Sramana: How much revenue did you generate in 2008?
Phil Fernandez: We did $400,000 of subscription revenue.
Sramana: How many customers did you have?
Phil Fernandez: We had acquired 70 customers by the end of that year.
Sramana: You had a very nice upselling pipeline developing during that time.
Phil Fernandez: Exactly. We were up and running right away. We used our own product and technique to drive new prospective buyers.
Sramana: Would you advise other SaaS companies to focus on getting a larger number of smaller sized deals or a smaller number of larger-sized deals?
Phil Fernandez: A larger number of small-sized deals. I use the term velocity for these businesses. Marketo was all about having people ready to buy the moment we launched. It is also about increasing the number of customers every month as quickly as possible. We are selling a pricey product. You have to adjust the numbers depending on the product and the nature of the industry you are competing in.
Regardless of where you are on that curve I am a believer that you have to drive velocity in today’s market. You need a lot of SaaS customers. In the early days we focused on any customer. We wanted the revenue machine moving. In 2009 we acquired 150 customers, and we did $4 million of recurring revenue.
In 2010 we were prepared to start going into the larger enterprises. We took our sales team that had been primarily selling to smaller customers and we built a parallel sales team to target some of the world’s largest enterprises. We gave our sales team slightly different commission structures and by that time our product had matured. We were ready to go after larger, more demanding customers.
While we did focus on scaling up that second line of businesses in 2010, we did not stop developing our smaller businesses. That thought never crossed our minds. That is what velocity business is all about. We continued to have great growth in 2010. In March of this year, almost two years after we entered the market, we announced our 1,000th customer. That is faster than Salesforce.com earned their first 1,000 customers, but we are in a different era.
Sramana: I have huge respect for Salesforce.com because they paved the way for everybody else.
Phil Fernandez: Whatever [founder Marc Benioff] spent to get there, probably $400 million, a good portion of that is money that I did not have to spend.
Sramana: The Internet has penetrated business so much more today that it makes life a lot easier. In 2000, the Internet penetration was not as significant. Building SaaS companies today is a lot easier than it was 10 years ago.
Phil Fernandez: I agree. It is a totally different ballgame.