare away – just be ready to make your case.

Dec 21, 2009