October 30, 2013
This is a follow up to my prior post ‘Do you need a Financial Plan to Raise Seed Capital?’
I had a number of entrepreneurs ask me what I meant when I described investors wanting to see that the entrepreneur understands the levers of their business. Specifically, people have asked about the “levers” of your business. Simply put, the “levers” are the critical factors that make your business run.
In an Internet media or SaaS company, they might be:
- Arrivals (consumers or B2B prospects who land on your web site)
- Conversions (number of people who sign up for your site)
- MAU, DAU (Monthly active users, Daily active users)
- Monetization- How do you (plan to) make money from your users? advertising (CPM, sponsorship), premium subscriptions (% who subscribe, price point). What are the assumptions here? Are they reasonable given other similar businesses?
- Churn- how many users leave the service
- Marketing Costs- how do you get users to know about you? Paid advertising? SEO? Social media? Costs of development? Costs of advertising?
- Sales expense- If you’re a SaaS business, do you plan to use sales people or are you freemium? If you use sales people, what will you pay them? How long will they take to ramp up? What quota will they carry? Will you upsell these customers? David Skok of Matrix Partners has written some great, in-depth blog posts about SaaS scaling here.
There can be a ton of complexity if you allow it. To reiterate a point from the prior post, the point is NOT that you have a complex 5 year financial model. It will certainly be wrong, and investors know this. The point is that you have a handle on the KEY metrics that will allow your business to grow rapidly.
June 28, 2010
Just when you think Microsoft may start to get the Internet, they dash your hopes again.
They just don’t get it.
In the most recent Business Week magazine, Steve Ballmer was interviewed about opportunities in Asia. He commented about the problems of what makes a country interesting and about the problems Microsoft has with software piracy. See the interview here http://bit.ly/bjZxOu
Two things really stood out to me:
1) On the question What excites you about Asia now? Ballmer answered, “Two things make a country interesting… One, they buy a lot of personal computers…”
Note that he didn’t mention mention Internet access or Smart Phones or broadband penetration. Just personal computers. I know Microsoft makes a ton of money from Windows and Office, but emerging markets and emerging technologies aren’t going to function the old way. The old metrics simply aren’t going to cut it. How could I ever believe that Microsoft cares about Search, or about SaaS, or Office in the cloud when the CEO doesn’t even mention mobile or the Internet when discussing opportunities in Asia? There are over 750 million mobile phone subscribers in China alone.
2) The second thing Ballmer comments on is the issue of software piracy in China. I won’t diminish the issue of piracy, because it is a real issue for all forms of IP. But Ballmer’s comments highlight how little Microsoft understands software as a service (SaaS). In a SaaS model, the software is typically paid for over time and accessed via a browser. SaaS doesn’t eliminate piracy, since users can share user names and passwords, but it does reduce it substantially. But Ballmer doesn’t think of the world this way.
They Don’t Get It. Why Does it matter if they get it? Because Word and Excel and Outlook are industry standard tools, and they would be so much more valuable to all of us users if Microsoft did get it. If I could access all my documents easily in one place. If I could sync all my contacts easily. If I had a truly unified “In Box.”