Customer experience and digital transformation concepts are merging during the pandemic

Customer experience and digital transformation are two terms we’ve been hearing about for years, but have often remained nebulous in many organizations — something to aspire to perhaps, but not take completely seriously. Yet the pandemic has been a forcing event for both concepts, thrusting the ideas front and center.

Suddenly startups that help with either of these concepts are seeing rising demand, even in a year with an overall difficult economic climate. If you are fortunate enough to be helping companies digitize a process or improve how customers interact with companies, you may be seeing increased interest from customers and potential acquirers (and this was true even before this year). A case in point is Twilio acquiring Segment for $3.2 billion recently to help build data-fueled applications to interact with customers.

Even though building a positive customer experience has never been completely about digital, at a time where it’s difficult to interact with customers in person, the digital side of it has taken new urgency. As COVID-19 took hold this year, businesses, large and small, suddenly realized the only way to connect to their customers was digitally. At that point, digital transformation became customer experience’s buddy when other ways of contacting one another have been severely limited.

Pandemic brings changes

Just about every startup founder I talk to these days, along with bigger, more established companies, talk about how the pandemic has pushed companies to digitally transform much faster than they would have without COVID.

Brent Leary, founder at CRM Essentials, says that the pandemic has certainly expedited the need to bring these two big ideas together and created opportunities as that happens. “The coronavirus, as terrible as it has been in so many ways to so many people, has created opportunities for companies to build direct-to-consumer (D2C) digital pipelines that can make them stronger companies despite the current hardships,” Leary told TechCrunch.

The cloud plays a big role in the digital transformation process, and for the last decade, we have seen companies make a slow but steady shift to the cloud. When you have a situation like we’ve had with the coronavirus, it speeds everything up. As it turns out, being in the cloud helps you move faster because you don’t have to worry about all of the overhead of running a business critical application as the SaaS vendors take care of all that for you.


By Ron Miller

Box benefits from digital transformation as it raises its growth forecast

Box has always been a bit of an enigma for Wall Street and perhaps for enterprise software in general. Unlike vendors who shifted tools like HR, CRM or ERP to the cloud, Box has been building a way to manage content in the cloud. It’s been a little harder to understand than these other enterprise software stalwarts, but slowly but surely Box has shifted into a more efficient, and dare we say, profitable public company.

Yesterday the company filed its Q2021 earnings reports and it was solid. In fact, the company reported revenue of $192.3 million. That’s an increase of 11% year over year and it beat analyst’s expectations of $189.6 million, according to the company. Meanwhile the guidance looked good too moving from a range of $760 to $768 million for the year to a range of $767 to $770 million.

All of this points to a company that is finding its footing. Let’s not forget, Starboard Value bought a 7.5% stake in the company a year ago, yet the activist investor has mostly stayed quiet and Box seems to be rewarding its patience as the pandemic acts as a forcing function to move customers to the cloud faster– and that seems to be working in Box’s favor.

Let’s get profitable

Box CEO Aaron Levie has not been shy about talking about how the pandemic has pushed companies to move to the cloud much more quickly than they probably would have. He said as a digital company, he was able to move his employees to work from home and remain efficient because of tools like Slack, Zoom, Okta, and yes, Box were in place to help them do that.

All of that helped keep the business going, and even thriving, through the extremely difficult times the pandemic has wrought. “We’re fortunate about how we’ve been able to execute in this environment. It helps that we’re 100% SaaS, and we’ve got a great digital engine to perform the business,” he said.

He added, “And at the same time, as we’ve talked about, we’ve been driving greater profitability. So the efficiency of the businesses has also improved dramatically, and the result was that overall we had a very strong quarter with better growth than expected and better profitability than expected. As a result, we were able to raise our targets on both revenue growth and profitability for the rest of the year,” Levie told TechCrunch.

Let’s get digital

Box is seeing existing customers and new customers alike moving more rapidly to the cloud, and that’s working in its favor. Levie believes that companies are in the process of reassessing their short and longer term digital strategy right now, and looking at what workloads they’ll be moving to the cloud, whether that’s cloud infrastructure, security in the cloud or content.

“Really customers are going to be trying to find a way to be able to shift their most important data and their most important content to the cloud, and that’s what we’re seeing play out within our customer base,” Levie said.

He added,”It’s not really a question anymore if you’re going to go to the cloud, it’s which cloud are you going to go to. And we’ve obviously been very focused on trying to build that leading platform for companies that want to be able to move their data to a cloud environment and be able to manage it securely, drive workflows on it, integrate it across our applications and that’s what we’re seeing,” he said.

That translated into a 60% increase quarter over quarter on the number of large deals over $100,000, and the company crossed 100,000 customers globally on the platform in the most recent quarter, so the approach seems to be working.

Let’s keep building

As with Salesforce a generation earlier, Box decided to build its product set on a platform of services. It enabled customers to tap into these base services like encryption, workflow and metadata and build their own customizations or even fully functional applications by taking advantage of the tools that Box has already built.

Much like Salesforce president and COO Bret Taylor told TechCrunch recently, that platform approach has been an integral part of its success, and Levie sees it similarly for Box. calling it fundamental to his company’s success, as well.

“We would not be here without that platform strategy,” he said. “Because we think about Box as a platform architecture, and we’ve built more and more capabilities into that platform, that’s what is giving us this strategic advantage right now,” he said.

And that hasn’t just worked to help customers using Box, it also helps Box itself to develop new capabilities more rapidly, something that has been absolutely essential during this pandemic when the company has had to react quickly to rapidly changing customer requirements.

Levie is 15 years into his tenure as CEO of Box, but he still sees a company and a market that is just getting started. “The opportunity is only bigger, and it’s more addressable by our product and platform today than it has been at any point in our history. So I think we’re still in the very early stages of digital transformation, and we’re in the earliest stages for how document and content management works in this modern era.”


By Ron Miller

Box CEO Aaron Levie says thrifty founders have more control

Once upon a time, Box’s Aaron Levie was just a guy with an idea for a company: 15 years ago as a USC student, he conceived of a way to simply store and share files online.

It may be hard to recall, but back then, the world was awash with thumb drives and moving files manually, but Levie saw an opportunity to change that.

Today, his company helps enterprise customers collaborate and manage content in the cloud, but when Levie appeared on an episode of Extra Crunch Live at the end of May, my colleague Jon Shieber and I asked him if he had any advice for startups. While he was careful to point out that there is no “one size fits all” advice, he did make one thing clear:

“I would highly recommend to any company of any size that you have as much control of your destiny as possible. So put yourself in a position where you spend as little amount of dollars as you can from a burn standpoint and get as close to revenue being equal to your expenses as you can possibly get to,” he advised.

Don’t let current conditions scare you

Levie also advised founders not to be frightened off by current conditions, whether that’s the pandemic or the recession. Instead, he said if you have an idea, seize the moment and build it, regardless of the economy or the state of the world. If, like Levie, you are in it for the long haul, this too will pass, and if your idea is good enough, it will survive and even thrive as you move through your startup growth cycle.


By Ron Miller

Emergence’s Jason Green still sees plenty of opportunities for enterprise SaaS startups

Jason Green, co-founder and partner at Emergence, has made some solid enterprise SaaS bets over the years, long before it was fashionable to do so. He invested early in companies like Box, ServiceMax, Yammer, SteelBrick and SuccessFactors.

Just those companies alone would be a pretty good track record, but his firm also invested in Salesforce, Zoom, Veeva and Bill.com. One consistent thread runs through Emergence’s portfolio: They focus on the cloud and enterprise, a thesis that has paid off big time. What’s more, every one of those previously mentioned companies had a great founding team and successful exit via either IPO or acquisition.

I spoke with Green in June about his investment performance with enterprise SaaS to get a sense of the secret of his long-term success. We also asked a few of those portfolio company CEOs about what it has been like to work with him over time.

All in on SaaS

Green and his co-founders saw something when it came to the emerging enterprise SaaS market in the early 2000s that a lot of firms missed. Salesforce co-founder and CEO Marc Benioff told a story in 2018 about his early attempts at getting funding for his company — and how every single Silicon Valley firm he talked to turned him down.

Green’s partner, Gordon Ritter, eventually invested in Salesforce as one of the company’s earliest investments because the partners saw something in the SaaS approach, even before the term entered the industry lexicon.


By Ron Miller

New Box tools should help ease creation of digitally driven workflows

As COVID-19 has forced companies to move employees from office to home, cloud services have seen a burst in business. Box has been speeding up its product roadmap to help companies who are in the midst of this transition. Today, the company announced the Box Relay template library, which includes a series of workflow templates to help customers build digital workflows faster.

Box CEO Aaron Levie says that the rapid shift to work from home has been a massive accelerant to digital transformation, in some cases driving years of digital transformation into a matter of weeks and months. He says that has made the need to digitize business processes more urgent than ever.

In fact, when he appeared on Extra Crunch Live last month, he indicated that businesses still have way too many manual processes:

We think we’re [in] an environment that anything that can be digitized probably will be. Certainly as this pandemic has reinforced, we have way too many manual processes in businesses. We have way too slow ways of working together and collaborating. And we know that we’re going to move more and more of that to digital platforms.

Box Relay is the company’s workflow tool, and while it has had the ability to create workflows, it required a certain level of knowledge and way of thinking to make that happen. Levie says that they wanted to make it as simple as possible for customers to build workflows to digitize manual processes.

“We are announcing an all new set of Box Relay templates, which are going straight to the heart of how do you automate and digitize business processes across the entire enterprise and make it really simple to do that,” he explained.

This could include things like a contract review, change order process or budget review to name a few examples. The template includes the pieces to get going, but the customer can customize the process to meet the needs of the individual organization’s requirements.

Image Credits: Box

While this is confined to Box-built templates for now, Levie says that down the road this could include the ability for customers to deploy templates of their own, or even for third parties like systems integrators to build industry or client-specific templates. But for today, it’s just about the ones you get out of the box from Box.

At the same time, the company is announcing the File Request feature, a name Levie admits doesn’t really do the feature justice. The idea is that in a workflow such as a paperless bank loan process, the individual has to submit multiple documents without having a Box account. After the company receives the documents, it can kick off a workflow automatically based on receiving the set of documents.

He says the combination of these two new capabilities will give customers the ability to digitize more and more of their processes and bring in a level of automation that wasn’t previously possible in Relay. “The combination of these two features is about driving automation across the entire enterprise and digitizing many more paper-based and manual processes in the enterprise,” Levie said.

Box will not be charging additional fees for these new features to customers using Box Relay. File Request should be available at the end of this month, while the template library should be available by the end of July, according to the company.


By Ron Miller

SaaS earnings rise as pandemic pushes companies more rapidly to the cloud

As the pandemic surged and companies moved from offices to working at home, they needed tools to ensure the continuity of their business operations. SaaS companies have always been focused on allowing work from anywhere there’s access to a computer and internet connection, and while the economy is reeling from COVID-19 fallout, modern software companies are thriving.

That’s because the pandemic has forced companies that might have been thinking about moving to the cloud to find tools what will get them there much faster. SaaS companies like Zoom, Box, Slack, Okta and Salesforce were there to help; cloud security companies like CrowdStrike also benefited.

While it’s too soon to say how the pandemic will affect work long term when it’s safe for all employees to return to the office, it seems that companies have learned that you can work from anywhere and still get work done, something that could change how we think about working in the future.

One thing is clear: SaaS companies that have reported recent earnings have done well, with Zoom being the most successful example. Revenue was up an eye-popping 169% year-over-year as the world shifted in a big way to online meetings, swelling its balance sheet.

There is a clear connection between the domestic economy’s rapid transition to the cloud and the earnings reports we are seeing — from infrastructure to software and services. The pandemic is forcing a big change to happen faster than we ever imagined.

Big numbers

Zoom and CrowdStrike are two companies expected to grow rapidly thanks to the recent acceleration of the digital transformation of work. Their earnings reports this week made those expectations concrete, with both firms beating expectations while posting impressive revenue growth and profitability results.


By Ron Miller

Aaron Levie: ‘We have way too many manual processes in businesses’

Box CEO Aaron Levie has been working to change the software world for 15 years, but the pandemic has accelerated the move to cloud services much faster than anyone imagined. As he pointed out yesterday in an Extra Crunch Live interview, who would have thought three months ago that businesses like yoga and cooking classes would have moved online — but here we are.

Levie says we are just beginning to see the range of what’s possible because circumstances are forcing us to move to the cloud much faster than most businesses probably would have without the pandemic acting as a change agent.

“Overall, what we’re going to see is that anything that can become digital probably will be in a much more accelerated way than we’ve ever seen before,” Levie said.

Fellow TechCrunch reporter Jon Shieber and I spent an hour chatting with Levie about how digital transformation is accelerating in general, how Box is coping with that internally and externally, his advice for founders in an economic crisis and what life might be like when we return to our offices.

Our interview was broadcast on YouTube and we have included the embed below.


Just a note that Extra Crunch Live is our new virtual speaker series for Extra Crunch members. Folks can ask their own questions live during the chat, with past and future guests like Alexis Ohanian, Garry Tan, GGV’s Hans Tung and Jeff Richards, Eventbrite’s Julia Hartz and many, many more. You can check out the schedule here. If you’d like to submit a question during a live chat, please join Extra Crunch.


On digital transformation

The way that we think about digital transformation is that much of the world has a whole bunch of processes and ways of working — ways of communicating and ways of collaborating where if those business processes or that way we worked were able to be done in digital forms or in the cloud, you’d actually be more productive, more secure and you’d be able to serve your customers better. You’d be able to automate more business processes.

We think we’re [in] an environment that anything that can be digitized probably will be. Certainly as this pandemic has reinforced, we have way too many manual processes in businesses. We have way too slow ways of working together and collaborating. And we know that we’re going to move more and more of that to digital platforms.

In some cases, it’s simple, like moving to being able to do video conferences and being able to collaborate virtually. Some of it will become more advanced. How do I begin to automate things like client onboarding processes or doing research in a life sciences organization or delivering telemedicine digitally, but overall, what we’re going to see is that anything that can become digital probably will be in a much more accelerated way than we’ve ever seen before.

How the pandemic is driving change faster


By Ron Miller

Extra Crunch Live: Join Box CEO Aaron Levie May 28th at noon PT/3 pm ET/7 pm GMT

We’ve been on a roll with our Extra Crunch Live Series for Extra Crunch members, where we’re talking to some of the biggest names in Silicon Valley about business, investment and the startup community. Recent interviews include Kirsten Green from Forerunner Ventures, Charles Hudson from Precursor Ventures and investor Mark Cuban.

Next week, we’re pleased to welcome Box CEO Aaron Levie. He is a well-known advocate of digital transformation, often a years-long process that many companies have compressed into a few months because of the pandemic, as he has pointed out lately.

As the head of an enterprise SaaS company that started out to help users manage information online, he has a unique perspective on what’s happening in this period as companies move employees home and implement cloud services to ease the transition.

Levie started his company 15 years ago while still an undergrad in the proverbial dorm room and has matured from those early days into a public company executive, guiding his employees, customers and investors through the current crisis. This is not the first economic downturn he has faced as CEO at Box; when it was still an early-stage startup, he saw it through the 2008 financial crisis. Presumably, he’s taking the lessons he learned then and applying them now to a much more mature organization.

Please join TechCrunch writers Ron Miller and Jon Shieber as we chat with Levie about how he’s handling the COVID-19 crisis, moving employees offsite and what advice he has for companies that are accelerating their digital transformation. After he’s shared his wisdom for startups seeking survival strategies, we’ll discuss what life might look like for Box and other companies in a post-pandemic environment.

During the call, audience members are encouraged to ask questions. We’ll get to as many as we can, but you can only participate if you’re an Extra Crunch member, so please subscribe here.

Extra Crunch subscribers can find the Zoom link below (with YouTube to follow) as well as a calendar invite so you won’t miss this conversation.


By Jonathan Shieber

Box makes quick decision to add new collaboration capabilities in face of pandemic

When the shutdown began six weeks ago, the powers that be at Box sat down for a meeting to discuss the situation. They weren’t in the same room of course. They were like everyone else, separated by the virus, but they saw this as a key moment for Box as a company.

They had been talking about digital transformation for years, trying to help customers get there with their cloud content management platform, and this was a pivotal moment with millions of employees working at home.

Box CEO Aaron Levie says the company’s executives had to decide if the change in work style they were seeing at that moment was going to be a temporary event or something that changed work forever.

After some debate, they concluded that it was going to change things for the long term, and that meant accelerating the product road map. “We made the bet six weeks ago that this was going to be a long-term change about how business works, and even if offices opened back up, we thought that companies were going to want to be resilient for this type of event in the future,” Levie explained.

From Box’s perspective, they saw this playing it in three crucial ways. Employees would need to be able to share files securely (their sweet spot). They would need to collaborate with folks inside and outside the organization. Finally, as you are working inside other cloud applications, what is the best way to interact with files stored in Box?

These are all scenarios that Levie has been talking about for years, and to some extent Box offered already, but they wanted to tighten everything up, while adding some new functionality. For starters, they are offering a cleaner interface to make it easier for users to interact with and share files.

They are also helping users organize those files with a new feature called Collections, which lets them group their files and folders in ways that make sense to them. For starters, this is on an individual basis, but Levie says they are already hearing requests to be able to publish collections inside the organization, something that could come down the road.

Next, they are adding an annotations capability that makes it easy to add comments either as a single editor or in a group discussion about a file. Think Google Docs collaboration tools, but for any document, allowing an individual or group to comment on a file remotely in real time, something many folks need to do right now.

Image Credit: Box

Finally, external partners and customers can share files in Box from a special landing page. Levie says that this is working in conjunction with Box Shield, and the malware detection capability announced last month to make sure these files are shared in a secure fashion.

“Companies are going to need to make sure that no matter what happens — in the fall, next year or 10 years from now — that they can be resilient to an event where people can’t transact physically, where you don’t have  manual processes, where employees can go work from home instantaneously, and so that’s going to change dramatically how you adjust your company’s priorities from a technology standpoint,” Levie said.

These new features may not answer all of those huge strategic questions, but this is a case where Box saw an opening for the company to address this change in how people work more directly, and they sped up the roadmap to seize it.

These features will be rolling out starting today, and over the next weeks.


By Ron Miller

Box adds automated malware detection to Box Shield security product

With more folks working at home than ever, and many on machines outside the purview of IT and security teams, it’s becoming increasingly imperative to find creative ways to protect them from harm. Today, Box announced it was adding automated malware detection tools to Box Shield, the security product it announced last year.

Aaron Levie, CEO at Box, says that it’s important to find new ways of thinking about security, especially with millions of people suddenly working at home using cloud solutions.

“As people have begun working from home in greater numbers, you’re seeing an increase in malware and phishing attacks. [Bad actors] are starting to spread these security vulnerabilities in a much more aggressive manner, and so we’re launching Box Shield with malware protection built-in with advanced tools and policies around that malware detection,” he said.

The company is taking a three-pronged approach with this solution. For starters, it will let users view a file without actually having to download it first, while indicating if there is a risk associated with it. Next, it will actually prevent users from downloading a file with malware attached, and finally it will alert the security team when a file with malware has been uploaded to Box.

The idea is to keep the file from infecting whatever device that employees are working on, alerting end users when there is a problem, while letting them see the content of the file gives them all the information they need to know if the file is actually legitimate in the first place.

It’s so much easier right now to be spreading this kind of malicious package with people working from home, and sharing files at a far greater rate than ever before. This new feature is designed to give everyone in the loop from the end user to the IT security team some confidence that they can know when files are infected or not and keep them from proliferating inside of Box.


By Ron Miller

Okta launches Lifecycle Management Workflows to make building identity-centric processes easy

Okta, the popular identity and access management service, today used its annual (and now virtual) user conference to launch Lifecycle Management Workflows, a new tool that helps IT teams build and manage IFTTT-like automated processes with the help of an easy to use graphical interface.

The new service is an extension of Okta’s existing automation tools. But the key here is that IT teams and developers can now easily build complex identity-centric workflows across a wide range of applications. With this, these teams can easily automate an onboarding process where setting up a new Okta account also immediately kicks off processes on third-party services like Box, Salesforce, ServiceNow and Slack to set up accounts there. The same goes for offboarding workflows and username creation. A lot of companies still do this manually, which is not just a hassle but also error-prone.

“Adopting more technology is incredibly beneficial for enterprises today, but complexity is a significant side effect of a changing technology ecosystem and workforce. There is no better example of the potential challenges it can create than with lifecycle management,” said Diya Jolly, Chief Product Officer at Okta. “Okta’s vision of enabling any organization to use any technology goes deeper than just access; it’s about improving how organizations use technology. Okta Lifecycle Management Workflows improves the efficiency and security of enterprises through its simple user experience and broad applicability, keeping organizations secure, and efficient without requiring the complexity of writing code.”

Okta, of course, had lifecycle management features before, but now it is also putting its acquisition of Azuqua to work and using that company’s graphical interface and technology for making it easier to create these automation processes. And while the focus right now is on processes like provisioning and de-provisioning accounts, the long-term plan is to expand Workflows with support for more identity processes.

As Okta also stresses, administrators can also manage very granular access across the supported third-party tools like assigning territories in Salesforce or access to specific group channels in Slack, for example. For temporary employees, admins can also set up automatic de-provisioning workflows that revoke access to some tools but maybe leave access to payroll services open for a while longer. There are also built-in tools for automatically managing conflicts when two people have the same name.

“Millions of people rely on Slack every day to make their working lives simpler, more pleasant, and more productive,” said Tamar Yehoshua, Chief Product Officer at Slack, one of the early adopters of this service. “Okta Lifecycle Management Workflows has significantly increased efficiency for us by automating the provisioning and de-provisioning of users from applications in our environment, without us ever having to write a line of code.”

This new feature is part of Okta’s new Platform Services, which the company also debuted today and which currently consists of core technologies like the Okta Identity Engine, Directories Integrations, Insights, Workflow and Devices. The core idea behind Platform Services is to give Okta users the flexibility to manage their unique identity use cases but also to give Okta itself a platform to innovate on. One other new product that sits on top of the platform is Okta Fastpass, for example, which allows for passwordless authentication on any device.


By Frederic Lardinois

Activist investor Starboard Value taking three Box board seats as involvement deepens

When activist investors Starboard Value took a 7.5% stake in Box last September, there was reasonable speculation that it would begin to try and push an agenda, as activist investors tend to do. While the firm has been quiet to this point, today Box announced that Starboard was adding three members to the 9 member Box board.

At the same time, two long-time Box investors and allies, Rory O’Driscoll from Scale Venture Partners and Josh Stein from DFJ, will be retiring from the board and not seeking re-election at the annual stockholder’s meeting in June.

O’Driscoll involvement with the company dates back a decade, and Stein has been with the company for 14 years and has been a big supporter from almost the beginning of the company.

For starters, Jack Lazar, whose credentials including being chief financial officer at GoPro and Atheros Communications, is joining the board immediately. A second new board member from a list to be agreed upon by Box and Starboard will also be joining immediately.

Finally, a third member will be selected by the newly constituted board in June, giving Starboard three friendly votes and the ability to push the Box agenda in a significant way.

At the time it announced it was taking a stake in Box, Starboard telegraphed that it could be doing something like this. Here’s what it had to say in its filing at the time:

“Depending on various factors including, without limitation, the Issuer’s financial position and investment strategy, the price levels of the Shares, conditions in the securities markets and general economic and industry conditions, the Reporting Persons may in the future take such actions with respect to their investment in the Issuer as they deem appropriate including, without limitation, engaging in communications with management and the Board of Directors of the Issuer, engaging in discussions with stockholders of the Issuer or other third parties about the Issuer and the [Starboard’s] investment, including potential business combinations or dispositions involving the Issuer or certain of its businesses, making recommendations or proposals to the Issuer concerning changes to the capitalization, ownership structure, board structure (including board composition), potential business combinations or dispositions involving the Issuer or certain of its businesses, or suggestions for improving the Issuer’s financial and/or operational performance, purchasing additional Shares, selling some or all of their Shares, engaging in short selling of or any hedging or similar transaction with respect to the Shares…”

Box CEO Aaron Levie appeared at TechCrunch Sessions: Enterprise, the week this news about Starboard broke, and he was careful in how he discussed a possible relationship with the firm. “Well, I think in their statement actually they really just identified that they think there’s upside in the stock. It’s still very early in the conversations and process, but again we’re super collaborative in these types of situations. We want to work with all of our investors, and I think that’ll be the same here,” Levie told us at the time.

Now the company has no choice but to work more collaboratively with Starboard as it takes a much more meaningful role on the company board. What impact this will have in the long run is hard to say, but surely significant changes are likely on the way.


By Ron Miller

Box’s Aaron Levie says it will take creativity and focus to get through this crisis

The COVID-19 virus is touching every aspect of our lives and having a profound impact on individuals, businesses and society at large. Box’s Aaron Levie has built a successful business from dorm room to IPO and beyond. He spoke to TechCrunch today about the level of creativity and focus that it’s going to take to succeed in the current environment.

Levie pointed out that his company was a fledgling startup when the economic downturn hit in 2008, but he thinks this one could have a much greater impact on business than that one did.

“I think Silicon Valley is going to definitely experience this in a very, very significant way. We were building a company in 2008, and that was extremely hard, but I don’t think it is going to compare to how hard the coming year is going to be,” Levie said.

This morning on Twitter, Levie wrote that we are in uncharted territory, and everyone will have to work together to help navigate this crisis.

He believes the government will need to step in to help individuals and businesses alike. “Businesses, who have lots of employees, need to be supported, but fundamentally we need to make sure that we’re focused on all the workers that are out of work, hopefully just temporarily displaced, but we’re going to need a lot of government financial support to get through this,” he said.

For startups, he advised startups to firmly focus on their mission. “It’s about extreme focus right now. It’s about extreme discipline. It’s about making sure that you’re maintaining your culture during this time,” Levie said.

As for his own company, he’s looking a three areas: his employees, his customers and the community. He said his first priority is making sure his employees are safe and healthy and that the hourly workers who support the business normally are being taken care of as we move through this unprecedented situation.

Secondly, he’s making sure that he supports his customers. To that end the company has removed any license limits as customers deal with increased usage with employees working from home.

He has also joined forces with Cloudflare in an effort to provide small businesses with 90 days of free services to help ride out the situation, and he said they would revisit extending these programs if the situation continues.

Thirdly, he says every business who can has to look at ways to support the communities where they live to assist non-profit organizations who are helping in the response. “This is an event where business communities globally are going to have to put more of a concerted effort on this than any issue in modern history,” Levie said.

Levie is not alone in this thinking by any means. He points to other leaders such as Chuck Robbins, Marc Benioff and Tim Cook, all who have stepped up in recent days to offer help and support.

He has built his company from the ground up to one that’s on nearly an $800 million run rate, but like so many business leaders, he is dealing with a situation which, as he said, has no playbook. Like every other CEO, he’s trying to help keep his business thriving, while not losing sight of the needs of the people in his organization, his customers or his community. It’s not an easy balancing act for anyone right now.


By Ron Miller

Good news for enterprise startups: SaaS helped kill the single-vendor stack

In the old days of enterprise software, when companies like IBM, Oracle and Microsoft ruled the roost, there was a tendency to shop from a single vendor. You bought the whole stack, which made life easier for IT — even if it didn’t always work out so well for end users, who were stuck using software that was designed with administrators in mind.

Once Software-as-a-Service (SaaS) came along, IT no longer had complete control over software choices. The companies that dominated the market began to stumble — although Microsoft later found its way — and a new generation of SaaS vendors developed.

As that happened, users saw a way to pick and choose software that worked best for them, as they were no longer bound to clunky enterprise software; they wanted tools at work that worked as well as the ones they used in the consumer space at home.

Through freemium models and low-cost subscriptions, individual employees and teams started selecting their own tools, and a new way of buying software began to take hold. Instead of buying software from a single shop, consumers could buy the best tool for the job. This in turn, led to wider adoption, as these small groups of users led the way to more lucrative enterprise deals.

The philosophical change has worked well for enterprise startups. The new world means a well-executed idea can beat an incumbent with a similar product. Just ask companies like Slack, Zoom and Box, which have shown what’s possible when you put users first.


By Ron Miller

Three SaaS companies we think will make it to $1B in revenue

What’s the most successful pure SaaS company of all time? The answer is Salesforce, and it’s no contest — the company closed the year on an $18 billion run rate, placing it in a category no other company born in the cloud can touch.

That Salesforce is on such an impressive run rate might suggest that reaching a billion in revenue is a fairly easy proposition for an enterprise SaaS company, but firms in this category grow or drive revenue like Salesforce. Some, in fact, find themselves growing much more slowly than anyone thought, but keep slugging it out as they inch steadily toward the $1 billion mark. This happens to public and private SaaS companies alike, which means that we can look at few public ones thanks to their regular earnings disclosures.

It’s a good time to look back at the year and analyze a few firms that should reach the mythical $1 billion in revenue at some point. Today we’re examining Zuora, a SaaS player focused on building and managing subscription-based services. GuideWire, a company transitioning to SaaS with big ambitions and Box, a well-known SaaS player caught somewhere between big and a billion.

Zuora: betting on SaaS

We’ll start with the smallest company that caught our eye, Zuora . We’ll proceed from here going up in revenue terms.

Zuora is as pure a SaaS company as you can imagine. The San Mateo-based company raised nearly a quarter billion dollars while private to build out the technology that other companies use to help build their own subscription-based businesses. To some degree, Zuora’s success can be viewed as a proxy for SaaS as a whole.

However, while SaaS has chugged along admirably, Zuora has seen its share price fall by more than half in recent quarters.

At issue is the firm’s slowing growth:

  • In the quarter detailed on March 21, 2019, Zuora’s subscription revenue growth slowed to 35% compared to the prior year period. Total revenue growth grew an even slower at 29%.
  • In the quarter announced on May 30, 2019, Zuora’s subscription revenue grew 32% while its total revenue expanded 22%.
  • Moving forward in time, the company’s quarter reported on August 28, 2019 saw subscription revenue growth of 24% and total revenue growth of 21% compared to the year-ago quarter.
  • Finally, in its most recent quarterly report earlier this month, Zuora reported marginally better 25% subscription revenue growth, but slower total revenue growth of 17%.

Why is Zuora’s growth slowing? There’s no single reason to point out. Reading through coverage of the firm’s earnings report reveals a number of issues that the company has dealt with this year, including slow sales rep ramp and some technology complaints. Add in Stripe’s meteoric rise (the unicorn added tools for subscription billing in 2018, expanding the product to Europe earlier this year) and you can see why Zuora has had a tough year.

Adding to its difficulties, the company has lost more money while its growth has slowed. Zuora’s net loss expanded from $53.6 million in the three calendar quarters of 2018. That rose to $59.9 million over the same period in 2019. But the news is not all bad.

In spite of these numbers, Zuora is still growing; the company expects around $276 to $278 million in revenue in its current fiscal year and between $206 and $207 million in subscription top-line revenue over the same period.

At the revenue growth pace set in its most recent quarter (17% in the third quarter of its fiscal 2020) the company is eight years from reaching $1 billion in revenue. However, Zuora’s rising subscription growth rate in the same period is very encouraging. And, the company’s cash burn is declining. Indeed, in the most recent quarter Zuora’s operations generated cash. That improvement led to the firm’s free cash flow improving by half in the first three calendar quarters of 2019.

It also has pedigree on its side. Founder and CEO Tien Tzuo was employee number 11 at Salesforce when the company launched in 1999. He left the company in 2007 to start Zuora after realizing that traditional accounting methods designed to account for selling a widget wouldn’t work in the subscription world.

Zuora’s subscription revenue is high-margin, but the rest of its revenue (services, mostly) is not. So, with less thirst for cash and modestly improving subscription revenue growth, Zuora is still on the path towards the next revenue threshold despite a rough past year.

Guidewire: going SaaS the hard way


By Ron Miller