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SaaSy Kiwi companies eye global growth at scale

Posted: 23 March 2018
Kiwi companies selling Software as a Service (SaaS) are reeling in global revenue and customers.

SaaStr Annual 2018 mission companies

Whether tap-and-go donations at church with Pushpay, in business with Xero's accounting software, at the museum with Dexibit's cultural data software, or during halftime with DropIt's reverse auction service – Kiwi companies selling Software as a Service (SaaS) are reeling in global revenue and customers.

58 Kiwi SaaS companies joined 10,000 global players at the recent 2018 SaaStr Annual conference in San Francisco - the largest non-vendor confab in the world. Their common aim: making life easier with innovative subscription based software. Paul Norrie, Digital Business Advisor at Callaghan Innovation, shares some of the key insights.

With San Francisco being a fertile ground for growing SaaS companies, our Kiwi entrepreneurs returned from 2018 SaaStr inspired and hungry for rapid expansion – but focused on accelerating in an intelligent way.

The 2018 SaaStr event was the trigger point that enabled us to bring the community of Kiwi SaaS founders and leaders together. Having so many Kiwi businesses together at a global event makes those in the know notice. Plus for each Kiwi delegate the energy from the cohort and the shared learnings, friendships and experiences will be of ongoing value over time.

SaaS companies achieve phenomenal growth 

SaaS companies are known for their ability to achieve speed, scale and volume. One company we spoke to in San Francisco went from $1-$50 million revenue in 3 years, another in 3 years now has 70 staff. That level of growth is phenomenal.

It’s not surprising given 7 out of the top 10 of Deloitte's North American 2017 Fast 500 were software companies, with 43% identifying themselves as SaaS companies. American software companies are relentless in their growth efforts.

Here in New Zealand, SaaS companies feature heavily in the Technology Investment Network 200. As a group, these companies experienced high revenue growth in 2017 of nearly $163m and many featured on TIN's high growth awards lists last year.

NZ is an attractive place for R&D

It became very clear on our trip that New Zealand is a really attractive place for companies to base their R&D activities - in this case software development.

In San Francisco you’d be looking at a cost of about $140K-plus for a graduate. In New Zealand it would be a fraction of the price, plus we have a government committed to supporting these high growth businesses via Callaghan Innovation and NZTE.

While in NZ we struggle to find leaders with startup experience, finding dedicated research and development talent isn’t a problem. In the US there is a faster churn rate where experts and employees don’t stay long because there is a huge appetite for hiring.

In the Bay Area of San Francisco you’d have a 13-month churn rate. Basically you’ve barely hired your expert and they’ve taken up another opportunity elsewhere.

Capital and risk appetites

In the US you have a $US75 billion capital market and it’s much different here. Even with the NZ capital we do have, there is a way to go to build a productive risk appetite.

It’s why many of our startups either list overseas, receive foreign investment, or are acquired by big multinationals - local investors aren’t signing up. We’re definitely seeing healthy international investment interest in some of our Kiwi startups and R&D projects.

It has a lot to do with the way Kiwis define and engage with risk. We are getting better, but we’ve got a lot of work to do to shift our traditional mindset. As Doblin’s Larry Keeley told us recently, the ultimate paradox is that the boldest and seemingly riskier ideas are actually the easiest to succeed.

NZ SaaS companies rate connections as essential

Storypark is using research and human-centred design in their service platform to help document and support children’s learning.

“It’s important being able to meet other CEOs and founders of companies and be able to talk about everything from how they structure their business, to how they reach their customers, to how they develop their product,” says Storypark’s Jamie MacDonald.

Feature IT's SaaS solution helps businesses make sense of the magnitude of data they are accumulating from a range of sources every day. Clients can mix and match their different functional software and cloud computing applications for smoother collective insights.

“It's about SaaS being an ecosystem of a lot of solutions that need to work together. That's the exciting part, for NZ to be a part of that,” says Penny Anderson of Feature.

Unison, traditionally a power lines company, is also in the SaaS business.

“People share the challenges and how they overcome them. That's definitely useful because if we are entering this new industry, we have to enter it with our eyes wide open and understand the different challenges,” says Unison’s Thahirah Jalal.

5 key lessons for Kiwi SaaS companies

  1. Connect and share to accelerate. Peer engagement is crucial for resilience, problem solving, and market knowledge.
  2. Be focused. Choose a narrow vertical/market that your product fits (product-market fit) and align your R&D pathway specifically.
  3. Know the well-established stages of growth. Arrange activities accordingly.
  4. Scale smartly. Nail your solution, lock in customers, and then scale.
  5. Make use of NZ’s competitive advantage in software development and R&D.

What is Software as a Service?

SaaS companies sell software services, but through a subscription. Google Docs, Netflix, Microsoft Office, Spotify and Audible are all examples you might use as a consumer. Organisations use SaaS applications for anything from accounting to inventory tracking.

The software is hosted elsewhere (‘the cloud’) but you can access the services almost anywhere over an internet connection. In the past you would have to physically have a CD or floppy disc and businesses would have to engineer their systems specifically for each service.

Digital services moving en masse to subscription

  • Radio, live sports games, maps, fitness workouts, personal assistants, medical tracking, news, TV and movies are largely predicted to shift to subscription-based models - much like Netflix.
  • Deloitte Global predicts 580 million digital subscriptions globally in 2018 with about 350 million subscribers, increasing 20% year-on-year. It says this year about 50% of adults in developed markets will have 2 digital subscriptions, increasing to 4 subscriptions in 2020.
  • Cisco's Global Cloud Index forecasts 95% of all data center traffic will come from the cloud and 59% of all cloud workflows will be delivered as SaaS by the end of this year.

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