Zuora’s IPO is another step in golden age of enterprise SaaS

Zuroa’s founder and CEO Tien Tzuo had a vision of a subscription economy long before most people ever considered the notion. He knew that for companies to succeed with subscriptions, they needed a bookkeeping system that understood how they collected and reported money. The company went public yesterday, another clear sign post on the road to SaaS maturation.

Tzuo was an early employee at Salesforce and their first CMO. He worked there in the early days in the late 90s when Salesforce’s Marc Benioff famously rented an apartment to launch the company. Tzuo was at Salesforce 9 years, and it helped him understand the nature of subscription-based businesses like Salesforce.

“We created a great environment for building, marketing and delivering software. We rewrote the rules, the way it was built, marketed and sold,” Tzuo told me in an interview in 2016.

He saw a fundamental problem with traditional accounting methods, which were designed for selling a widget and declaring the revenue. A subscription was an entirely different model and it required a new way to track revenue and communicate with customers. Tzuo took the long view when he started his company in early 2007, leaving a secure job at a growing company like Salesforce.

He did it because he had the vision, long before anyone else, that SaaS companies would require a subscription bookkeeping system, but before long, so would other unrelated businesses.

Building a subscription system

As he put it in that 2016 interview, if you commit to pay me $1 for 10 years, you know that $1 was coming in come hell or high water, that’s $10 I know I’m getting, but I can’t declare the money until I get it. That recurring revenue still has value though because my investors know that I’m secure for 10 years, even though it’s not on the books yet. That’s where Zuora came in. It could account for that recurring revenue when nobody else could. What’s more, it could track the billing over time, and send out reminders, help the companies stay engaged with their customers.

Photo: Lukas Kurka/Getty Images

As Ray Wang, founder and principal analyst at Constellation Research put it, they pioneered the whole idea of a subscription economy, and not just for SaaS companies. Over the last several years, we’ve heard companies talking about selling services and SLAs (service/uptime agreements) instead of a one-time sale of an item, but not that long ago it wasn’t something a lot of companies were thinking about.

“They pioneered how companies can think about monetization,” Wang said. “So large companies like a GE could go from selling a wind turbine one time to selling a subscription to deliver a certain number of Kw/hr of green energy at peak hours from 1 to 5 pm with 98 percent uptime.” There wasn’t any way to do this before Zuora came along.

Jason Lemkin, founder at SaaStr, a firm that invests in SaaS startups, says Tzuo was a genuine visionary and helped create the underlying system for SaaS subscriptions to work. “The most interesting part of Zuora is that it is a “second” order SaaS play. It could only thrive once SaaS became mainstream, and could only scale on top of other recurring revenue businesses. Zuora started off as a niche player helping SaaS companies do billing, and it dramatically expanded and thrived as SaaS became … Software.”

Market catches up with idea

When he launched the company in 2007, perhaps he saw that extension of his idea out on the distant horizon. He certainly saw companies like Salesforce needing a service like the one he had decided to create. The early investors must have recognized that his vision was early and it would take a slow, steady climb on the way to exiting. It took 11 years and $242 million in venture capital before they saw the payoff. The revenue after 11 years was a reported $167 million. There is plenty of room to grow.

But yesterday the company had its initial public offering, and it was by any measure a huge success. According TechCrunch’s Katie Roof, “After pricing its IPO at $14 and raising $154 million, the company closed at $20, valuing the company around $2 billion.” Today it was up a bit more as of this writing.

When you consider the Tzuo’s former company has become a $10 billion company, that companies like Box, Zendesk, Workday and Dropbox have all gone public, and others like DocuSign and Smartsheet are not far behind, it’s pretty clear that we are in a golden age of SaaS — and chances are it’s only going to get better.

Here are the 12 startups in Techstars NYC’s Winter 2018 class

The latest startups to participate in Techstars NYC have spent the past week pitching investors, journalists and the broader New York community.

I swung by the accelerator’s new office a few days ago to meet each team. In a two-hour period, I found myself discussing everything from cryptocurrency to kitchen sanitation to gene sequencing.

Here’s what the companies are up to:

  • Acculis is building collaborative software for construction. One of the key features is a lightweight 3D model viewer that can be on accessed a phone, tablet or web browser. By making it easier to bring this information into the field, the team is hoping to reduce delays and mistakes.
  • Altru helps companies tap their employees for marketing and recruiting. Potential hires can browse through videos of team members answering questions about what it’s like to work at the company, and they can also post questions of their own. CEO Alykhan Rehmatullah suggested that this serves as an “antidote to Glassdoor,” allowing employees to share their authentic opinions in a more controlled and positive way.

The Clear Cut

  • The Clear Cut offers a concierge service for consumers to design their own diamond engagement rings. The idea is to offer a personalized experience and product at significant savings compared to the big-name jewelry stores. Eventually, the company could expand into other types of jewelry.
  • kpiReady is building tools for startups and small businesses to track their most important metrics. It’s offering data collection as well as visualization — so it should be quick and easy to create presentations and reports about how the business is doing. Investors could also use this to track how the startups in their portfolio are doing.
  • Kyso allows users to share their data science models. That means data scientists have to spend less time building models from scratch every time they’re performing a new study. It also includes tools for visualizing the results of those models.
  • Loom Network is a blockchain infrastructure company. The goal is to help developers create “Twitter- or World of Warcraft-scale apps on top of Ethereum,” with an initial focus on bringing game developers onto the platform.
  • One Step Software is building patient monitoring software for sober group homes. This can help family members keep track of how residents are doing. And on an aggregate level, it helps the homes see which approaches are succeeding.
  • PathSpot has built a device that can scan restaurant employees’ hands and detect the pathogens that can cause food-borne illness. If an employee fails the scan, they’re asked to wash their hands and then try again. And the scan itself should only take two seconds.

Rootine

  • Rootine uses customers’ genetic data to create a daily regimen of nutritional supplements. These supplements are delivered in the form of “micro-beads” that can be added to foods like yogurt. The company already has 1,500 paying customers in Europe and is looking to expand to the United States.
  • Streamline Genomics aims to help clinicians and researchers use genomic sequencing. CEO Josette-Renée Landry said that 40 percent of patients with cancer would have received more effective treatment if their tumor had been sequenced. But while the cost of the actual sequencing has fallen, analyzing the “terabytes of data” remains a barrier. So Streamline’s software handles that analysis.
  • TypingDNA offers a new way to verify your identity, potentially replacing cumbersome two-factor identification methods like sending a temporary code to your phone. Instead, it analyzes the unique patterns of how users type. The company recently launched a Chrome extension.
  • Vertoe helps you store your luggage by leaving it at nearby businesses. If you’re checking out of an Airbnb, or if you’re heading to a concert or sporting event where you can’t bring a large suitcase, you can open up Vertoe, find a nearby location and pay just $5.95 per item per day. The company currently has more than 70 partner locations across New York City.

The Roadie 2 tuner ups your guitar game

The first Roadie tuner was a modern marvel. An automatic guitar tuning system, the little device connected to your phone to listen to your guitar strings and then set them to the proper tuning using an internal motor. The new model, the $129 Roadie 2, is even cooler.

I’ve been using the Roadie 2 for a few months now and I’m hooked. I was never a good player or tuner – my ear wasn’t quite right and even with tools I couldn’t get my guitars exactly in tune. Now, however, with the Roadie 2 I just place the winding end on the pegs and press a button. A quick pluck of the string and you’re tuned in seconds.

The Roadie 2 is completely self-contained and charges via USB-C. It has a built-in vibration sensor that can also asses the current string and change the tuning accordingly. The system also allows you to add multiple stringed instruments – you can set up profiles for your electrics and acoustics and even your banjo . You can also tune them to standard or even open tunings. The high-torque motor spins the pegs quickly and effortlessly and you can wind and unwind your instruments as well.

The team kickstarted the Roadie 2 last March and began shipping this year. I’ve been using it to tune my guitars since I got it and it’s worked quite well except for one unfortunate incident while winding – and overwinding – a kid’s guitar. An app included with the package lets you control the instruments and the tunings.

I know some guitarists can tune to the sound of overhead fluorescent lights and still others are OK with a quick listen to a digital tuner. I’m neither of those. The Roadie 2, then, is a godsend for those of us cursed to the never-ending torment of being really bad at guitar. At least now I can be really good at tuning.

Podcasting app Anchor can now find you a cohost

Fresh off its relaunch as an app offering a suite of tools for podcasters, Anchor today is rolling a new feature that will make it easier for people to find someone to podcast with: Cohosts. As the name implies, the app will now connect you – sometimes immediately, if people are available – with another person who’s interested in discussing the topic you’ve chosen.

The result is a more engaging podcast where a conversation is taking place between two people, rather than a monologue.

“We give people the ability to choose a topic that they want to talk about on their podcasts, and the product will get to work trying to match you up with someone who wants to talk about the exact thing,” explains Anchor CEO Mike Mignano.

At first, Anchor will try to match you with someone who’s also currently in the app, he says. If it’s not able to do that, then it will notify you when it finds a match through an alert on your phone.

“We’ve developed an intelligent matching system to make sure there’s a high likelihood that you get matched up with someone that wants to talk at the same time,” Mignano notes.

The topics users select can be either broad – like politics – or narrow and hyper-specific, the company says.

One you’ve been offered a connection to a cohost, you have 30 seconds to meet in the app and decide how you want to get started. The recording will then start automatically, and will continue for up to 15 minutes. Both users will receive a copy of the recording and can choose to publish it to their own podcast right away, or save it for later.

After the recording, podcasters rate each other with a simple thumbs up or down. (If down, you’ll need to select a reason in case Anchor needs to step in and review bad behavior. Bad actors will no longer be permitted to use the service.)

If both give each other a thumbs up, though, they’ll automatically be favorited on each other’s account, so they can find each other again. Next time they want to record, they’ll have the option to team up through Anchor’s “Record with Friends” feature, where there’s no time limit.

Those who are highly rated will also get better ranked in the matching algorithm, Anchor notes.

If a podcaster has a particular topic in mind – like wanting to discuss Stephen King novels, for example – Mignano continues, they’re very likely to return to the app when they get a match, the team found during testing.

The Cohosts feature was beta tested with a small subset of users prior to today’s launch, but the company declines to share how many users tested it or how many people are currently using the app to create podcasts.

However, the app’s big makeover which took place in February basically turned Anchor into a different kind of app – so it’s still establishing a new user base.

While before, the app was focused on recording audio, Anchor 3.0 is meant to be a podcasting suite in your pocket. The new version includes recording features with no time limits, a built-in library of transition sounds, tools for adding music, support for voice messages (a call-in like feature), free hosting, and a push button experience for publishing to share your podcast to all the top platforms.

Matching cohosts in teams of two may just be the start.

Mignano hints that a future version of Anchor may include more flexibility on the number of cohosts. “You can imagine us doing something like, if the user specifies the topic, they can indicate how many people they want to have a conversation with,” he teases.

The new feature recalls Anchor’s roots as a platform for social audio.

“It’s something we’ve been thinking about for a while, says Mignano. “If you think back to Anchor 2.0 – and 3.0, as well – we’ve always wanted to make Anchor a little more interactive than a standard podcasting platform. To us, democratizing audio doesn’t just mean making it easier to create. It also means modernizing the format by making it more shareable, easier to interact with, short form, etc.,” he says.

The Cohosts feature is rolling out today in Anchor’s app.

PullRequest pulls in $8M Series A just months after scoring seed round

PullRequest has been on a whirlwind lately, but it’s the kind that any startup would likely welcome. The company was in Y Combinator last August just trying to learn the startup ropes. By December it had scored a $2.3 million seed round — and it’s keeping it going. Today the company announced an $8 million Series A led by seed investor Google Gradient Ventures, who also led the seed round.

Today’s investment includes from participation from other seed investors too including Y Combinator, Fika Ventures, Lynett Capital and Defy Partners. That brings the total raised to $10.3 million in just a few months.

What is warranting such positive investor attention? PullRequest is working to solve a big developer pain point. As development cycles speed up, the part of the process that tends to suffer is code quality assurance (QA). As company founder and CEO Lyal Avery told TechCrunch last August, it’s using on demand reviewers to solve the problem.

“We offer code review as a service. As developers push code, we have on-demand experts that review it [before it gets published]. This allows them to move forward without resources constraining the operation,” company founder Lyal Avery told TechCrunch.

When the company got the seed round in December, Avery said the goal is to begin to bring an element of automation and intelligence to the platform and he recently said that the company is continuing the move in that direction.

In the age of big data leaks, Avery points out that his platform not only finds bugs and issues in the code, it could help prevent data leaks like the ones we’ve seen lately from Under Armour and others (they are simply the flavor of the week). In fact, he claims they have found vulnerabilities that prevented such leaks recently (although he wouldn’t say who the client was for obvious reasons).

Anna Patterson, managing director at lead investor Gradient Ventures, sees a powerful combination in on-demand and code review. “PullRequest is working at the intersection of better code and the future of work – leveraging AI to make code reviews more accessible, so that enterprises, of all scales, can adopt this methodology,” she said in a statement.

Code review and bug tracking remain a hot startup area as companies struggle to fit this kind of review into increasingly fast development cycles. Back in the day, it was easy to include QA in the development workflow because timeframes were so long. As the timeframes become more and more compressed, a company like PullRequest is filling in the gap — and investors are noticing.

Exit scammers run off with $660 million in ICO earnings

A Vietnamese cryptocurrency company Modern Tech launched an ICO for its Pincoin token, raising $660 million from approximately 32,000 people. The company first ran the Pincoin ICO, promising constant returns to investors, and then launched another token, iFan (a social network token for celebrities). Picoin investors first received cash from their investment and then the team began paying out rewards to Pincoin investors in iFan tokens.

Then the team disappeared.

This so-called exit scam could be that largest in recent memory and is also indicative of what’s to come in the ICO space. The team of seven Vietnamese nationals seem to have left the country while scammed investors massed outside the company’s old headquarters.

From Tuoi Tre news:

In fact, the real mastermind behind these projects is a team of seven Vietnamese nationals, who have held different conferences in Hanoi, Ho Chi Minh City and even remote areas to lure investors.

Investors have been told that they would enjoy a profit rate of 48 percent a month from their initial investment, and recoup all investments after four months. People would also be rewarded with an eight percent commission for every new member they have introduced to the network.

Pincoin was particularly unique in that it offered bonuses for bringing other people into the program, a tactic that might sound familiar. The scammers paid out in cash until January when they began sending iFan tokens. Then, last month, the team vacated their fancy offices leaving only an oddly well-made – if incomplete – website in its wake. Taking a closer look at the site we find a model of obfuscation. The mission – “The PIN Project is about building an online collaborative consumption platform for global community, base on principles of Sharing Economy, Blockchain Technology, and Crypto Currency” – seems on par with other pie-in-the-sky solutions but there is no mention of any founders or advisors and even their fancy, multi-lingual white paper, has no clear founder information. In short, the team paid a great deal for a very nice website and convinced thousands of people it was legitimate.

According to Viet Bao, a team consisting of Bui Thi My Ngoc, Ho Phu Ty, Ho Xuan Van, Luong Huynh Quoc Huy, Luu Trong Tuan, Nguyen Duc Trong, Nguyen Trung Hieu, and Vu Huu Loi led Pincoin and iFan from zero to multi-millions in a few months while claiming they were representing products from Singapore and India. “To formalize the mode of operation, ifan and Pincoin authorized their company as legal representative in Vietnam with tax code 0314707223. Modern Tech then held the event in Ho Chi Minh City Minh and Hanoi to raise capital from investors,” Viet Bao reporter.

One interesting bit of chicanery is this screen from the iFan page. Near the middle of the page we find information that the token is based on the Ethereum platform. The page shows the price and rating of the cryptocurrency, suggesting that the Ethereum is directly related to the iFan price.

And this popped up when I visited the project’s white paper:

Again we find that the current, unregulated, ICO market is the most interesting system for parting fools from their money in recent history.