Looking to build a business plan for your cloud company, but don’t know how to create the right financial model? This session features best practices and actionable tips from cloud finance experts and investors on what financial metrics matter—and how they affect your business plan, ability to raise capital, and long-term profitability.
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Cloudonomics 101 - Creating a Financial Plan for your SaaS or Cloud Computing Business
1. Cloudonomics 101: Creating a Financial Plan for Your Force.com Startup Tour de Force: Cloud Entrepreneurs Byron Deeter, Bessemer Venture Partners Philippe Botteri, Bessemer Venture Partners
52. Productivity is unlikely to improve with scale, so don’t invest and burn your cash if the model is not tunedCash Flow for CAC = 1.0 Cash Flow for CAC = 0.5 Additional $66m burn
57. Should not include professional services and support (unless delivered in a subscription)
58. Need to include deal CMRR view into Salesforce.com!Time frame: monthly, quarterly, or rolling? Σ [ deal CMRR x probability] Cpipe = Probability: show the pipeline as a total number or a factored number? Stage: all qualified and above? Probable? Only Committed?
77. 3-5x your CMRR target for the quarterFree Cash Flow at scale: 20%+!
78. Content of today’s discussion Who we are Get Instrument Rated: the Bessemer’s “6Cs” of Cloud Finance Preparing your 2010 flight plan
79. A year ago, the world collapsed… The SaaS 13 Index 5.0x Multiple Base 100 = Jan 1st 2008 -60% 2.3x Multiple
80. …but we are more than half way back! -13% 3-4x Multiple
81. However things have changed …and sales productivity declined Average growth rate is down… SaaS 13 Index, Percent SaaS 13 Index, CAC Ratio Is 15% the new SaaS growth rate? Market recovery? Staff reduction? 08/09 growth projection
82.
83. Sales & Marketing:It might be time to step on the gas…or not! Your CAC ratio will tell you
84. Focus on customer retention: without a low churn, you cannot build a profitable business modelMange your cash carefully but don’t underinvest: capital is available but your metrics will tell you if you can raise outside capital or not in good terms Watch for cheap MRR (M&A, Other structure to avoid buying assets?): you may be able to buy failing competitors. The recession created opportunities
85. Plan your fuel stops carefully Cloud Computing Company Lifecycle All 6 C’s at benchmark level GAAP revenues Cash Flow IPO! $3-5m Series A @$5-10m pre. $8-12m Series B @$20-30m pre. $15-20m Series C @$50-80m pre. Total Cash Burn:~$40m
86. Mind the GAAP! 6 pitfalls to avoid GAAP revenue should be recognized ratably: even if your contract if paid upfront, you need to recognize the revenue ratably over the lifetime of the contract Don’t recognize your professional services too early Don’t forget to amortize your sales commissions Stock options ARE expenses: you need to recognize the fair value of stock option grants as a compensation cost and amortize it over the vesting period in your financial statements Watch out for investors warrants: as your company grow and their value increase, and you need to record the negative impact on your GAAP income statement Exclude your deferred revenues from your “quick ratio” in your debt covenants