Building a Mid-Market Security SaaS Company from Canada: J. Paul Haynes, CEO of eSentire (Part 6)

Sramana Mitra: What was the growth rate from there on? Once you got to building the SaaS business, you zeroed in on the mid-market financial services vertical. You’ve defined your target audience very precisely. You’ve got this whole community of influencers around you. What kind of growth rate were you hitting?

J. Paul Haynes: This is going back a few years. We were probably in the 75% y-o-y range. It was higher in the earlier days. We’re at about 65% right now.

Sramana Mitra: What are some of the other strategic moves that you’ve made in building the business that are worth discussing?

J. Paul Haynes: This would be true for multiple firms. In bringing our next investor Edison Venture, our particular interest in partnering with an equity firm that could help us not just with capital, but with also executing on our growth is important. Edison has a strong skillset in growing revenue-generating organizations on the East Coast, which is where we were finding a lot of our business. In picking our next investor, we wanted somebody who was going to help with sales and marketing expansion. That was when we brought Edison in July of 2013.

Sramana Mitra: What did that do to the business?

J. Paul Haynes: That further accelerated it. Through their network, we were able to bring in a sales leader in the middle of the market. That was most important to us. With the team that came with them, we went from nothing to five or six sales professionals in about three months.

Sramana Mitra: What else is interesting?

J. Paul Haynes: That was a strategic move in 2011. Another thing that was related to that was we started looking at the business through SaaS metrics prior to raising that funding in 2013. Probably starting in 2012, we started tracking the business and not listening to accountants, which were Deloitte. They have an audit standard.

When you’re a SaaS business, all of the key metrics are not regular GAAP financial metrics. They are completely different metrics. We started looking at things like customer acquisition cost, long-term value, gross margin contribution, churn rates, net retention rates, and logo retention rates. These are all key indicators of the health of the SaaS business.

We started tracking ourselves that way and using those more to make decisions rather than any of the more traditional GAAP accounting measures. I, quite by accident, came across Bessemer original SaaS metrics, which were published 10 years ago, and I started using some of that as guidance. They were built for B2C businesses but we adopted them for B2B. That gave you clarity on things like customer acquisition costs.

We were getting to break even on customers in six months. If you talk to any of the professional money people, they would say, “You’re not spending enough on sales and marketing because you’re not getting enough at that. Your customer acquisition cost should be greater than 12 months but under 24 months. You look at the business quite differently when you look at it through that lens.

This segment is part 6 in the series : Building a Mid-Market Security SaaS Company from Canada: J. Paul Haynes, CEO of eSentire
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