Wildcat Venture Partners & The Traction Gap Framework

Well, I know it has been quite some time since my last post – some of you have emailed me asking what’s up.

As you will soon read, I have had a few things on my plate over the past year and a half since InterWest Partners made the decision to go forward as a healthcare only venture firm. That decision set in motion many cascading events for me and my partners.Continue Reading …

In Pursuit of Becoming a Platform

StartupsI focus exclusively on investing in software startups that build products used by businesses and business users. My current and past portfolio includes infrastructure companies such as Aria Systems and Splice Machine as well as application software companies such as Doximity, MarketoStellar Loyalty, and Workday. Most of these use a SaaS business model.

My investments are often very early stage – Seed and Series A – with either just a product/market concept (e.g. we invested in Marketo when it was just an idea, no code or customers; the same with Doximity and Stellar Loyalty) or prior to a Minimally Viable Product (MVP) such as the case with Aria Systems and Splice Machine.

This involves a lot of risk because these companies have significant hurdles to overcome — incomplete teams, lack of product/market fit and/or a repeatable go-to-market process. The trade-off for that risk is ownership. We can secure 20%+ ownership in these companies so that if they are successful, they have the opportunity to be significant drivers in our fund.Continue Reading …

Bend Polytechnic Academy (BendPoly) – A Bridge Over Troubled Waters

BendPoly_Logo_F-BigIn the 20th century, when the US was largely based upon a manufacturing economy, American schools provided two educational tracks and career paths for students: higher education and vocational.

Higher education focused on delivering a broad general education to those students who had the aptitude and desire to pursue management or professional careers. Vocational schools provided students with the skills needed by the vast number of industrial manufacturing companies at the time: carpentry, welding, plumbing, electrical, and others.

Today, however, the US – and global- economy has been transformed to be primarily service-based. According to a 2014 Bloomberg Business report, “Worldwide, services account for 70 percent of value added and…that’s true in some developing countries, too.”

The majority of manufacturing jobs that still exist have been shipped outside the US and are unlikely to return – at least not at the scale prior American generations experienced. Many of the skills required for excelling in our service-based economy are not taught in either higher education or in vocational schools.

Higher education must continue to focus on providing students with a solid and broad educational foundation. These subjects are important to learn how to think critically, and understand who we are and how we fit into an ever-increasing global economy.Continue Reading …

The Rise of RevTech and EmpTech

Machinery-ManufacturingMy investment partner at InterWest, Doug Pepper, and I co-authored an article on TechCrunch this weekend titled  “A New Revolution Modernizes The Revenue Supply Chain“.

In it, we discuss a new class of enterprise software applications that we see emerging in the Front Office and Back Office. These new applications are not replacing first generation applications per se (e.g. CRM, ERP, HCM).

Instead, they are using the transaction data generated by first generation applications  to provide real-time business insights at “the moment of value” — when a decision needs to be made by an individual, manager or executive.

They are also doing something very interesting — they are embedding collaboration and workflow into the fabric of the applications and leveraging mobile for anywhere, anytime computing across the enterprise.

These new applications, we believe, may be the foundation of a step-function increase in global employee and company productivity.

We have given these data-driven enterprise applications the labels of “RevTech” (Front Office) and “EmpTech” (Back Office). They are already helping companies to optimize both their revenue supply chains and talent supply chains.

I encourage you to read the article and provide your comments. Always interested in your feedback.

The Missing SaaS Metric – Customer Retention Cost

A few months ago, on a quiet Sunday, I was reading through some of my board decks getting prepared for the upcoming board meetings.

A common theme among all of those decks was a section on churn and the impact it was having – both positively and negatively – on my portfolio companies. Some of those companies, fortunately, are experiencing negative churn as their customers increase the footprint of the portfolio company’s technology.

I got to thinking about this issue.

We have a significant number of metrics we use to measure top of the funnel health for our companies that use a SaaS business model – Customer Acquisition Cost Ratio (CAC Ratio), Customer Lifetime Value, Churn, etc. These are tried, tested and proven metrics management teams and investors use to evaluate how well a company with a recurring revenue model is performing.

However, with churn  a critical component of the SaaS model, I asked myself, “Why don’t we have a common metric to measure the health of the bottom of the funnel?”

Key questions are:

  • Shouldn’t we know how much we are spending to retain a customer?
  • At what point should we “fire” a customer?
  • Should that point vary by industry or type of customer?
  • When should we parachute in our “customer success” teams?

It seemed to me that if we have a Customer Acquisition Cost metric, shouldn’t we have a Customer Retention Cost (CRC) metric and what would be the elements we would use to measure the CRC and CRC ratio?

So, I put together a bunch of thoughts on what should go into the calculation of such a metric and sent that over to one of our portfolio companies – Totango.

Totango provides a customer success platform. Software companies and others use their platform to determine whether or not a customer is deriving value from a software product. This enables customer success teams to “parachute in” and help a customer derive value from the vendor’s software product and mitigate a key issue associated with churn.

Given they are “in the business of reducing churn”, it seemed to me only natural that they take my initial concepts, flesh them out,  and launch the CRC  and CRC Ratio metrics into the industry as a whole.

I am happy to report they have done that with a fantastic white paper on the subject. I would encourage anyone dealing with churn/retention, to read this paper and add to the conversation.

The CRC and CRC Ratio are not metrics to be owned by any one individual or company. They need to be owned by the industry and your contributions are welcome.