With over 30 years of experience in building, launching and growing successful enterprise software businesses, SaasOptics CEO, Tim McCormick has seen his share of businesses go from start-up, through to acquisition. Before joining SaaSOptics, Tim was the director of Americas sales operations at Cisco Systems following its acquisition of JouleX, where he was the vice president of sales and marketing from the founding in 2010 through the acquisition in 2013 for $107M.
He was a member of the founding management team and vice president of marketing for Internet Security Systems (ISS), where he increased market share and grew the company’s revenue from $5M in 1996 to over $400M, and saw the company through a successful IPO in 1998 and in 2006, when ISS was acquired by IBM for $1.9B.
So needless to say, my conversation with Tim acquired a lot of information and perspective–which explains my four questions!
M.R. Rangaswami: It’s been a while since we last spoke. From your perspective, what’s new in SaaS?
Tim McCormick: The subscription model has experienced explosive adoption. Eighty-four percent of new software today is delivered as SaaS. By next year, it’s expected that more than 80 percent of software providers will transition their business models from “traditional” perpetual license and maintenance to subscription-based models. In addition, we’re also seeing private equity and venture capital firms competing over opportunities to invest in promising SaaS businesses at an earlier stage and as a result, growing demand from SaaS businesses who need to be more prepared with the metrics and insight investors expect.
M.R.: What has been the impact of SaaS market growth on SaaSOptics?
Tim: With this influx of capital, an increasing number of B2B SaaS businesses are turning to SaaSOptics to automate their financial operations to scale and generate SaaS metrics and analytics that will help them get funded and stay funded.
Our customer base is growing and in turn, so is our team. Since January 2018 when we closed our Series A round, our Annual Recurring Revenue (ARR) increased 103 percent, we added nearly 50 employees and our customer base grew by 58 percent, bringing the number of B2B SaaS businesses that rely on SaaSOptics to over 600. Since 2018, those customers have used the data, insights and reporting in SaaSOptics to raise $2.75B in capital. These are numbers we are extremely proud of.
Investors are also continuing to see value in supporting SaaSOptics. This month, we announced a $12M Series B investment led by Fulcrum Equity Partners. The funding round will help us continue to scale sales, marketing, customer success and support teams, while adding more engineering and product management resources to extend our total addressable market.
M.R.: What is the most common mistake you see B2B SaaS businesses make?
Tim: With the rapid adoption of SaaS, many businesses are navigating SaaS financial operations and subscription management for the first time. Most start out using spreadsheets, disconnected systems and other manual processes to manage their financial operations. The effects of taking this approach might not be seen in the first six months, but growth quickly reveals that spreadsheets are poorly suited for managing a recurring revenue business. As the customer base grows, spreadsheets become too complex and can’t accurately account for the upgrades, downgrades, renewals, re-negotiations of renewals, upgrade-extensions, cancellations and early terminations that are inevitable in a SaaS business.
Without real-time metrics, it’s hard to have confidence in the financial data. And, without the right infrastructure and processes in place, it becomes difficult to make informed decisions. This situation can create a real roadblock to raising capital. While VCs and private equity professionals don’t expect the CEO of an early stage company to be a CFO, they expect financial data for insight into a company’s past performance, present standing and future projections. Automated financial operations are the only path to the polished, accurate revenue and financial metrics that will inform operational decisions, streamline audits and due diligence, and satisfy potential investors or buyers.
M.R.: You’ve been successful at growing SaaSOptics year over year. What advice do you have for other SaaS businesses seeking the same rapid growth?
Tim: Think long-term. As your sales volume grows, you’ll see an incremental increase in new contracts, contract changes and renewal transactions. Failure to keep up with this increase in volume will impact the integrity of your financial data and leave you drowning in revenue recognition schedules, invoicing, accounts receivables management and collections.
Automate your financial operations early on and make sure the platform you select is tailored for your business. There are significant differences in managing the financial operations of a B2B vs. a B2C SaaS business. The platform should be able to scale as contracts increase and become more complex, and as stakeholders demand new metrics. Equally important is integrating that platform with your CRM system for visibility across sales, finance and customer success teams. This streamlines the sales-to-finance handoff so that when the sales team secures a new order, the details populate in your subscription management solution and are automatically turned into GAAP-compliant customer financial records and the SaaS metrics and analytics you need to manage and grow your business.