In addition to Bessemer's long history of successful enterprise software investing, we have been particularly focused on the emergence of Software as a Service (SaaS). We believe SaaS is the most important trend in the software industry of the decade. We have been fortunate to work with many of the early pioneers in this high growth market segment, and continue to invest actively to grow our current portfolio

1. Your key business metrics are CMRR (Contracted Monthly Recurring Revenue) and cash. “Bookings” is for suckers.

2. It takes at least $300k of monthly recurring revenue to climb the Sales Learning Curve. Stop at 3 reps until at least two of them are making $100k CMRR quotas.

3. Separate your hunters and farmers.  As soon as you’ve climbed the Sales Learning Curve, begin ramping your sales force by hiring renewal-oriented account managers.  Keep the hunters moving, and let farmers tend to the crops.

4. It's a whole new ecosystem.  Channels are very hard for SaaS companies to build, so don’t base your plan on SI’s and traditional ISV’s. You will need to sell directly for a long time.

5. Stay local.  Prove your business in North America first. Only after reaching $1M MRR, consider hiring European sales and services execs behind customer demand.  Save Asia for post-IPO.

6. One Datacenter.  Invest early in backup and disaster recovery, but stick to one data center, at least until well after IPO.

7. Single Instance, Multi-tenant.  Only one version of code in production. Really. Just say No to on-premise deployments.

8. By definition, your sales prospects are online!  Savvy online marketing is a core competence (sometimes the only one) of every successful SaaS business.

9. Constantly trade off cash vs. growth. If you must replenish supplies while still crossing the desert, optimize your growth rate (sales rep recruitment and marketing spending) so that you maximize your recurring revenue run rate when you need to fundraise next.

10. Be prepared to cross the desert. SaaS requires R&D and sales expense up front for a multi-year stream of revenue, so it demands enough investment capital to fund 4+ years of runway. Load up for the long trip and pace your consumption of calories!

You can ignore one of these, but not more than two.  Great companies innovate, but pick your battles!

• Postini (Acq. by Google, 2007)
• Netli (Acq. by Akamai, 2007)
• Trigo (Acq. by RSA, 2005)
• Register.com (RCOM, 2000)
• Telocity (TLCT, 2000)
• Keynote (KEYN, 1999)
• Verisign (VRSN, 1998)
• PSI-Net (PSIX, 1995)
• Counterpane (acq. by BT, 2007)

• Perimeter
• Eloqua
• Cornerstone OnDemand
• SelectMinds
• Endeca
• Retail Solutions
• LinkedIn
• Intego
• Network Magic
• Broadsoft
• Parallels
• Lifelock
• Intacct

• The Bessemer 10 Laws of SaaS 2008
• Measuring Sales & Marketing efficiency: the CAC ratio
• SaaS business metrics: why are they different?
• Software 2.0: How the use of internet is transforming the software industry
• What's Great for the Customer is Great for SaaS adoption
• SaaSy Security Suits SMB

• Byron Deeter: Introduction
• Keith Krach: Building a High Performance Team
• Soeren Von Varchmin: SaaS Infrastructure and Virtualization

Several presentations are in the password protected section of this website. If you do not have a BVP password but are affiliated with a SaaS company and would like a copy of the article, please email saasvc@bvp.com.

• Eloqua case study
• Perimeter case study
• Cornerstone OnDemand case study
• SelectMinds case study
• Endeca case study