Gaps in Analytics: Jon Kondo, CEO of Host Analytics (Part 6)

Sramana: What is the current financing market like for enterprise software? Silicon Valley has tipped heavily in favor of B2C. Having said that, a lot of cloud computing companies are doing well and raising financing. Can you comment about the lay of the land in general?

Jon Kondo: It is a very good time for financing with a cloud or SaaS model. If you were trying to build a business based on traditional software financing, it would be a lot more difficult. There is a lot of sexiness around B2C. Some of them have received unbelievable valuations. There is a very large set of investors that recognizes that there is also a very big business out there when it comes to helping other people run their businesses. The enterprise software pot is substantial. Many of the traditional enterprise software companies are now being run in the cloud. We happen to be one of those companies, so we continue to garner a lot of interest.

There is a lot of ‘show me’ mentality among investors. They want to see customers and they want to see validation. For a company of our stage they want to see that customers are still buying, that existing customers are renewing, and that we are continuing to innovate on the product side.

Sramana: Your points are exactly correct. The bar is high if you want to raise financing. Having said that, investing in B2C companies is often tantamount to gambling, whereas there are fewer unknowns when investing in B2C companies. A B2C business either knows what it is doing or it doesn’t. For a B2C business, success comes down to execution.

Jon Kondo: Absolutely. I think that is a very accurate statement.

Sramana: What metrics do you track?

Jon Kondo: We help companies track financial metrics, so we track a ton of metrics on our own. Our customer facing metrics are very important, so we pay close attention to things like monthly recurring revenue; we track our customer turn, and our customer usage. We also look at every sales and marketing metric you can think of. We are a metrics oriented business.

Right after I joined the company, someone told me that running a SaaS company is like running a factory. It is all about metrics. You have to put so many things into the top to get products out of the bottom. You have to think about everything from a perspective of tuning. Unless you can get it into a finely tuned machine, it is a very tough road.

Sramana: When a customer does not renew, what is going wrong?

Jon Kondo: We have been very fortunate to have had very, very few customers who have declined to renew. Our product is very sticky. The few customers who have turned have [done so] due to reasons that are beyond their control:  they were acquired or were a division of corporate and a new mandate came down. That is beyond our control and our direct users’ control.

There have been a select few cases where customer turn has come for a different reason. In one case, our customer had a complete change of individuals who managed the application, and the new team did not get trained. We were not tracking usage then, and their usage dropped quite a bit. We should have called and offered training. If we see degradation of customer usage, our success team will call and inquire about the drop in usage.

This segment is part 6 in the series : Gaps in Analytics: Jon Kondo, CEO of Host Analytics
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