1Mby1M Virtual Accelerator Investor Forum: With Rajeev Madhavan, Founder and General Partner at Clear Ventures 2021 (Part 5)

Rajeev Madhavan: It’s no longer enough to provide a set of solutions. You have to provide the entire platform as a solution. Salesforce was the first one to apply this. I was one of the first customers when I was at Magma deploying Salesforce. We had the same VC as Salesforce so I had no choice but to use it.

I was one of the first customers at Magma. We ended up realizing that we could build our system around it. Back in 2001 to 2002, we built our entire company’s operations on Salesforce.

Marc and the team focused on not just providing the engines inside the platform but the whole platform as a service from day one. This is something that every entrepreneur should look at. It is not the code that I provide and selling that to some executable form.

It is the whole aspect of how to increase the usage rapidly. SaaS has a great advantage. It has recurring revenue. It is a beautiful model, but it also has a big disadvantage. If you do a bad job, the customer can go away in a year because it is a one-year commitment.

You need to make sure that your service is phenomenal. If you are doing that kind of phenomenal service, then why not offer all of that service as part of the platform and provide a value-added solution rather than just the platform. 

Sramana Mitra: There are various nuances to this strategy. Some players do have a Platform-as-a-Service product, but they are working with large enterprises and workloads within the enterprise. They are working with the system integrators.

I also really like how Salesforce activated a lot of startups on top of their platform like Veeva. The Veeva story is an incredible story. I have known them for a long time. They basically built the company for $4 million and delivered $600 million worth of revenue and a multi-billion market cap.

This company had raised money, but they didn’t need it because it was developed on Salesforce’s stack. I like capital-efficient companies – the vision of many of these PaaS ecosystems emerging in different use case areas and genres whether it is the supply chain, manufacturing, DevOps, and various areas.

Different ecosystems are emerging on different platforms and enabling different ISVs to take the use case further. It just sounds like a phenomenal forward-looking opportunity to me. 

Rajeev Madhavan: In every platform that starts, you don’t have the APIs and integrations that startups and others could build on because you are barely a startup and you are trying to get your first sale. Once the platform becomes beautiful and if it is done right, there is going to be an ecosystem of applications around your platform.

That is when you have truly succeeded. This was when Salesforce succeeded. Now, there could be a repertoire of companies that come around in various facets. It’s not only going to be the internal teams that will do it. This is an opportunity for founders. This is an area where you can do it with less money and get to a certain point. There was one at $600 million and there are many that are sold for $3 million to $2 million. There is nothing wrong with doing that. Every entrepreneur has to know where you are and, based on that, determine how much money you need to raise.

If I am going to build the entire platform from scratch, then I am going to do a lot more heavy lifting than I would have if I were building on a stack. This was there in the early days of Silicon Valley too. There were all these companies that built things on top of somebody’s tools and got bought by that company for $50 million and higher and all they have done is a $1 million raise from a few private investors who have been in the space. 

This segment is part 5 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Rajeev Madhavan, Founder and General Partner at Clear Ventures 2021
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