A Tip of the Hat to Grid On Their Launch Day

It’s not every day you hear about a startup in Iceland, founded by a guy whose last company was a data marketplace that he sold to Qlik.  And it’s a small world when a friend and fellow board member had independently discovered the same tool and built a SAFE calculator  and an inverted pipeline model using it.  Moreover, I included this tool, Grid, almost tangentially in my next-generation EPM round-up, as it’s not really an EPM tool, but it looked interested anyway and I thought it was worth mentioning.

With all this karma pointing me towards Reykjavik, I sat down for a Zoom call the other day with the guy in question, Hjalmar (pronounced like Hallmark without the k) Gislason, founder and CEO of Grid.  After being impressed with him and the tool, I decided to do a quick post to support their official launch, which is today.

Grid is pretty simple in essence.  It’s not a reinvention of the spreadsheet.  It’s not a replacement for the spreadsheet.  It’s a layer atop spreadsheets, a no-code tool that lets spreadsheet users build interactive web documents using their spreadsheets as data sources and publish them on the web.

Here’s an example of what you can build using it in about two minutes.  Among other things, it gives a whole new look to driver-based planning.

The company raised a $12M series A back in August, led by NEA. Congratulations to Grid on their official launch and best of luck to Hjalmar and the team going forward.

SaaS Product Power Breakfasts, Thursdays at 8 AM Pacific on Clubhouse

Interested in all things product?

Then please join me and my friend and esteemed colleague Thomas Otter on Thursday mornings at 8 am pacific for what we’re hoping will become a series of Enterprise SaaS Product Power Breakfasts where we will talk among ourselves, with invited guests, and with the audience about all things product, including:

  • Product management
  • Product strategy
  • Product marketing
  • Product design
  • Product positioning
  • Product roadmaps
  • Product requirements (to generalize or not to generalize)
  • Application / platform dynamics
  • Product input and feedback processes
  • Pricing strategies
  • Product portfolios
  • Product-led growth
  • Managing new vs. existing products
  • The transition from 1 to N products
  • Product development processes (e.g., agile, scrum)
  • Minimum viable product
  • Managing product managers
  • The transition to general manager (GM)
  • And much more

For those on Clubhouse, here’s a link to the event.  If you’ve not tried Clubhouse yet, well here’s a great reason to join — ask a friend for an invite if you need one.  In a real pinch, ask me or Thomas via DM on Twitter (we each have a few).

My interest in product stems from my overall fascination with strategy and my experience in product marketing at Ingres (RDBMS), CMO at Versant (ODBMS) and Business Objects (BI/analytics), SVP/GM at Salesforce.com (Service Cloud), and CEO at MarkLogic (NoSQL) and Host Analytics (Planning).  That’s not to mention lesser involvement in strategy working in board and/or advisory mode at companies including Aster Data (NoSQL), Nuxeo (ECM/DAM), and Alation (data intelligence).

Thomas’ interest in product stems from his infinite curiosity about the intersection between technology and people.  Thomas was part of the leadership team that scaled SuccessFactors to over 50M end users, managing not only product but literally scores of product managers.  Prior to that Thomas was an analyst at Gartner where he drove the HRTECH research agenda that helped shape the industry.  Truly a multidisciplinary thinker, Thomas’ PhD dissertation “sits awkwardly at the intersection of IT, law, and business.”  He’s thus a heck of an interesting guy to talk to.

See you there!

What a Pipeline Coverage Target of >3x Says To Me

I’m working with a lot of different companies these days and one of the perennial topics is pipeline.

One pattern I’m seeing is CROs increasingly saying that they need more than the proverbial 3x pipeline coverage ratio to hit their numbers [2] [3].  I’m hearing 3.5x, 4x, or even 5x.  Heck — and I’m not exaggerating here — I even met one company that said they needed 100x.  Proof that once you start down the >3x slippery slope that you can slide all the way into patent absurdity.

Here’s what I think when a company tells me they need >3x pipeline coverage [4]:

  • The pipeline isn’t scrubbed.  If you can’t convert 33% of your week 3 pipeline, you likely have a pipeline that’s full of junk opportunities (oppties). Rough math, if 1/3rd slips or derails [5] [6] and you go 50-50 on the remaining 2/3rds, you convert 33%.
  • You lose too much.  If you need 5x pipeline coverage because you convert only 20% of it, maybe the problem isn’t lack of pipeline but lack of winning [7].  Perhaps you are better off investing in sales training, improved messaging, win/loss research, and competitive analysis than simply generating more pipeline, only to have it leak out of the funnel.
  • The pipeline is of low quality.  If the pipeline is scrubbed and your deal execution is good, then perhaps the problem is the quality of pipeline itself.  Maybe you’re better off rethinking your ideal customer profile and/or better targeting your marketing programs than simply generating more bad pipeline [8].
  • Sales is more powerful than marketing.  By (usually arbitrarily) setting an unusually high bar on required coverage, sales tees up lack-of-pipeline as an excuse for missing numbers.  Since marketing is commonly the majority pipeline source, this often puts the problem squarely on the back of marketing.
  • There’s no nurture program.  Particularly when you’re looking at annual pipeline (which I generally don’t recommend), if you’re looking three or four quarters out, you’ll often find “fake opportunities” that aren’t actually sales opportunities, but are really just attractive prospects who said they might start an evaluation later.  Are these valid sales opportunities?  No.  Should they be in the pipeline?  No.  Do they warrant special treatment?  Yes.   That should ideally be accomplished by a sophisticated nurture program. But lacking that, reps can and should nurture accounts.  But they shouldn’t use the opportunity management system to do so; it creates “rolling hairballs” in the pipeline.
  • Salesreps are squatting.  The less altruistic interpretation of fake long-term oppties is squatting.  In this case, a rep does not create a fake Q+3 opportunity as a self-reminder to nurture, but instead to stake a claim on the account to protect against its loss in a territory reorganization [9].   In reality, this is simply a sub-case of the first bullet (the pipeline isn’t scrubbed), but I break it out both to highlight it as a frequent problem and to emphasize that pipeline scrubbing shouldn’t just mean this- and next-quarter pipeline, but all-quarter pipeline as well [10].

# # #

Notes

[1] e.g., from marketing, sales, SDRs, alliances.  I haven’t yet blogged on this, and I really need to.  It’s on the list!

[2] Pipeline coverage is ARR pipeline divided by the new ARR target.  For example, if your new ARR target for a given quarter is $3,000K and you have $9,000K in that-quarter pipeline covering it, then you have a 3x pipeline coverage ratio.  My primary coverage metric is snapshotted in week 3, so week 3 pipeline coverage of 3x implies a 33% week three pipeline conversion rate.

[3] Note that it’s often useful to segment pipeline coverage.  For example, new logo pipeline tends to convert at a lower rate (and require higher coverage) than expansion pipeline which often converts at a rate near or even over 100% (as the reps sometimes don’t enter the oppties until the close date — an atrocious habit!)  So when you’re looking at aggregate pipeline coverage, as I often do, you must remember that it works best when the mix of pipeline by segment and the conversion rate of each segment is relatively stable.  The more that’s not true, the more you must do segmented pipeline analysis.

[4] See note 2.  Note also the ambiguity in simply saying “pipeline coverage” as I’m not sure when you snapshotted it (it’s constantly changing) or what time period it’s covering.  Hence, my tendency is to say “week 3 current-quarter pipeline coverage” in order to be precise.  In this case, I’m being a little vague on purpose because that’s how most folks express it to me.

[5] In my parlance, slip means the close date changes and derail means the project was cancelled (or delayed outside your valid opportunity timeframe).  In a win, we win; in a loss, someone else wins; in a derail, no one wins.  Note that — pet peeve alert — not making the short list is not a derail, but a loss to as-yet-known (so don’t require losses to fill in a single competitor and ensure missed-short-list is a possible lost-to selection).

[6] Where sales management should be scrubbing the close date as well as other fields like stage, forecast category, and value.

[7] To paraphrase James Mason in The Verdict, salesreps “aren’t paid to do their best, they’re paid to win.”  Not just to have a 33% odds of winning a deal with a three-vendor short list.  If we’re really good we’re winning half or more of those.

[8] The nuance here is that sales did accept the pipeline so it’s presumably objectively always above some quality standard.  The reality is that pipeline acceptance bar is not fixed but floating and the more / better quality oppties a rep has the higher the acceptance bar.  And conversely:  even junk oppties look great to a starving rep who’s being flogged by their manager to increase their pipeline.  This is one reason why clear written definitions are so important:  the bar will always float around somewhat, but you can get some control with clear definitions.

[9] In such cases, companies will often “grandfather” the oppty into the rep’s new territory even if it ordinarily would not have been included.

[10] Which it all too often doesn’t.

What is a Minimum Viable Product, Anyway? My Favorite MVP Analogy.

The concept of minimum viable product (MVP) has been popularized in the past decade thanks to the success of the wonderful book, The Lean Startup.  It’s thrown around so casually, and you hear it so often, that sometimes you wonder how — or even if — people define it.

In this post, I’ll describe how I think about MVPs, first using one real-life example and then using my favorite MVP analogy.

The concept of a minimum viable product is simple:

  • Every startup is basically a hypothesis (e.g., we think people will buy an X).
  • Instead of doing a big build-up during a lengthy stealth phase concluding in a triumphant (if often ill-fated) product unveiling, let’s build and ship something basic quickly — and start iterating.
  • By taking this lean approach we can test our hypothesis, learn, and iterate more quickly — and avoid tons of work and waste in the process.

The trick is, of course, those two pesky words, minimum and viable.  In my worldview:

  • Minimum means the least you can do to test your hypothesis.
  • Viable means the product actually does the thing it’s supposed to do, even in some very basic way.

I’ll use an old, but concrete, example of an MVP from my career at Business Objects.  It’s the late 1990s.  The Internet is transforming computing.  We sell a high-functionality query & reporting tool, capable of everything from ad hoc query to complex, highly-formatted reports to interactive multidimensional analysis.  That tool is a client/server Windows application and we need to figure out our web strategy.  We are highly constrained technologically, because it’s still the early days of the web browser (e.g., browsers had no print functionality) [1].

After much controversy, John Ball and the WebIntelligence team agreed on (what we’d now call) the following MVP:

  • A catalog of reports that users can open/browse
  • End-user ad hoc query
  • Production of very basic tabular reports
  • Semi-compatibility with our existing product [2]

But it would work in a browser without any plug-ins, web native.  No multi-block reports.  No pages.  No printing.  No interactive analysis.  No multidimensional analysis.  No charting.  No cross-tabs.  No headers, no footers.  Effectively, the world’s most basic reporting tool — but it let users run an ad hoc query over the web and produce a simple report.  That was the MVP.  That was the hypothesis — that people would want to buy that and evolve with us over time.

Because of that tightly focused MVP we were able to build the product quickly, position it clearly within the product line [3], and eventually use it as the basis for an entirely new line of business [4].

Now, let’s do the analogy.  Pretend for a moment we’re in a world where there are no four-wheel drive cars.  We have invented the four-wheel drive car.  We imagine numerous use-cases [5] and a big total available market (TAM).

What should be our MVP?  Meet the 1947 Jeep Willys [6] [7].

No roof.  No back seat.  In some cases, no windscreen.  No doors.  No air conditioning.  No entertainment system.  No navigation.  No cup holders.  No leather.  No cruise control.  No rearview camera.  No ABS.  No seatbelts.  No airbags.

No <all that shit that too many product managers say are requirements because they don’t understand what MVP means>.

Just the core:  a seat, a steering wheel, an engine, a transmission, a clutch, and four traction tires.

  • Is it missing all kinds of functionality?  Yes
  • In this case, would it even be legal to sell?  No.  Well, maybe off-road, but we’re in analogy-mode here.
  • But can it get you across a muddy field or down a muddy road?  YES.

And that’s the point.  It’s minimum because it’s missing all kinds of things we can easily imagine people wanting, later.  It’s viable because it does the one thing that no other car does.  So if you need to cross a muddy field or go down a muddy road, you’ll buy one.

As Steve Blank says:  “You’re selling the vision and delivering the minimum feature set to visionaries, not everyone” [8]. 

So next time you think someone is focused on jamming common but non-core attributes into an MVP, tell them they’re counting cupholders in a Willys and point them here.

# # #

Notes

[1] And printing is a pretty core requirement for a reporting application!

[2] This was key.  WebIntelligence could not even open a BusinessObjects report.  Instead, we opted for compatibility one layer deeper, at the semantic layer (that defined data objects and security) not the reporting layer.

[3] If you want all that power, use BusinessObjects.  If you want web native, use WebIntelligence.  And you can share semantic layer definitions and security.

[4] BI extranets.

[5] From military off-road applications to emergency off-road and/or slippery conditions to sand recreational to family vehicles on snow and many  more.

[6] Which in some ways literally was the MVP for Jeeps.

[7] Popularized by the Grateful Dead in Sugar Magnolia (“… jump like a Willys in four-wheel drive.”)

[8] Where I’ll define visionary as someone who has the problem we’re trying to solve and willing to use a new technology to solve it.  It’s a little easier to think of someone trying a next-generation database system as a “technology visionary” than the Army buying a Jeep, but it’s the same characteristic.  They need a currently unsolvable problem solved, and are willing to try unconventional solutions to do it.

Congratulations to Nuxeo on its Acquisition by Hyland

It feels like the just the other day when I met a passionate French entrepreneur in the bar on the 15th floor of the Hilton Times Square to discuss Nuxeo.  I remember being interested in the space, which I then viewed as next-generation content management (which, by the way, seemed extraordinarily in need of a next generation) and today what we’d call a content services platform (CSP) — in Nuxeo’s case, with a strong digital asset management angle.

I remember being impressed with the guy, Eric Barroca, as well.  If I could check my notebook from that evening, I’m sure I’d see written:  “smart, goes fast, no BS.”  Eric remains one of the few people who — when he interrupts me saying “got it” — that I’m quite sure that he does.

To me, Nuxeo is a tale of technology leadership combined with market focus, teamwork, and leadership.  All to produce a great result.

Congrats to Eric, the entire team, and the key folks I worked with most closely during my tenure on the board:  CMO/CPO Chris McGlaughlin, CFO James Colquhoun, and CTO Thierry Delprat.

Thanks to the board for having me, including Christian Resch and Nishi Somaiya from Goldman Sachs, Michael Elias from Kennet, and Steve King.  It’s been a true pleasure working with you.

My Two Appearances on the SaaShimi Podcast: Comprehensive SaaS Metrics Overview and Differences between PE and VC

The SaaShimi podcast just dropped the first two episodes of its second season and I’m back speaking with PNC Technology Finance banker Aznaur Midov, this time discussing some of the key difference between private equity (PE) and venture capital (VC) when it comes to philosophy, business model, portfolio company engagement, diligence,  and exit processes.  You can check out the entire podcast on the web here or this episode on Spotify or Apple podcasts.

I’ve also embedded it below:

Dave Kellogg on SaaShimi Discussing Differences between Private Equity and Venture Capital.

 

If you missed it and/or you’re otherwise interested, on my prior appearance we did a pretty darn comprehensive overview of SaaS metrics, available here on Apple podcasts and here on Spotify.

I’ve embedded this episode as well, below:

Dave Kellogg on SaaShimi with a Comprehensive Overview of SaaS Metrics.

 

Thanks Aznaur for having me.  I think he’s created a high quality, focused series on SaaS.

What Are The Units On Your Lead SaaS Metric — And What Does That Say About Your Culture

Quick:

  • How big is the Acme deal?  $250K.
  • What’s Joe’s forecast for the quarter?  $500K
  • What’s the number this year?  Duh.  $7,500K.

Awesome.  By the way:  $250K what?  $500K what?  $7,500K what?  ARR, ACV, bookings, TCV, new ARR, net new ARR, committed ARR, contracted ARR, terminal ARR, or something else?

Defining those terms isn’t the point of this post, so see note [1] below if interested.

The point is that these ambiguous, unitless conversations happen all the time in enterprise software companies.  This isn’t a post about confusion; the vast majority of the time, everyone understands exactly what is being said.  What those implicit units really tell you about is culture.

Since there can be only one lead metric, every company, typically silently, decides what it is.  And what you pick says a lot about what you’re focused on.

  • New ARR means you’re focused on sales adding water to the SaaS leaky bucket — regardless of whether it’s from new or existing customers.
  • Net New ARR means you’re focused the change in water level in the SaaS leaky bucket — balancing new sales and churn — and presumably means you hold AEs accountable for both sales and renewals within their patch.
  • New Logo ARR means you’re focused on new ARR from new customers.  That is, you’re focused on “lands” [2].
  • Bookings means you’re focused on cash [3], bringing in dollars regardless of whether they’re from subscription or services, or potentially something else [4].
  • TCV, which became a four-letter word after management teams too often conflated it with ARR, is probably still best avoided in polite company.  Use RPO for a similar, if not identical, concept.
  • Committed ARR usually means somebody important is a fan of Bessemer metrics, and means the company is (as with Net New ARR) focused on new ARR net of actual and projected churn.
  • Terminal ARR means you’re focused on the final-year ARR of multi-year contracts, implying you sign contracts with built-in expansion, not a bad idea in an NDR-focused world, I might add.
  • Contracted ARR can be a synonym for either committed or terminal ARR, so I’d refer to the appropriate bullet above as the case may be.

While your choice of lead metric certainly affects the calculations of other metrics (a bookings CAC or a terminal-ARR CAC) that’s not today’s point, either.  Today’s point is simple.  What you pick says a lot about you and what you want your organization focused on.

  • What number do you celebrate at the all hands meeting?
  • What number do you tell employees is “the number” for the year?

For example, in my opinion:

  • A strong sales culture should focus on New ARR.  Yes, the CFO and CEO care about Ending ARR and thus Net New ARR, but the job of sales is to fill the bucket.  Someone else typically worries about what leaks out.
  • A shareholder value culture would focus on Ending ARR, and ergo Net New ARR.  After all, the company’s value is typically a linear function of its Ending ARR (with slope determined by growth).
  • A strong land-and-expand culture might focus on Terminal ARR, thinking, regardless of precisely when they come in, we have contracts that converge to a given total ARR value over time [5].
  • Conversely, a strong land and expand-through-usage culture might focus on New Logo ARR (i.e., “land”), especially if the downstream, usage-based expansion is seen as somewhat automatic [6].
  • A cash-focused culture (and I hope you’re bootstrapped) would focus on bookings.  Think:  we eat what we kill.

This isn’t about a right or wrong answer [7].  It’s about a choice for your organization, and one that likely changes as you scale.  It’s about mindfulness in making a subtle choice that actually makes a big statement about what you value.

# # #

Notes
[1] For clarity’s sake, ARR is annual recurring revenue, the annual subscription value.  ACV is annual contract value which, while some treat as identical to ARR, others treat as first-year total contract value, i.e., first-year ARR plus year-one services.  Bookings is usually used as a proxy for cash and ergo would include any effects of multi-year prepayments, e.g., a two-year, prepaid, $100K/year ARR contract would be $200K in bookings.  TCV is total contract value which is typically the total (subscription) value of the contract, e.g., a 3-year deal with an ARR stream of $100K, $200K, $300K would have a $600K, regardless of when the cash payments occurred.  New ARR is new ARR from either new customers (often called New Logo ARR) or existing customers (often called Upsell ARR).  Net New ARR is new ARR minus churn ARR, e.g., if a regional manager starts with $10,000K in their region, adds $2,000K in new ARR and churns $500K, then net new ARR is $1,500K.  Committed ARR (as defined by Bessemer who defined the term) is “contracted, but not yet live ARR, plus live ARR netted against known projected ARR churn” (e.g., if a regional manager starts with $10,000K in their region, has signed contracts that start within an acceptable time period of $2,000K, takes $200K of expected churn in the period, and knows of $500K of new projected churn upcoming, then their ending committed is ARR is $11,500K.  (Why not $11,300K?  Because the $200K of expected churn was presumably already in the starting figure.)  Terminal ARR the ARR in the last year of the contract, e.g., say a contract has an ARR stream of $100K, $200K, $300K, the terminal ARR is $300K [1A].  Contracted ARR is for companies that have hybrid models (e.g., annual subscription plus usage fee) and includes only the contractually committed recurring revenues and not usage fees.

[1A] Note that it’s not yet clear to me how far Bessemer goes out with “contracted” ARR in their committed ARR definition, but I’m currently guessing they don’t mean three years.  Watch this space as I get clarification from them on this issue.

[2] In the sense of land-and-expand.

[3] On the assumptions that bookings is being used as a proxy for cash, which I recommend, but which is not always the case.

[4] e.g., non-recurring engineering; a bad thing to be focused on.

[5] Although if they all do so in different timeframes it becomes less meaningful.  Also unless the company has a track record of actually achieving the contractually committed growth figures, it becomes less credible.

[6] Which it never actually is in my experience, but it is a matter of degree.

[7] Though your investors will definitely like some of these choices better than others.