Friday, October 17, 2008

Bessemer SaaS Law #7

Bessemer SaaS Law #7. Stay local - Prove your business in North America first. Only after reaching $1M in CMRR should you consider hiring European sales and services execs
behind customer demand. Save Asia for post-IPO.

Almost all businesses will look to go global at some point if they continue to grow. But SaaS vendors face more barriers to globalization than traditional software companies because you can’t just localize the UI and ship a new CD to some remote country. Given the different architecture and high service level expectations in the SaaS industry, companies are faced with questions about latency, data access and security through replicated local datacenters, in-country customer support personnel, packaged integration with other regional software and SaaS products, and other similar issues.

Simply put, North America is a massive market with a rising tide around SaaS. There is no need to go global early and force this cost and complexity upon your organization. In most SaaS sub- markets, we find that Europe is roughly three years behind the US in adoption, and Asia is slightly behind Europe – although we have recently seen some interesting pockets of activity in Japan and India that may be accelerating. A rough rule of thumb is that you should look to pass $1M CMRR ($12M Annual Contract Value) before even considering Europe, and even then you should let customer deals pull you into the region as you incrementally hire sales and services professionals. Unless you have some extremely unfair advantage in Asia, wait until Europe is a clear home run before even considering opening up a sales war on another front. Your default position should be to consider Europe as your pre-IPO growth story, and Asia only after you’re a high-flying public company.

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