Anyone who has written an iOS mobile application knows that using Core Data and SQLite is not for the fainthearted. And anyone who has read through the documentation for Apple’s ‘NSPersistentStoreCoordinator’ was likely asleep before they had figured out how to retrieve any information from the database. Why is it, then, that SQLite became the default database for both iOS and Android?
It is probable that no one anticipated the increasing complexity of mobile applications and, more importantly, there was no alternative at the time. It was natural that Apple would reach for the mature, embedded SQLite database and that Google would follow in their footsteps. SQLite, though, was never built for mobile applications or the needs of the millions of mobile developers who would gravitate to the new platforms. SQLite was designed over 15 years ago for use on board the US Navy’s guided missile destroyers. The phrase ‘platform shift’ does not begin to adequately capture the difference between that environment and a modern cell phone. Nevertheless, there has been almost no investment in mobile databases since the design of SQLite 15 years ago. And that is one of the reasons we are happy to announce our new investment in Realm. The team at Realm has built a database that has several critical advantages over SQLite:
1. Simple and Concise API
Compare the following two code snippets:
Developers want to be productive and write code that is simple yet expressive. Database functionality is well understood and represents a perfect opportunity to abstract away unnecessary complexity. Realm has solved this. Realm also has better support for native objects. Preserving the structure of objects as they move in and out of the database is a boon.
Usually, compact code is associated with higher-level languages (like Ruby & Python) that lose in performance what they gain in simplicity. But that leads one to Realm’s second big advantage.
2. 10-100x Faster
Realm is significantly faster than SQLite as the benchmark below shows:
As the storage available in mobile phones increases, databases will grow in both size and complexity. The drive to eliminate cellular network latency and improve the user experience on mobile devices will result in larger, local databases. Fast and responsive catalog search requires every product to be in database on the user’s phone. Once that happens, query performance will be critical.
3. Cross-Platform Consistency
The same Realm database can be used across both iOS and Android. This allows the same data model to be shared across both platforms and allows for greater code ‘reuse’ across the major mobile platforms, a huge advantage over the platform-specific frameworks that usually sit on top of SQLite.
We are very enthusiastic about our investment in Realm. In the short time since they launched the product it has already been widely adopted by mobile developers who relish an opportunity to improve the performance of their application while simultaneously improving code readability and scrapping a ton of boilerplate code. The team at Realm has tackled the long-neglected problem of building a better mobile database and we are excited to be partnering with them.
 Despite an explosion of investment in server side databases over the past decade, the timeline below shows the dearth of investment on the mobile side.
At Scale we focus our investing on enterprise software companies. Unpacking that one step:
Enterprise (B2B) = non-consumer (B2C)
Software = non-hardware
Scale Partner, Rory O’Driscoll, wrote a blog post last year explaining that Scale uses the buyers of technology to divide the landscape, and within enterprise software there are two: the IT buyer and the Line of Business (LOB) buyer. Historically, these have been distinct categories but more and more often we are seeing companies deliberately target the LOB buyer in preference to the IT buyer and articulate that choice as a competitive advantage.
Under the old model, corporate IT departments purchased all goods and services related to ‘technology’ on behalf of all users and departments. As a result, sales reps were let loose on IT departments, not unlike what I practiced as a sales rep at Oracle and Cloudera. Technology purchases involved everything from the data center to function-specific business applications. Some products were intended for universal consumption – say, the data center infrastructure powering company-wide usage – and some were department specific, such as Netsuite for finance teams and Oracle Siebel CRM for sales teams. Traditional LOB software packages required extensive customization and implementation and consequently were motivated by pains experienced by business units but purchased by corporate IT.
This line has blurred and we think several trends are prompting purchasing decisions to move to the business buyer:
Time to Insight: Today, the goal for many technology startups is to get insights into the hands of the business users quickly and to improve consumption of data, whether it be mobile application crash reports (Crittercism) or indications that a project running on Amazon Web Services may be running over-budget (CloudHealth). The goal for modern software companies is different than it has been historically and is more focused on abstracting the technicalities and details and putting design and agility first. Abstraction allows for users to be less familiar with the technology and entirely divorced from implementation cycles, but still extract value quickly. Some think of this as the ‘consumerization’ of IT.
The Spectacular Rise of Software Delivery -aaS: Software is moving to the cloud and, as a result, the delivery model is moving from packaged software to consumption as-a-service (-aaS). IT no longer has to install the software, nor do they have to operate and monitor on-premise. Employees and teams can now deploy a system without explicit approval from IT because software vendors commit to operating their product and delivering an always-on service directly to the end-users. LOB users can directly consume software without help from IT. The new delivery model has positives (a new source for innovation) and negatives (raises concerns about security and control, new challenges of building multi-tenancy) but in either case it removes IT as a gatekeeper. In some case, this move to the cloud is akin to outsourcing core responsibilities that were once owned by IT.
Critical Mass: Freemium business models (those practiced by Evernote, Box) have become a well-adopted sales strategy. Freemium was once unthinkable in corporate IT where security and governance were top of mind. That governance focus has not changed at the IT level but start-ups are making their tools freely available to individuals and teams, in hopes that when adoption takes off department-wide, revenue will follow. This is especially true in developer communities, with software like Slack or languages like node.js and Swift.
Self-Service: For new software vendors the easier path to market is with a business model that minimizes sales touch-points and puts the process in the hands of the end-user. SaaS has enabled this, monthly payment by credit card has reduced friction, online software downloads have expedited the time to value, and open source downloads have created an inexpensive lead generation channel. Startups never used to post pricing pages on their websites but this is changing; companies want to supply end-users with the requisite information for making a final decision.
Chief Data Officer / Chief Revenue Officer: Corporate IT has always been an enabler by using technology to allow the business to be more efficient and competitive and to make employees more effective and productive. With the rise of the CDO and CRO, internal data is being seen as a competitive advantage. These executives have a clear understanding of business drivers and a technical knowledge of the data assets at the company. When start-ups can articulate tools that will reduce churn, improve data analysis across disparate data sets for a more holistic business view, or real-time insights, that becomes a business imperative, worthy of CDO or CRO attention.
In this era of IT becoming ‘consumerized’ and less centralized, the IT department becomes only the enabler and not the decision-maker, responding to requests from the business, instead of the reverse. Ultimately, start-ups are finding that their message resonates more clearly with teams looking for results from their data, and these individuals double as their internal champion to help close the deal.
Last Friday Box completed their long awaited IPO. What a wild ten-year journey it has been. It has all the elements of a great Silicon Valley win, starting with a founding team led by Aaron Levie dropping out of college in 2005 to chase a vision, financed by the poker winnings of his high school friend, co-founder and CFO, Dylan Smith and some early angel investors. Then came the inevitable but terrifying walk in the woods; the vision did not change but the go to market had to evolve to find a set of viable paying customers in the funding desert of 2008/2009. The company survived several near death experiences, kept alive by the guts of the founding team and the support of a great first institutional investor Josh Stein at DFJ (and later Mamoon Hamid at USVP).
We were lucky enough to meet Box in late 2009 and invest in early 2010 after the company had just cracked the code on selling to business. The average deal size was still tiny, there were only a few sales reps at the company but it was clear that the company had found a compelling use case and that it was time to start to scale. We led a $15M round and said we felt the company should invest more aggressively in sales and marketing. Aaron clearly agreed! From trailing revenues of less than $ 5 MM when we invested, the team has built a company with revenue of over $150 MM for the nine months ended October 31, 2014 and has gone from small departmental sales of $1,000 to signing million dollar investments with Fortune 500 companies.
It has been both a joy and an honor to work with this team. The four original founders, Aaron, Dylan, Sam and Jeff are all still with the company, and have been the heart and soul of the last ten years. They have been complemented by an experienced management team led by Dan Levin and including Sam Schillace, the original developer of Google docs, Whitney Bouck the former CMO of Documentum and Graham Younger the former EVP Sales from Successfactors. The company has managed the hard task of becoming “professionally managed” without becoming corporate, we are all still Boxers and glad to be that.
I am sure at the next board meeting someone, possibly me, will remind the team that the IPO is an event not an ending and how we have to get back to deliver at least ten more years of great execution to make our customers and our investors happy. All that is true but an IPO is still a significant milestone for any company. Being private has its virtues, much talked about in Silicon Valley of late, but with rare exceptions, successful enduring technology companies go public as a part of the process of growing. Customers want it. They like the visibility and transparency it shows, employees want it and even detractors of the process have come around. As I settle back from NYC and as all Boxers head back to work, we can say well done on achieving a major step in our journey to being the enterprise platform for how tomorrow works.
2014 was undeniably a productive year for Scale…but it’s in our DNA to regularly ask ourselves, “Can we do better?” Particularly when the market is as competitive — and potentially frothy — as it is now. The first thing we do is go back to our principles. While our job is to buy low and sell high on behalf of our limited partners, the real value is created by the fundamental high growth generated by our portfolio companies. That is why we spend our energy looking at company go-to-market strategies, customer traction and sales productivity rather than stock prices. A transformative category leader with skilled execution in a growing sector will be able to exit successfully in almost any market.
We’ve had the good fortune to invest in and partner with a number of best-in-class entrepreneurs who strategically grew their startups into dominant market leaders.These are teams that begin with an understanding of how to consistently delight their customers in large and globally expanding markets. The Scale model is to complement that vision with the experience and knowledge we’ve developed after 15+ years helping early-in-revenue enterprise software companies successfully grow.
In 2015, we’re “productizing” that scaling expertise to make it more accessible to entrepreneurs. The ScaleVP team is doing that by investing in our own best-in-class “Scaler,” Dale Chang, who joined us this month as VP of Portfolio Operations. Dale has incredible depth of knowledge on how to successfully scale market-leading software companies.Dale formerly was a partner with the Alexander Group, the premier independent group for sales execution in Silicon Valley. Our team and our portfolio companies are lining up outside Dale’s door to tap into his expertise and network. Given our focus on investing in companies early in their commercial lives, our ability to help them travel up that learning curve and execute quickly can make a difference between dominating a market and being the runner up.
As my partner Rory notes in a recent blog post , “… our objective is to compress the sales learning curve and … the whole scaling process in our portfolio. We don’t mind paying to learn an expensive lesson once, but we see no value for us, or for our CEOs, in having multiple companies pay for the same lesson.“
Dale is the most recent in a string of strategic hires and promotions we made this past year to help us accelerate our own growth. Cack Wilhelm and Rose Yuan joined us in the summer, and in the early fall, Ariel Tseitlin was promoted to Partner and Susan Liu was promoted to Senior Associate. And we continued to expand our network of successful operating executives with our most recent Executive-in-Residence, Bill Burns, who shared his expertise in the security issues that are increasingly plaguing large companies and governments, and helped us run a recent survey of Chief Information Security Officers (CISOs). His insight helped refine our approach to investing in the security sector. This collaboration resulted in our September investment in Agari.
Today’s momentum is built on a series of recent successes. We were thrilled to see the teams at BrightRoll, Everyday Health, Hubspot, Healogics & Jaspersoft realize strong exits in 2014 and congratulate Box on its successful IPO last week, the first large tech IPO for 2015.
It is a great time to exit, but a tricky time to invest given the high-priced environment. Our experience with more than 20 companies who have scaled successfully has improved our deal flow significantly, both in quantity and quality. It also gives us increasing confidence based on the common patterns we find in early-stage companies who are best positioned to lead in their markets and achieve successful exits. We continued to be disciplined about investing, selecting real gems to add to our Fund IV portfolio last year. These include:
We have never felt better about how the Scale team and our portfolio companies are performing – everyone is firing on all cylinders – but we remain attentive to the market forces around us. The venture industry raised more capital last year than it did in the previous seven years. Given our long-held beliefs about the dangers of an oversupply of capital, that puts us on our guard. That oversupply coupled with high private valuations means our investing, and that being done by our portfolio companies, need to take into account that enterprise valuations will return to normal levels sooner rather than later. At that stage, there will likely be a greater gap between the best companies and the merely good companies. This is why we have sharpened our team, our focus and our execution. Our eyes remain fixed on working with transformative companies that can be positioned to scale successfully for years to come.
Scale invests in technology companies that have established product market fit and are just starting to scale. When we invest, revenue is often in the low single digit millions, and the go to market team consists of a couple of newly hired sales reps, and a CEO who is doing double duty as the company’s best sales person. That CEO is looking to quadruple, triple and then double the company, year on year, to get to $100 MM as quickly as possible. What we want to do is help.
What we have seen is that, while every technology product is different, the challenges of scaling an enterprise software company are remarkably consistent across companies
For a software company, once product market fit is established, the vast majority of the additional investment dollars and headcount go into sales and marketing. A great distribution deal can change this dynamic (example Microsoft and the IBM deal) but for the most part software growth is about distribution and distribution is expensive. This is even more the case, in the SaaS/subscription era, where the costs still come up front but the revenue only comes slowly over time.
Smaller businesses and departments are early adopters and are willing to buy online or via telesales. A typical Scale investment will start with a simple predictable sales model based on some variation of web visits, conversions to leads and a “same quarter” pipeline close rate. It’s simple math. Large customers have much bigger budgets but require in person meetings, and extensive and expensive sales cycles. No one spends $1.0M by credit card. Unless the company wants to remain SMB focused, scaling usually involves taking this simple proven go to market model and making it more complex and thus harder to predict over time.
Call it what you like, choreography, or logistics, but growth is all about getting all the details right such that all parts of the company show up at the same time ready to dance and sing in unison. A software company doing $50 MM in revenue and looking to double this year faces some or all of the following issues, all of which have to be resolved and executed in year.
How do we double sales capacity while maintaining efficiency?
Do we start to “sell high” or keep doing what we are doing? If we start to sell to larger enterprises does our product really fill the need?
Is this the year for international? How do you decide and if international, where ?
$50 MM in new revenue means $150 MM in new pipeline assuming a 33% close ratio. With a conversation rate of 10% this means we need $1.5BN of raw interest. Is that level of demand even out there?
This is a list of four, I could make it a list of twenty but you get the point. The challenge is not making each individual decision but in ensuring that the sum of all the decisions adds up to a coherent overall plan.
When we look across our portfolio companies we see the same set of go to market questions being asked over and over again with an almost insatiable need for CEO’s to know “what have other companies like us done”. Answering these questions is what a partner should bring to the table and we all do this as board members. However there are limits to this approach.
Therefore, we decided to hire an executive who was experienced both in 1) go to market execution, knowing what works and 2) consulting, knowing how to assess each companies needs and explain what works. Dale Chang comes to us from the Alexander Group, the premier independent consulting group on sales execution in the valley, and has worked on many of our portfolio companies including Box and DocuSign as well as other great companies like New Relic and LinkedIn. He has already helped many of our companies scale and we look forward to having him drive this systemically across the portfolio.
He will focus on delivering answers to the most asked questions around go to market execution leveraging blinded data from our portfolio. We want to be able to tell a CEO this is what equivalent companies have done that works, and this is what has failed. We are realistic about what this will achieve. It will not create product market fit, and it will not make a bad business good. What it can do is allow CEOs to judge their Go To Market effectiveness against a realistic benchmark of the possible, based on peer companies.
Beyond this, we hope to compress the sales learning curve and more broadly the whole scaling process in our portfolio.
Welcome Dale to the Scale family, we are delighted to have him on board.
Netflix, a company that accounts for over a third of all downstream internet traffic in the US at peak, is widely regarded as a pioneer in the cloud. I had the privilege to manage the Cloud Solutions team at Netflix through 2013, looking after streaming operations and cloud tooling. I, along with others at Netflix, often spoke publicly about Netflix’s migration to the cloud, as we were one of the first to move major infrastructure to the cloud.
Migrating from the data center into the cloud was no easy task, but the hard work emerged after we were functioning in the cloud. Only then did we fully appreciate the complexity of running a globally-distributed, always-on end-user service on top of an elastic software-defined infrastructure. From the start, the cloud-based service was superior to the same service running in Netflix data centers. But we quickly realized the added complexity and management of operating in the cloud.
This led us to build tools like Asgard, ICE, Chaos Monkey, and the rest of the Simian Army, all of which are now a part of NetflixOSS. Back then, Netflix was a trailblazer and early adopter of the cloud. Now, more and more “traditional” enterprises are going all-in the cloud.
Since leaving Netflix and joining Scale Venture Partners, I have been on the lookout for a company that encapsulates the best practices and tools we developed at Netflix for highly-available and efficient cloud operations because many companies prefer to buy instead of build. I’m thrilled to have found it in CloudHealth Technologies. Today, we announced a 12M investment in the company to help support customer acquisition and expansion of the platform.
The typical cloud adoption lifecycle goes like this:
When we look across early cloud adopters, we find that many built their own internal sets of management services for making cloud operations more automated, less costly, and more performant, available, and secure. Looking ahead, this need to automate and simplify cloud operations is a universal requirement for cost-effective cloud adoption and one that is very much not limited to early adopters. CloudHealth solves that need and can help any company, small or large, that is serious about maximizing the return of a cloud investment.
What I liked about CloudHealth was that they have a holistic vision for what IT Service Management in the cloud should be. They deliver an easy-to-use, API-driven, cloud analytics platform that addresses all aspects of the traditional IT service management platforms without the heavy investment. The CloudHealth platform collects, integrates, correlates and analyzes the massive amount of data available from all of the cloud-based platforms and services that companies use today thus giving customers the context to develop business models, analyze trends, and report historically. They are setting the pillars for companies to recognize success in the cloud. I look forward to working with the team on their next phase of growth.
At some point during the past decade everyone forgot the hard-knock lessons from the pre-SaaS era and decided that running a highly-available, on premise big data infrastructure was a good idea. We heartily disagree. We have been looking for a cloud-based big data-as-a-service offering for a few years. The need was clear: it should allow easy data ingest from any device, in real-time, and with a simplicity that requires no more than 1/10th of an engineer to manage. A cursory glance at any ‘Big Data Market Map‘ reveals that this is a very hard problem to solve. When we first met Treasure Data it was clear that the company occupies a unique position in the landscape. The Treasure Data offering has four characteristics that combine to form a very valuable service:
I added the Treasure Data software to one of my web applications and was streaming data into their cloud service within 5 minutes. In about the same amount of time I was able to connect from Tableau and generate visualizations of the data. Any company that empowers individuals to that extent has a strong wedge into a market. The service dramatically reduces both upfront capital expenditure and ongoing operational costs over time.
Treasure Data sponsors FluentD, the open-source data collector that has become the standard in the industry. Streaming data from myriad devices with intermittent web connectivity is a hard problem and Treasure Data has solved it elegantly.
Anytime engineers stream data on intervals approaching 1 second, the torrent of JSON blobs becomes staggeringly large. Handling a million incoming data records every second is a huge technical achievement. It is one that will provide a lot of value as corporations continues to connect sensors to the web, as mobile devices capture location and application usage data, and as web applications begin to capture not only system logs but also user activity logs.
The team at Treasure Data has coupled a flexible schema with SQL access from all the usual business intelligence tools. Allowing easy query access into the data store is clever and will massively reduce the friction associated with adopting a big data platform.
It is far easier to describe these characteristics than it is to build them. At ScaleVP we like to invest in companies that are both well-aligned with technology trends and have a deep technical moat. It is wizardry to be able to handle large amounts of data and completely abstract away the complexity of the underlying architecture. The capital efficiency with which the Treasure Data team has accomplished this feat is rare and is a big part of our enthusiasm in partnering with them as an investor.
There is something to be said for a benign dictatorship. For all its faults, the world of the Microsoft PC desktop was an orderly one, and for IT administrators, an easy one to manage. The occasional “blue screen of death” was a reasonable price to pay for a compute environment where services like identity, security and monitoring could be provided efficiently across all applications using Active Directory, anti-virus and myriad PC management tools. By contrast, SaaS is like a democracy, lots of potential but messy, and to a control freak (and all great IT managers are a little bit controlling!) a little bit worrying.
End users are not going back to the PC desktop, so now IT has to re-create the desktop experience and the desktop management experience, but in the far more heterogeneous and disparate world of the cloud. Building the desktop in the cloud is a megatrend that will impact hundreds of tech companies. Google, Microsoft, Apple and Firefox are duking it out for browser market share, because the browser is the new OS. At the back end, there are hundreds of cloud-based SaaS applications. In the middle is a great big mess. In the absence of a dominant vendor that comes between all clients and all apps (the role Microsoft used to fill in the LAN), there are a host of new security, management, monitoring and identity products, all selling to IT to help control the world of cloud without destroying productivity.
In the world of PCs, identity was important, but in the cloud it is vital. With PCs, LANs, and the always hated VPN, IT could have a high degree of confidence in what applications were running and what devices they were running on. Today that is gone. Applications from SaaS providers are now purchased on credit cards and run outside of IT. End devices can be a tablet, a BYOD phone that the employee owns, or a PC. The IT “bag of tricks” for locking down devices and blocking access to applications is now completely irrelevant. What IT can still manage is identity, which is simply the list of current employees (plus vendors, customers and consultants), and what applications and what information these employees can have access to. If that list can be kept up to date via close integration with HR systems, and if that list can then be promulgated across all third-party applications in real time, then IT can use identity as the leverage point to seamlessly re-achieve control. That is the business OneLogin is in.
In the new world, IT cannot make things worse for users just to make things better for IT. Users will go around them. In response, identity services and access control, which is what IT wants, has been cleverly packaged by vendors to appear to the user as Single Sign On (SSO), which is what users want. The idea is simple, if you are a typical knowledge worker today, you use an average of 13 different SaaS applications that you sign into regularly. Thirteen applications means thirteen passwords and thirteen opportunities to forget a password. With Single Sign On, you log in once, and you are automatically logged into all your applications.
For IT, this is a chance to roll out a user win that is also a huge long-term win for IT. Once users access all their applications through SSO, IT can then use SSO as a central clearinghouse to enforce stronger authentication (not just password but two-factor authentication), to do real-time provisioning of new employees (once an employee joins a company they get instant access to all relevant applications), and to do real-time de-provisioning (once an employee leaves or is asked to leave, they instantly lose access to all applications). This is not rocket science stuff, but if the average employee has 10 SaaS applications, and staff turnover is 15% per year, then a 1,000 person company has to provision and de-provision 1,500 different accounts annually.
This is a competitive market with a few direct competitors and many incumbents and adjacent players that are starting to tell a “we manage cloud identity” story to stay relevant. In this market we have been consistently impressed with the execution of the OneLogin team since we started tracking the company two years ago. The founders, Thomas (CEO) and brother Christian Pederson (CTO), have the classic immigrant entrepreneur story, literally building the first version of the product while living on ramen noodles in an apartment in Los Angeles. The company has moved to Silicon Valley, and Thomas has built a strong go-to-market team around him. What we particularly like is the focus on being partner friendly, including helping other SaaS vendors implement standards like SAML and now NAPPS (for mobile) by providing free toolkits to integrate these emerging standards.
The biggest challenge the company faces now is keeping up with the demands of an exploding marketplace. The company is hiring across sales, customer service and engineering. We are excited to be part of the team and look forward to working with Thomas, the team and the board to build the winner in the cloud-based identity market.
It’s no surprise that consumer and business buyers are more likely to buy something on the recommendation of a friend or peer – “earned advertising” as Nielsen calls it. I noted this rise of referral marketing in a post called The New Marketing Funnel, which examined how buyers’ behaviors have changed in the wake of the digital revolution. Some of today’s most successful startups have made referral marketing the backbone of their demand generation activities. The reach that companies can achieve with referrals is wide; 39% of marketers use referral regularly and 43% of these acquire more than 35% of new customers through referral. That is why I am proud to announce our investment in Extole.
Building a sophisticated referral and advocacy program in-house can be costly and complicated. The Extole platform makes it possible for marketers to go beyond paid search and SEO – to amplify the passion of their own members and loyal base to acquire new, passionate, paying customers. Existing customers are a company’s biggest champions and people rely on their peers for suggestions on products and services. With the Extole platform advocates receive a unique referral link to share with friends. When a friend purchases through the link, both the friend and advocate get rewarded.
The appeal of Extole also comes from the fact that the marketing department, not IT, manages the platform. Extole provides the software to help companies test incentive programs, manage multiple campaigns, and easily access analytics. The platform helps to mitigate user fraud. Extole customers can even save companies money on customer service by deflecting calls for referral rewards.
We’ve witnessed a growth in essential platforms for acquisition and demand gen over email (ExactTarget, Constant Contact), search (Kenshoo, Marin Software), and marketing automation (Marketo, HubSpot). Until now, however, there’s been no enterprise platform for referrals. Extole is delivering the key “third channel” for online marketers.
A quick review of Extole’s customer shows that many companies had a latent need for this platform. The company has already signed deals with companies from Boden, DocuSign, Fleetmatics, Intuit, and Kraft.
Extole is still a startup but its management team isn’t new to this game—or each other. Many of the senior executives worked together at a previous ScaleVP backed company – Omniture/Offermatica and I am thrilled to have them join the ScaleVP portfolio again. Welcome Extole!
Customer retention is critical to any company’s business model. Every company spends good money attracting and acquiring customers, and this simply goes to waste if you don’t retain them over time. At minimum, every company wants to recover its initial sales and marketing expense, however customers become more profitable through their lifetime … so the longer you retain a customer, the better the ROI and profitability of your business.
Many companies will assign customer retention responsibility to one functional leader. After all, product should create a product, business development should do deals, marketing should drive awareness, sales should sell, and G&A functions should keep a company humming. What is left over, i.e., managing the customer experience and lifetime value of those customers is often thrown to a support function, “Customer Success”, or marketing (when there is significant opportunity to cross-sell additional products – such as in e-commerce or financial services). But having any one function owning customer retention or lifetime value is a mistake.
A customer’s reaction to your product or service is valuable information that should guide every department. Without a customer-back mindset and incentives, functional leaders run the risk of optimizing near-term goals without doing what is in the best interest of the company’s long-term financial health…retaining customers.
CEOs I have spoken with are generally intrigued by and supportive of this “it takes a village” philosophy to maximizing customer lifetime value. After all, who doesn’t want a more successful and profitable business? Here are a few tactical approaches to driving this in your organization:
I would love to hear your thoughts, ideas and lessons-learned on this type of an approach to driving customer lifetime value.
Monica Adractas is VP, Customer Success at Box where she leads cross-company customer retention and churn initiatives. Previously, Monica was a Principal at McKinsey & Company where she served clients on growth, customer and digital strategy. You can find more from her on LinkedIn.