Summarizing Tomasz Tunguz's S-1 analyses: Zoom, Slack, Salesforce, and Atlassian
Most recent update: 29th May 2020 - 14:52:28 - 3727 characters
Spa thoughts (i.e. I read these in the spa, literally) whilst reading S-1 analyses by Tomasz Tunguz ...
- Profitable at IPO (2% net income margin, similar to Atlassian at IPO)
- Only spent 10% on R&D, likely due to labor-market arbitrage as most of their team is in China
- A high sales efficiency, with every $1 spent on sales and marketing returning $1.8, comparable to only Atlassian who get an insane $2.56 return
- "Zoom is externally viral while Slack is internally viral; we send Zoom invitations outside of our companies, but Slack messages to our colleagues."
- Slask had $401 million in revenue at IPO compared to Zoom's $331, Atlassian's $319, and Twilio's $166
- Slack’s average annual contract value is the smallest of the group at $4.6k and closest to Zoom’s ($5.1k) or Atlassian's ($5.6k)
- "Slack has approximately 17 users per organization on average (though the distribution likely follows a power law with a few organizations in the tens and potentially hundreds of thousands of seats). The number of $100k+ accounts has about doubled year over year to 575 out of total customer base of 88,000, and these large customers constitute 40% of revenue."
- Slack has 88k customers in 2019 vs 51k for Zoom
- For gross margins, Slack is at approximately 85% whilst Zoom is at 80%, which makes sense as one is images and text whilst the other is real time video
- "Slack spends 39% of revenues on R&D compared to 10% for Zoom"
- "Seven years after founding, the company generated $500M in revenue. No other SaaS company has come close to the same scale of achievement."
- Early Salesforce revenue (millions): $5.4, $22.4, $51, $96, $176, $309, $497
- "Salesforce’s averaged an $11k account at IPO across 8000 customers"
- "In the company’s earliest years, Salesforce invested about 75-100% of revenues into sales and marketing, a figure that tapers off to the 50%."
- "Initially, the company spent very little on engineering. In fact, it was once among the lowest of any SaaS company. But now the company is on a steady path above the median [of approximately 15%]."
- "Though Atlassian counts more than half of the Fortune 500 as customers, no single customer accounts for more than 1% of revenue. In other words, no single client pays Atlassian more than $3.5M. And only 864 customers pay more than $50k per year."
- "While the median SaaS company spends between 50-100% of their annual revenue on sales and marketing, Atlassian has spent between 12 and 21% of their revenue on customer acquisition in the last three years."
- "Atlassian operates at 83.4% gross margin, 12 percentage points above the SaaS median of 70.9%."
- "Atlassian surpassed the $50M revenue mark seven years after founding"
- Inspired by Atlassian's approach that broke into the Fortune 500 with only a tiny expense in sales and marketing ...
- "The Flywheel Model differs from the Traditional Model in one fundamental regard. The enterprise sales team is exclusively inbound."
- "[The internal teams] find, cultivate and upsell these [existing] growing accounts [rather than hunt for large ones]."
- "The up-sell conversation is a very easy one: “Mr. CXO, there’s no need for a trial or feature comparison. 25% of your employees are already using our product.” What better argument for success is there than internal social proof?"