Tuesday, September 19, 2017

Cloud Europe 2017: The Factory is Cranking

Recent SaaS trends and the Accel Euroscape of the 100 most promising companies in Europe and Israel

This article was co-authored with my colleague Pia d'Iribarne and published initially on Tech.eu. Findings were presented at Cloud Europe, an Accel and Salesforce event gathering the top 100 SaaS companies in Europe, in conjunction with SaaStock 2017. You can see the full presentation here -

Europe is fertile ground for Software-as-a-Service (SaaS) companies, as shown in our comprehensive look at SaaS last year, “SaaS Wars – Europe Awakens”. Since then, momentum has only accelerated, and we’ve published a fresh edition of the top 100 European SaaS companies in conjunction with SaaStock 2017.

But, first, let’s take a look at the overall health of the SaaS industry.

12 cloud IPOs in the past 2 years: One from Europe 

SaaS companies are thriving in the public markets, with their aggregated market cap grew 350% since 2011, and 12 cloud companies going public in the past 24 months. These 12 have performed well, with an aggregate $2.6 billion in revenues (growing 39% year-on-year) and $25B of market cap. Compared to Salesforce, the industry leader, the stats were not too dissimilar over the same period: its market cap grew by $19B and its revenue increased by $3.3B.

Looking closer at the 12 companies, we can conclude that it takes a $100m+ revenue run rate and 30-50% growth to go public in the current environment, even if several companies like Atlassian and Cloudera waited to reach $300M+ revenues before going public. However, the companies’ annualised free cash flow showed a big variation, ranging from -$100M for Box and Cloudera to +$100M for Atlasssian.

 Out of the 12 IPOs, Mimecast is the only company from Europe. However, as Europe’s SaaS acceleration began in 2013, and given that the median time to IPO from this group is 10 years, it will take time before we see a meaningful geographical change in SaaS IPOs. 

A healthy funding environment and momentum in Europe 

Like the public market, the private funding environment is still at an all-time high in 2017 with an annualised investment rate of $8.4B in the US, $2.6B in Europe and $0.9B in India. Europe and India are growing particularly quickly, and investment more than doubled from 2015, while the US is up 20%. 

The pace of SaaS company creation in Europe is growing even faster, up from 200 companies in 2008-10 to 670 in 2014-16. Our investments in the space have followed suit. We’ve invested $2.3B in SaaS companies globally. In 2010, 4% of this funding was going to European SaaS companies, while it’s over 40% this year.

With a more mature SaaS market and more late stage companies, the US is posting record late stage funding rounds with Dropbox raising $600M, Slack $200M and Qualtrics $180M in the past 18 months. Funding in Europe is healthy but reflects the market’s earlier stage. The largest rounds include Algolia with $53M, Collibra and Showpad with $50M each and CallSign with $35M.

The Accel Euroscape

With a positive environment fuelling the market, this year we extended our research for the Accel Euroscape, the 100 most promising SaaS companies, to look at over 1,000 companies across 12 countries and included a new category, Security:

Note: to create the list, we ranked each company by a set of criteria including market attractiveness, level of technology differentiation, strength of the team and initial traction (monthly recurring revenues and growth in number of employees). Nothing is perfect, and we might have missed some great companies. Your feedback is welcome!

Overall, these 100 companies illustrate how the European market is maturing. They have raised $3.4B in total, of which $1.8B or 53% was in the last two years alone. Close to 60% of them have raised more than $15M, and 22% have raised more than $50M, including Algolia, Collibra, Doctolib, Qubit and Showpad. From a revenue standpoint, 58 companies have already crossed the $5M per year mark and 29 are $15M+.

From a geographic standpoint, the UK and Israel lead the pack with 20 companies each, followed by France with 18 and Germany with 8. The remaining companies are fragmented across Europe, showing that great SaaS companies can emerge from any city on the continent. From a funding perspective, Israeli companies have raised on average more than their British (-48%) and French (-160%) counterparts at similar stages. 

Comparing the list to the top 300 leading SaaS companies in the US, some interesting trends emerge:
  • Europe is showing strength in data/ analytics and security, driven by the booming ecosystem in Israel but is less represented in developer/infrastructure and vertical applications.
  • The EU/US funding gap still exists, especially at the seed stage ($1-2M raised on average in Europe vs. $5M in the US) and series B ($20M raised on average in Europe vs. $37M in the US).
  • In terms of funding efficiency, leading European companies appear to be more efficient than their US counterparts. We looked at capital required to reach $10M Annual Recurring Revenue and saw that European companies required $7-15M to get there while US companies required $15-20m.
  • In addition, fast-growing US and European companies are reaching $10M in revenue in similar time periods. Whether Algolia or Twilio and Duetto or Doctolib, they took 1-2 years.
EU Companies: Blue Lines - US Companies: Black Lines

Crystal ball: What the future holds

With the European SaaS landscape moving fast, we’ll continue to see it evolve and believe there are five trends that will define the next crop of fast growing SaaS businesses:

  1. AI and Automation-driven productivity: The next generation of AI-driven technologies to improve backend processes is now coming of age, and is seeing fast adoption from Fortune 500 companies redesigning their processes. Large System Integrators are developing dedicated practices to drive this change. Promising companies in this segment include Robotic Process Automation vendor UI Path and process mining software startup Celonis.

  2. The rise of the SMB engine: The past few years have demonstrated that companies focusing on the SMB segment can become very valuable businesses – both as public companies, with Shopify reaching $10B market cap and Xero, Wix and Hubspot in the $2-3B range, or through M&A, with Netsuite acquired for $9.3B, Constant Contact for $1.1B and Intacct for $0.85B.

  3. APIs and Microservices-driven infrastructure: Given the increasing need for agility and scalability, micro-services and APIs are taking over infrastructure, and we can expect more companies to emerge in this area, providing API-driven functionality (like hosted search engine API Algolia) or helping to manage this next generation of infrastructure (like Application Performance Management solution Instana).

  4. Vertical applications: With the SaaS market in Europe maturing, we expect to see this category develop, and a new generation of services driven by mobile and AI to emerge, such as Shift Technology in insurance, Doctolib in health, Mambo in finance and Mirakl in retail.

  5. Compliance and security: With cyber threats on the rise, the need for security and compliance platforms has never been so acute. One of the challenges businesses face is how to enforce security without complicating the ease of use to the point that it becomes a hindrance to productivity. One pioneer is CallSign, which has developed an adaptive authentication platform, getting rid of passwords.

Sunday, April 09, 2017

Accel SaaS 100 Europe 2017: Calling the Leaders

Nominations are now open for the 2017 edition of Accel SaaS 100 Europe, the list of the top 100 leading SaaS companies emerging from Europe & Israel.

Last year, after many months of research, we published alongside our Article “SaaS Wars: Europe awakens” the first list of 100 leading SaaS companies from Europe & Israel, in conjunction with SaaStock 2016, the first large scale SaaS event taking place in Europe. In front of the enthusiasm raised by the post and the conference, we have decided to renew the initiative this year and update our Top 100 for 2017. We will even go further and invite the founders of the Top 100 companies to a unique half-day event organised by Accel in partnership with SaaStock 2017, on Monday September 18th, right before the start of the conference. 

This past year’s winners have raised a combined $2.5 billion to redefine industries on a global scale. They include Trustpilot, Intercom, Doctolib, Showpad, Zerto, Algolia, Qubit and Typeform among others. To compile last year’s list, we screened more than 1,000 companies across 12 countries in Europe, met hundreds of them, and spoke with dozens of entrepreneurs & investors from the SaaS ecosystem. Nobody is perfect - we know we might have missed some amazing companies, so this year we are opening up the entry. 

Do you think you are ready to join the ranks of Europe & Israel’s most promising SaaS Leaders? If so, it is easy to apply, just fill the official nomination form here. Feel free to also refer any other company you think should be on this list. After you submit your nomination, use the hashtag #AccelSaaS100 and tell the world why we should pay close attention to your nominee.

The nomination submission deadline is June 15th 2017 and we will announce the final list on September 18th. 

Stay tuned as we release more information and we look forward to hosting the companies shaping the future of SaaS in Dublin in September!

The Accel Team

Thursday, October 20, 2016

Global Expansion: 8 Tips to Make Your Next Acqui-Hire Successful

As an investor, I’ve sat on both sides of the table in more than a dozen acqui-hire situations. Companies that successfullyleverage acqui-hires can save years of work and gain a competitive advantage by adding skilled technical and operational talent, deep local market knowledge and an accelerated time-to-market.

However, not all acqui-hires are created equal, but there are numerous pre-deal considerations to ensure post-deal success. Here are eight tips I’ve learned from the trenches.

Acqui-hire Tip 1: One Vision, Same Values
Both the acquiring and acquired teams need to share the same vision and values. The two teams must work closely and effectively together in order to be successful. “What matters most is the personal and professional fit between the two teams. They should ideally share the same goals, business and company cultures.” (Olivier Bremer, founder of PostoInAuto – acquired by Blablacar)

Acqui-hire Tip 2: Crystal-Clear Roles
Define clear roles at the outset to avoid any misunderstanding or redundancy. This starts by deeply understanding the attributes and behaviors of the other company. Micro-managing a highly entrepreneurial and innovative team, for example, can cause animosity and frustration. Be certain that both parties understand how the acquired executives and employees will fill key roles within the larger organization. Acqui-hires work well when the acquired team continues to run the business or business functions with relative autonomy. “Being clear about the future roles of an acqui-hired team is key to post acqui-hire integration.”  (Piotr Jas, founder of a Polish ride sharing company acquired by BlaBlaCar)

Acqui-hire Tip 3: One Big, One Small
Size matters. The larger the size differential between the two companies, the easier the acqui-hire will be. It’s more difficult when companies are of relative equal size, and the main variant is one company’s cash on-hand. The smaller the size difference, the more conflicts emerge around products, leadership, best practices, etc.

Acqui-hire Tip 4: Equity is King
You must agree to an incentive structure that motivates the founders and key executives within the company you acquire. This is paramount to make sure they remain invested in the success of the company at large. An acqui-hire is not a cash-out event. Use equity and options to incentivize and reward these new team members. Determine the amount relative to the value of the businesses – prioritize options over equity as motivation to stay.

Acqui-hire Tip 5: Global Incentives
The right approach is to allocate options and shares of the global company rather than the subsidiary where the acqui-hired team operated. Here’s what it is important to align incentives on the overall success of the company:
  • Growth within a country is linked to the amount invested in the region, which the acqui-hired team does not control and may change over time.
  • Team roles will evolve, including those from the acqui-hire. You will have to renegotiate incentives if and when roles evolve in tandem with the company’s growth.
  • Finally, it is hard to define the relative value of a specific country vs. the overall company. When an exit comes, determining the respective value of each part has a high chance of creating conflict at a time when all the team needs to work closely together to make the exit happen

Acqui-hire Tip 6: Avoid Hidden Liabilities
Understand tax liabilities. There are two common acquisition structures: option-A) asset purchase: the preferable option where the acquiring company buys only the assets; option-B) company purchase: acquiring company buys both the assets and liabilities. Option-A is usually faster and safer, as you will not take on any hidden liability, which may arise in the future. However, it can trigger tax liabilities for the founders/investors of the acquired company. If you must take option-B, conduct thorough legal due diligence to avoid future liability surprises.

Acqui-hire Tip 7: Keep it Simple
Acquiring a company with a complex equity structure (i.e. many angel investors) can lead to a large administrative burden that slows decision-making. Offer angels cash or options, which can be only exercised at expiration (typically 10 years) or an exit. This way they benefit from the full economic value, but are not shareholders. If this is not possible, you can group them into a Special Purchase Vehicle (SPV) with only one signatory.

Acqui-hire Tip 8: One Brand to Rule Them All
A global brand offers significant synergies, so make sure acqui-hires rebrand quickly. BlaBlaCar rebranded all local brands into one unified international brand, including their initial market, France: “A single brand offers clarity and consistency for customers and employees. The parent brand should have a brand on-boarding process to streamline the transition, while creating a strong, unified and identifiable global brand experience.” (Frederic Mazzella, founder of Blablacar)

 Account for these factors, but understand that every company and situation is different. The founders and executives from both parties must be diligent and transparent, and leave nothing to question. I hope these learnings will influence your thinking in your quest to go global, and as always, share your thoughts, feedback and questions with me here or on Twitter (@pbotteri).

Tuesday, September 20, 2016

SaaS Wars: Europe Awakens

Accel Euroscape: The 100 most promising Software-as-a- Service companies in Europe and Israel

-This article was co-authored with my colleague Pia d'Iribarne and published initially on Tech.eu. Findings were presented at SaaStock 2016 and you can see the slides here-

Software is eating the world, and Software-as-a-Service (SaaS) is eating software. Global SaaS revenues are expected to grow by $19 billion in 2016, an increase of 22% from 2015, while traditional software revenues are shrinking by $10B. Two dollars in SaaS revenues are created for every $1 of software revenues eaten – an impressive stat, but where does Europe stand on the global SaaS map?

Rising tide

When I was in Silicon Valley, I spent most of my time investing in SaaS companies. When I moved back to Europe in 2011, I had to reduce my activity significantly in this area, as there was not enough going on. Five years later, the picture has changed drastically: five of Accel’s 10 most recent investments in Europe have been SaaS companies. SaaS in Europe is exploding in terms of both quantity and quality. Our analysis estimates that the number of SaaS companies created has grown 4x between 2007-09 and 2013-15, and the amount raised by European SaaS companies has more than doubled. 

As it takes around 10 years for a SaaS company to reach maturity, the explosion we are seeing at the early stage has not yet translated into a significant number of exits. To date, there have been only four major European SaaS exits (all IPOs), including QlikTech in 2010, Wix in 2013, Zendesk in 2014 and Mimecast in 2015. The combined market cap of these companies today is around $9B. By comparison, the US has seen around 60 SaaS IPOs with a combined market cap of close to $140B ($50B of this is Salesforce).

The Accel EuroScape

To better understand the new generation of SaaS companies, we took a systematic look at more than 1,000 SaaS startups across 12 countries to create the “Accel EuroScape” – a list of the top 100 most promising SaaS companies in Europe and Israel:
Note: to create the list, we ranked each company by a set of criteria including market attractiveness, level of technology differentiation, strength of the team and initial traction (monthly recurring revenues and growth in number of employees). Nothing is perfect, and we might have missed some great companies, so please send us any additional companies to saas@accel.com

These 100 companies have raised a combined $2.5B and 85% of the $900M that went into European SaaS companies in 2015 alone. Twenty-eight of them have raised more than $30 million in total, while Trustpilot, Intercom, NewVoiceMedia and Zerto have raised above $100M. This concentration of capital in a limited number of champions will hopefully pave the way for a good number of IPOs in the coming years.

From a geographic standpoint, the top three regions for SaaS companies are the UK, France and Israel, with around 20 logos each in our top 100. Perhaps surprisingly, despite all the hype, Germany only has eight companies on the list. Across the rest of Europe, SaaS is still very fragmented, but every single country, big or small, has the potential to generate a champion. Take Denmark, where the passion of Peter Holten Mühlmann has made Trustpilot the online standard for customer experiences.

When these 100 companies are compared to a similar list of 300 US SaaS companies, a few trends emerge:
  • Marketing is the leading SaaS industry in Europe – 22% of the companies vs. 13% in the US. It’s interesting to see Europe overweight in this area, and the reason may be that several marketing start-ups in various European countries are going after the same problem – A/B testing is a good example. This creates small country leaders rather than global businesses and leads to a very fragmented market.
  • Europe is underrepresented in vertical SaaS solutions – 17% of the companies vs. 23% in the US. Vertical solutions are typically a sign of a more mature ecosystem. In Europe, a range of vertical SaaS companies is beginning to emerge, and it's likely to catch-up in the future.
  • From a funding standpoint, European SaaS companies have raised on average 30-40% less capital than their US counterpart at a comparable stage. Even with the difference in cost base (engineers in Europe are cheaper than in the Valley), the funding gap has not been closed yet, and European companies have less firepower than their US counterparts on average. That said, with 28% having raised more than $30M and a handful more than $100M, the funding they have received is enough to help them reach significant scale.

Building European Champions

Taking a step back from the categories on this map, two main types of European and Israeli SaaS champions emerge. 

The first is the B2B global platform play, such as Algolia, the search-as-a-service API Nicolas Dessaigne and Julien Lemoine have built out of Paris. Like other technology infrastructure businesses, search is a truly global opportunity, and these companies need to bring their fight to the US early, as its size makes it the most strategic market. For example, half of Algolia’s initial customers where from the US. While breaking into the US can be a challenge, Europe has the engineering talent to build world-class companies. Take Intercom as an example; the combined design and technology skills of Des Traynor and Ciaran Lee have allowed it to shine in the very competitive field of customer communication. 

The second type of company is the local SaaS champion with a solution connecting businesses to consumers. The consumer marketplace creates a winner-takes-all dynamic, which opens the door to grabbing massive market share. For example, two software companies are emerging in Europe for doctor booking management, Doctolib and DocPlanner. 

Crystal balling

Looking back at the growth of SaaS ecosystem in Europe over the past five years, I am very excited about what will happen in the next five. A number of companies in our EuroScape have the breakout potential to be tomorrow’s global leaders and put Europe firmly on the Global SaaS map.

But, the story does not stop there. If SaaS is eating software, Artificial Intelligence is starting to eat SaaS. It’s early days, but legacy SaaS applications will be disrupted by a new generation integrating Artificial Intelligence and machine learning technologies. A good example is Shift Technology, which is applying AI to fraud detection in insurance. Founder Jeremy Jawish gave me a striking example of the power of its AI engine: would you think that someone filing a claim for a car accident the day after subscribing to a policy is a fraudster? In most cases this would be true, but not if the driver just got their license. No insurance claim investigator could figure this out, but Shift’s AI engine did.

Monday, August 15, 2016

Tuesday, July 05, 2016

The Magic of Acqui-Hire in Europe: Learnings from Blablacar

Most startups fail at getting a new country off the ground. This is why Unicorns are such a rare breed. Fortunately, a happy few have succeeded at finding this magic formula, like the team at Blablacar and turned it into a competitive weapon. One of their secret: acqui- hiring. 

This is my second post on international expansion. If you wonder how to pick your next launch country first, see my earlier post here.


One of the most important decisions any company of any size will make is how it will successfully launch operations in a new country (the following applies to launching in new cities or states within an existing country). For early stage companies, the stakes are even higher, and finding a great country manager is the single most important element of a successful launch.

The most common solution is not necessarily the easiest, where companies hire a manager with expertise or a network in the chosen country, and enable him or her to hire a team of two or three people as support to get started. However, an experienced leader is extremely difficult to find and the risk of failure is high. Alternatively, companies will “spin-off” an existing core team member to lead the launch. While this is a good option, it can be difficult to implement because this person must meet important criteria like language fluency, geographic familiarity and more.

Fortunately, there is another, proven strategy, which I will expand on here – the acqui-hire.

Lessons from Acqui-Hire Success Stories

The best example of launching and expanding in new countries via acqui-hire can be found in Paris-based BlaBlaCar, Europe's top ride-sharing company with 16 offices worldwide. As, I was about to lead Accel’s first investment in the company, I began building a list of all the start-ups operating in a similar or adjacent space. Among them was a small company of two people in Italy called PostoInAuto (at the time, BlaBlaCar had only launched in France and Spain). PostoInAuto’s founder, Olivier Bremer, was terribly talented, but his business was not at a point where he could raise a significant investment.

As our investment in Bablacar was ready to close, I again reached out to Olivier to gauge his interest in joining the BlaBlaCar team – strong leadership, significant funding and the opportunity to retain total freedom to build the service in Italy. He was intrigued, so I connected him to BlaBlaCar’s founders who convinced him to join the adventure shortly after. Within four months, Olivier re-launched his service under the BlaBlaCar brand in Italy, and today BlaBlaCar is the dominant service in the country. Olivier went on to lead the company’s launch in Germany given his dual German/Italian background, and currently leads the business in both countries.

"There were many reasons why I decided to join forces with BlaBlaCar: we shared the same long term goals; I could feel a very good fit with the founding team; my company was early stage and by joining BlaBlaCar” said Olivier Bremer, BlaBlaCar GM Germany and Italy. “I was empowered to continue doing what I had been doing, but with a much larger budget and support from a team that shared my same passion.“

Learning from the success of this initiative, I introduced the BlaBlaCar team to companies in Poland and Russia, which have also been very successful acqui-hires.

Making an acqui-hire successful

If successfully executed, combining resources from an acqui-hire will save years of work while broadening the technical and talent bench. But, this is a highly emotional process for the acqui-hired team. Therefore, it is very important to set the right rationale and motivation to ease the process.

“Like any successful partnership, the acqui-hiring and -hired companies must fully align in terms of strategic goals, operational processes and culture. Both sides must trust the other and commit to a shared vision,” said Piotr Jas, BlaBlaCar GM CEE. “Both companies need to actively learn from one another throughout the diligence process, and maintain an open and honest line of communication in the early days of the expansion.”

Like any relationship, the responsibility for success is shared. The acquiring company must find a team with the skills and passion to accelerate growth exponentially.

“Being acqui-hired can be seen as a ‘fundraising++’ because the local team receives money to expand faster (like any fundraising) and a robust and proven product and tech platform. It also receives access to ultra-relevant experience in their field, fast-growth methods, tailored customer support – provided by HQ in our case –, a strong international brand with related communication methods and positioning,” said Frederic Mazzella, BlaBlaCar co-founder. “Thus it is not only about the money.”

Since its acqui-hire of PostoInAuto, BlaBlaCar developed a team that scouts potential acqui-hire opportunities across the globe. While it’s not possible to find strong acquisitions opportunities in every country (the launches in India and Turkey have been organic), it remains a key element of its fast global rollout.

The interesting element of the acqui-hire strategy is that it does not require a lot of upfront cash to implement relative to the resulting growth (assuming proper diligence ahead of time).

“We acquired three companies in short amount of time and each time I re-used the same term sheet template. Most of the consideration for these deals was equity and options, so cash is not a requirement. To be successful, you need to have the right skills and having someone in the core team with M&A or venture background helps a lot,” said Nicolas Brusson, BlaBlaCar co-founder.


Today, more than 50% of BlaBlaCar new members are coming from acqui-hires – an impressive ratio proving the effectiveness of the approach.

While this is one example of many across our portfolio and beyond, the acqui-hire strategy remains consistent and taps into a set of best practices, regardless of country: find great talent, maintain great culture and clearly communicate strong values across each local teams.

Friday, May 20, 2016

Brexit: What Start-ups Need to Know

In 30 days, on June 23rd, UK voters will be asked a simple question: 

“Should the United Kingdom remain a member of the European Union or leave the European Union?”

I hope the answer will be "Stay" - currently the betting odds are 1:5 for "Stay" and 10:3 for "Out", so the odds are clearly in the "Stay" camp. But who knows? The interesting part about this vote is that voters will not have a clear picture of what a Brexit actually means, since the post-Brexit UK/EU relationship will have to be negotiated after the referendum.  If the "Out" vote succeeds, it will trigger a 2-year notice period during which the negotiations will take place.  

I worked with my colleague James Cameron to look at the potential outcomes and in particular how it would impact start-ups in the UK and Europe and we put together this short post.

Three key areas will be on the negotiation table:  

  1. Trade terms and the extent to which the UK can still access the EU single market
  2. UK control over EU immigration
  3. How EU regulations will continue to impact the UK
All are interrelated and there will be trade-offs between all three. 

The likely options
Neither the major parties nor the "Out" campaign have released proposals for the UK’s future after a Brexit –so we can only speculate based on other models that currently exist: 

Option 1:
The Norwegian model
Option 2:
The Swiss model
Option 3:
The Turkish model
Option 4:
WTO rules
Out of EU, but still in EEA (e.g. like Norway, Iceland). Preserves access to the EU single market for most trading sectors, but most EU-derived laws remain in place.  Free movement still applies.
Out of EEA, but the UK would negotiate access to the single market, sector by sector.  Example - Switzerland has 129 different bilateral trade accords with the EU, but must accept free movement of people and still pays fees to the EU.
Outside EEA, but with a negotiated customs union.  In Turkey’s case, it doesn’t pay fees to the EU and there is no freedom of movement.

Simply rely on WTO rules for access to the EU market.
The situation would be very similar to what we have now, but the UK would have reduced power to influence the rules that would apply domestically.  This solution may appease ‘Out’ voters’ desire for more sovereignty - but is arguably an unattractive result for both sides.
This model could give UK more latitude to negotiate preferred deals in certain areas. However, the EU think the current situation with Switzerland is unsustainable, and many commentators think it’s unlikely they will accept a similar deal for the UK.
The Turkish customs union covers only goods, not services or finance, so a similar deal for the UK would deny the UK access to a big part of the single market.
This is a fallback option would give the UK more sovereignty at the price of less trade and a potentially big fall in income.

A Fifth option?
  • A fifth option that is advocated by ‘Out’ proponents is to negotiate a special deal for Britain alone that retains full access to the single market without observing all the EU’s rules (including freedom of movement) or contributing heavily to its budget (i.e. a form of ‘EEA lite’). 
  • Whether the UK will be able to negotiate such a deal comes down to the relative bargaining power of the two parties.  The Leave camp believes that UK will be in strong position since it is the 5th biggest economy in the world.  However, the Remain camp notes that it is the relative size of the market that matters most - the EU is half of Britain’s export market, whereas Britain would be only 10% of the EU’s. 
  • Ultimately, in a post-Brexit with a potentially hostile EU, we can expect that it will be extremely hard to secure as favourable a trading relationship as the UK enjoys at present, especially if it insists on curbing free movement of people. 
Possible impacts on the UK tech ecosystem
  • Skilled labour migration:  This is probably the biggest single concern for the UK tech scene. Restricting free movement will need to be negotiated if the UK wants to keep favourable trading terms post Brexit, but given immigration control is central to the Out campaign, we should expect the UK to push for at least some restrictions on free movement.  Many in the Out campaign want to design a system that will favour immigration from skilled migrants regardless of origin (the ‘Australian model’).  This may be workable in the longer term, but at least in the short-to-medium term we should expect a Brexit to trigger a sharp drop in the number of available skilled immigrants from the EU, which would be highly detrimental to the UK tech ecosystem. 
  • Existing immigrants: Any EU nationals that are already in the UK pursuant to the existing arrangements should be unaffected.  Under the Vienna Convention on the Law of Treaties they cannot be removed from the UK unless the countries agree otherwise – which is unlikely.
  • Financial services: Unless UK remains in the EEA (i.e. the Norwegian option), the European passporting rules for financial services will no longer apply to UK firms after Brexit.  This will impact any UK companies operating regulated financial services in Europe or vice-versa.  
  • EU R&D funding: UK is the second largest recipient of EU research and innovation funding (expecting £2bn in the next 2 years – roughly 20% of the total science budget allocated by the UK gov).  Most has gone to university R&D programmes, but at least 15% typically goes to startups/SMEs. This funding will likely no longer be available after a Brexit.   
  • Data privacy: On a Brexit, the EC must decide whether to designate the UK as a 'safe third country' for data. If it didn’t, personal data transfers to the UK could be restricted – similar to the US. 
  • No Digital Single Market:  A Brexit will most likely mean that the UK firms are excluded from the proposed digital single market – a basket of regulations that expect to be implemented between now and 2018 to streamline EU copyright applications, streamline VAT payments for digital goods, harmonise ecommerce rules and abolish EU roaming charges, amongst other things.
  • Currency impact:  The pound will almost certainly continue to suffer a sharp sell off in the wake of a Brexit vote – which will benefit any UK based startups that sell globally, at least in the short term.
Possible impact on the broader economy

Base case
Upside case
Downside case
Similar to Norway or Switzerland - the UK maintains deep and wide trade relations with the EU after leaving the bloc, but continues with many of the laws and regulations that are currently part of EU law (inc. free movement).
UK negotiates more favourable trade terms with the EU and is able to quickly put in place favourable terms with other key countries.  At the same time, the UK gets more control over immigration and finds an immigration solution that does not restrict flow of skilled labour. 
Drawn out negotiations, with UK eventually trading controls over immigration for much weaker access to the single market.  At the same time, UK finds it difficult to sign beneficial trade deals with other countries.
The impact on the broader economy over the long term may be neutral, but we will likely still see a period of volatility and low investment with the risk of a run on the pound.  Sovereignty will be re-established, but in practice UK will be subject to regulation without representation.
Most commentators discount the likelihood of this scenario heavily – it will be very difficult to secure as beneficial trading relationship outside the EU as it enjoys at present, especially if it insists on curbing free movement of people.
Britain receives less inward foreign direct investment, fewer skilled immigrants, and does not improve the regulation of the economy.  The tech ecosystem is disproportionately impacted by the reduction in skilled immigration.

Broadly neutral (between -0.8% and +0.6% of GDP by 2030 according to OpenEurope)
Moderately positive (+1.6% of GDP by 2030 according to OpenEurope)
Strongly negative (-2.2% of GDP by 2030
according to OpenEurope)

Expert views on the outcome
  • In one of the most comprehensive polls of experts done so far (an FT poll of >100 economists in Jan 2016), >75% thought Brexit would adversely affect the UK’s medium-term economic prospects, only 8% thought Britain’s economy would benefit.
  • “There are few issues that unite UK economists but Brexit is one of them: they overwhelmingly believe leaving the is bad for the country’s economic prospects.”  Financial Times

30 more days before we know...let's hope the "Stay" will prevail!

Tuesday, February 23, 2016

Killer SaaS Pitch: the Video

25mn presentation of the "Killer SaaS Pitch" at the Accel "We Love SaaS" event in Paris in front of 200 entrepreneurs. Thanks to The Family for hosting us!

Tuesday, January 19, 2016

Why do I invest in SaaS?

I was recently interviewed by the team of eFounders, the new Parisian SaaS start-up incubator founded by Thibaud Elzière (Fotolia) and Quentin Nickmans. They are running a series of interviews of European VCs investing in SaaS and I was lucky to be the first one.

Accel SaaS portfolio
  • Europe: Algolia, Doctolib, PeopleDoc, Qubit, CartoDB, Prezi, KDS
  • US: Slack, Dropbox, Docusign, Squarespace, Cloudera, Qualtrics, SumoLogic, RelateIQ, Dealer.com, Responsys, Coremetrics, HasOffers, Airwatch, Xero, Invoice2Go
  • Asia: Freshdesk, Atlassian
SaaS trends I like 
  • “SMB Operating System”
  • API-driven products
  • Vertical SaaS
  • Enterprise mobile-driven services (like Docusign)

What I look for in SaaS companies
  • Passionate founders
  • Differentiated product addressing a very large market opportunity
  • SaaS metrics, → the “5C” of SaaS finance (CMRR, CAC, Churn, Cashburn and CLTV) completed by an additional “3Cs”: Cohorts, Clients concentration, and Country breakdown
Why do I invest in SaaS?
I began my career at McKinsey and when the Internet bubble burst in 2001, I made a shift towards online software (ASP at the time). From then on, I remained convinced that SaaS was a much more efficient model, for both ISVs and customers — although many people remained skeptical on the viability of the model for a long time. Even in 2006, when I joined Bessemer Venture Partners, there was still a lot of skepticism in the Silicon Valley around SaaS (one of my first blog post in 2006 was titled: “Why I disagree with Tony Zingale — CEO of Mercury Interactive — on the future of SaaS"). My SaaS focus at Accel Partners is the natural continuity of this path. Today is a very interesting time for the SaaS industry: Europe has shown it was capable of creating successful SaaS businesses, and it’s only the beginning.

What makes a good VC for a SaaS startup?
SaaS startups need to have a VC that understands the SaaS model, including market development strategies, upsell dynamics, sales incentive plan, etc. They also need VCs capable of financing their entire life cycle — on average, SaaS startups raise between $80 and $100 million before an IPO. Lastly, SaaS startups can only thrive if they become leaders in the US. As a consequence, they need a VC that has a strong international network and can help them develop their go to market successfully in the US.

What investment trends do I foresee for 2020 in the SaaS industry?
  • More and more champions will be built out of Europe.
  • The SaaS infrastructure will become increasingly more driven by APIs: developers will use more API driven services like Algolia or Segment to reduce time to market and focus their dev resources on the part of their product which differentiate them.
  • Mobile will drive new use cases.

Do you consider yourself as competing with US VCs for SaaS startups?
We are a global VC, therefore we’re competing — and at the same time partnering! — with VCs everywhere in the world.

What’s the n°1 startup that you wish you had in your portfolio?
Zendesk — the 1st SaaS EU company to be listed on the Nasdaq

Friday, December 11, 2015

#KillerSaaSPitch in 10 Words (Part 2)

Mastering your pitch to a VC, prospective customers, new hires or partners is part art and part science. As a VC, I hear dozens of these every week, and what I’ve learned is that a masterful and successful pitch for a SaaS company involves 10 key items.

The best entrepreneurs are often those who can articulate their vision and roadmap in a simple, elegant and purposeful manner. I have tried to analyze the elements which get me excited about a company – drawing from what I observed from CEOS of start-ups I have backed, like Nicolas Dessaigne (Algolia), Frederic Mazzella (BlaBlaCar), Stan Niox-Chateau (Doctolib), Graham Cooke (Qubit) or Jonathan Benhamou (PeopleDoc). This post is a summary of my findings, with a lens focused on SaaS businesses.

I highlighted five pieces of advice in part-one of this two-part post as illustrated in five words: Alignment, Preparation, Advice, Backdoor and ‘Wow’. Here are the final five pieces of advice. Hopefully this will help you pitch your SaaS company with greater impact.

#6 Passion
While everyone wants to make money, good VCs look for more in an entrepreneur than the desire to cash out. They invest in entrepreneurs who want to change the world. When Elon Musk received $200 million from the proceeds of the PayPal acquisition in 2002, he re-invested everything to build the next big thing: $100 million in SpaceX and  $100 million in Tesla. Talk about passion and commitment!

Don’t hold back your passion and your vision – give examples of crazy flights and nights in the office to meet a launch date, or epic stories with your first customers. Illustrate how you have pushed the limits of what’s possible.

#7 Story
Smart VCs fund entrepreneurs if they believe in their story. When you prepare slides, think about the narrative – it should be told as a personal story. A touch of humor also helps. Illustrating your points with personal stories help people relate and remember your message. For example, I have always remembered how Frederic came up with the idea of BlaBlacar:

It all started one Christmas, when Frédéric wanted to get home to his family in the French countryside. He had no car. The trains were full. The roads, too, were full of people driving home, alone in their car. It occurred to him that he should try and find one of the drivers going his way and offer to share petrol costs in exchange for use of an empty seat. He thought he could do it online, but no such site existed.” (You can read the full story here)

#8 Engine
Developing a scalable sales and marketing engine is a key element of success for SaaS companies. It’s very important to explain in detail how this engine is designed and how you can scale while maintaining quality and productivity. Here are a few typical models and some of the points I would find interesting to highlight:

  • Enterprise sales (e.g., Docusign, Peopledoc): typical outbound sales model targeting mid market+ companies and relying on being able to hire consistently sales people making their quota. I like to understand for these models how many sales people are quota carrying, what is the distribution of quota attainment, and what is the profile of an ideal sales person 
  • Inbound model (e.g., Algolia, Twilio, Sendgrid): for companies targeting developers for example, the outbound model is harder to develop as developers rarely answer sales call. This model relies on grass root marketing of the targeted community, combined with smart online tactics (e.g., content development) to generate inbound interest. For this type of model, I would like to understand how the number of inbounds is scaling with the activities and how much virality there is in the model as the word spreads out in the community
  • SMB door to door sales (e.g., Doctolib, OpenTable): this model is the little parent of the enterprise sales model but for SMBs. Typically, it is a combination of an inside sales engine generating leads and booking appointments for an outbound door to door sales team. These teams are typically run on monthly quotas. For this model, I like to understand how scalable the lead gen model is (e.g., how many searches are available on Adwords) and what is the quota attainment and churn rate of the sales people as well as their profile
  • SMB online sales (e.g., Wix): for SMB product sold mostly online, the key for me is to understand the scalability on Adwords as well as the channel strategy

Entrepreneurs must concisely explain their own model and describe how the engine will churn out powerful results month-after-month and year-after-year. You might not add all of this in the slides, but be prepared to explain how your engine will scale, where your teams be located and how they will be structured for growth.

#9 Numbers
There’s a saying that “numbers raise dollars.” In other words, there are universal metrics that smart investors require to make investing decisions. I outlined five of these financial KPIs for SaaS, which I called the 5 C’s of SaaS Finance: Customer Monthly Recurring Revenue (CMRR); Customer Acquisition Cost (CAC); Churn; Customer Lifetime Value (CLTV); and Cash.

However, with the evolution of new SaaS models, I added three more that will likely pertain to your sales engine:
  • Cohorts: when most SaaS models were targeting mid-market or enterprise customers, there was not a lot of volatility in the churn and upsells, so looking at the average was meaningful enough. Today, we are seeing more an mode model where the churn can be high but the upsells are also very high and looking at cohorts help see how they net out over time
  • Concentration: I see more and more companies being built on the back of one or a few very large contract. Understanding the breakdown of the revenues by customer is something I like to see upfront in the discussion
  • Country breakdown: with the development of the SaaS ecosystem, it is now more common, in particular for services targeting SMBs to see early stage SaaS companies with customers on all continents and it says a lot about the scalability of the model. For more traditional enterprise SaaS companies starting in Europe, showing traction in the US and outside of their home country is also very important.

#10 Listen  
A pitch is also an opportunity to get to know the VC, so prepare questions and take this opportunity to assess what kind of value the investor will provide. This is essential in determining whether or not you would like to work with him/her for the next five-seven years. When I ask entrepreneurs if they want an overview of Accel, I often get the answer “we know, we looked at the website.”

How would you feel if a VC were to tell you: “I know all about your start-up because I looked t your website!” You get the idea.

Bonus: European founders should spend a week in San Francisco. Why? Because telling European VCs that you are going to the US will add a bit of competitive dynamics to your fundraising process. They will assume you’ll meet Silicon Valley-based VCs (even if it is not the case!), which will likely help advance and deepen your conversations locally.


Allow your passion to be at the foundation of your approach – from there, create a masterful pitch and build a trusted relationship with investors. Remember, it’s not always about immediate results, but rather about your vision, ambition and a deep knowledge of the industry you hope to disrupt. Adapt and make it personal – show us something we’ve never seen before!

Wednesday, November 25, 2015

When And How To Pick Your Next Launch Country

(This post was originally published on TechCrunch and has been enriched with a few quotes from the Blablacar founders)

International expansion is a challenge any globally ambitious company will face — some sooner than others.

As a long-time investor in both the U.S. and Europe, I often get asked by the venture community about the difference between the two. In my opinion, one of the key elements is the market fragmentation, which is something that European companies tend to come up against sooner than their U.S. counterparts. I like the way Frederic Mazzella, the founder and CEO of Blablacar, describes it: “When I'm asked if it's easier to launch a business in the EU or in the US, I say that it's like comparing a 110 meters hurdle to a 100 meter run... In the EU we have to adapt to 28 different countries, regulations, cultures and markets, which slows down the growth”.

While both the U.S. and Europe are consumer markets of more than 300 million people, grasping this potential in Europe is more challenging — and few companies have managed to do it successfully, given the region’s many diverse, distinct markets. As a result, I’m going to talk about international expansion using European examples and context for this piece — hopefully with takeaways that are universally relevant.

Can you go big without going home? Sure you can — if you give enough thought to the dynamics of expansion, starting with when and where to go next.

Is There Such A Thing As The “Right Time” To Launch In A New Country?

The first question the founding team of a consumer service needs to address concerns the timing of the launch in a new country. At McKinsey, and in most books on strategy, you will read that you can only replicate something successful, so you need to wait until your home country is cranking before starting abroad.

This is sound judgment. Unfortunately, it does not play out very well in the startup world. Why? Because by the time you have proven your model is a success in your home country, you already have other startups doing the same model in other key European markets, and competition gets fierce. As Nicolas Brusson, the co-founder of Blablacar puts it: “By the time most European companies go international it is too late…We decided to go early into different European countries — adding a local team each time — before proving the business model, something very few players do.”

On the other hand, if you do a full roll-out with something that is not working or tuned enough, you will waste a lot of resources, which can sink the company.

So when is the right time? Every company will have a different answer. In my view, given the current competitive environment, the sooner the better. However, it is critical to do it gradually and in a controlled manner.

Here’s how I advise startups to approach expansion:

Nail your MVP (Minimum Viable Product) first. You need to have a service with a clear value proposition that works in different markets. You don’t need bells and whistles, just something simple but effective.

Field test your product with a meaningful amount of customers — typically a few thousands or tens of thousands. This should give you a good idea of what to expect.

Complete your initial marketing playbook. You need to have identified acquisition channels (SEM, Facebook, offline…) at a reasonable cost with payback typically in less than nine months. Make sure your approach is scalable.

Taking a thoughtful and considered approach to scaling internationally is key.

How To Pick Your Next Country?

Once you’re clear on the ideal time to launch in your next country, the question becomes “where to go next?”

While every business and situation are different, the following three elements should always be considered when choosing your next market:

Market Potential: The “market potential” is a mix of different elements that must be weighted specifically for each business. It includes the market size, of course, but also the competitive dynamics, your network in the country (or your investor network) and the similarity with your home country. For example, in my experience, what works in France tends to also work well in Italy and Spain, but the U.K. can be an outlier.

Cash Requirements: Be clever with your resources. It is very important to assess your cost of capital and how much burn you can afford. If you raised €20 million in your Series A, you can take more risks and launch abroad sooner than if you raised €3-4 million. Picking a large market is attractive, but if it requires a level of investment that would reduce your runway considerably, you may be better off picking a smaller market. I have seen too many companies go big, burn big and then have to retrench, which is not a good position to be in.

Human Capital: Money is not everything; it is reasonably easy to get. The real challenge of international expansion lies in finding the right team, both at HQ to support the local launch and locally to scale the activity.

I typically encourage companies to start their expansion with one country and digest it to the point where it is scaling before launching a new one. It does not mean you need to wait a couple of years — a few months may be enough.

Most technology markets are winner-takes-all.

You can then accelerate the number of launches over time if you are successful. It’s key to remember that most technology markets are winner-takes-all — or at least takes most. It is, therefore, much better to be the leader in three countries than No. 5 in 10 countries.

Also, the more countries you support, the higher your cash burn and the fewer resources you can allocate to win in a given market — this is something that needs constant evaluation.

In summary, taking a thoughtful and considered approach to scaling internationally is key — and the sooner the better. First-mover advantage can offer a decisive advantage over competitors — and accelerate a company’s ability to become the global category leader early on.

While there may not necessarily be a perfect time for launching in a new market, preparing your business for expansion early on will support your continued success in a world where scaling internationally fast has become a requirement for any founder with global ambition.

Friday, November 06, 2015

Has Europe Earned its Place as a Global Tech Leader?

Short interview on the European tech ecosystem and recent exits at the Dublin Web Summit with Caroline Hyde from Bloomberg:

Tuesday, November 03, 2015

#KillerSaaSPitch in 10 Words (Part 1)

Last month, I attended the SaaS Founder Meetup organized by Point Nine Capital in Berlin. In its fourth year, the event is a great opportunity for SaaS ‘aficionados’ to compare notes, share war stories and learn from each other. For those in SaaS, this event is a must attend in Europe, and as Algolia’s founder Nicolas told me during our board meeting the week before, I better “get my game up because the level of the presentations at the Meetup is high, and I’d better be well prepared!”.

Advice in tow, I focused my keynote on “How to Best Pitch a SaaS Company.” While much has been said ‘how to pitch a VC’ ($1B+ market, competition, differentiation…), I brought a new approach and focus on elements which are outside of the traditional Powerpoint slides.

Here, I recap the first five pieces of advice as illustrated in five words – I will follow-up with another post, including the latter five pieces of advice, in the next couple of weeks:

#1 Alignment: It’s crucial that entrepreneurs find an investor whose interest aligns with yours, and supports you in your approach. The reality is that entrepreneurs can be blinded by a pre-conceived notion that a certain investor is right, before having ever talked with anyone from the firm.

One of the element to consider is the size of the fund. When you look at the two pie charts on the right - which white share of the pie is the biggest?

Actually, both are the same size (if my math is correct!). As a founder, there’s no difference in having a small share of big exit or large share of small exit. When narrowing your list of potential investors, consider the size of the firm’s fund. A venture investor typically owns 20% of a company (an amount that will ideally yield a meaningful return for the fund). A $50-100 million exit will return $10-20 million, which is meaningful for a $50 million fund. You’ll need an exit of $500 million-$1 billion to have the same proportional return for a roughly $500 million fund (like Accel in Europe). 

Another very important consideration is the geographic footprint of the fund. For most B2B SaaS companies, category leadership often means US leadership. Winning companies find a way to expand to the US as soon as possible, so choose a firm with a global network to support your ambitions to cross the ocean.

#2 Be prepared: When I received my engineering degree, I decided to start in management consulting and began preparing for my interviews. I interviewed with a dozen of firms keeping my three favorites for the end. When I got to interview with these three firms, I had completed more than 35 interviews. This training allowed me to practice and refine my presentation style. It paid off, as I ended up working for McKinsey in Paris and Palo Alto.

Entrepreneurs should apply a similar approach when pitching VCs. You need to understand the questions and refine your slides to run a more impactful meeting. Start with dry runs in front of entrepreneurial friends, peers or people familiar with the industry and get honest feedback.

From there, it’s crucial to understand who you are meeting – not only the fund, but also the investor profile, his/her past investments, hobbies and common connections (people, cities, companies, etc.). We apply the same approach at Accel and work hard to develop a deep expertise in the areas we focus on: one of our moto is “Chance favors the prepared mind.

#3 Ask for Advice (not money). If you ask a VC for money, you will get a yes or no answer. However, if you ask for a meeting to get some advice on your business, the pressure of a yes or no answer is off the table and you’ll likely get a lot more from the meeting. This also will increase the chances that you get a follow-up meeting three-to-six months down the road or a preemptive offer if this is an immediate fit.

Build a relationship with the investor: get to know him/her and assess if you’d want them on your board. Similarly, they will gain confidence in you throughout the process. Most of my investments have come 12-24 months after the first meeting with the entrepreneur.

When I first met PeopleDoc CEO Jonathan Benhamou in November 2012, they had just one product, relevant in France. Jon did not ask for money, just for advice, but we began to collaborate and I suggested him to broaden his solution. Less than a year later, he had launched a new and powerful product – I advised that he expand to the US, which he did. In April 2014, we closed an $18 million round of funding which was followed by a $28 million round last month.

#4 Backdoor: In the surfing world, there’s a famous wave called “Pipeline” in Oahu. For 14 years following the first time anyone surfed the wave, riders always went on its left side (the right side was considered too dangerous). In 1975, Shaun Thomson won the famous contest held at the break by doing the unthinkable: surfing the wave on the other side and renaming the wave “Backdoor.”

Shaun Thomson surfing Backdoor
To win, you need to do things most entrepreneurs don’t do. VCs like to find hidden gems, so find an unconventional way in. Ask an entrepreneur from the VC portfolio to introduce you or find an industry expert connected to the VC to refer you. Or do something original – a 3D printing company once offered to print an iPhone case with the Accel logo on it. Not a game changer, but it caught my attention.

#5 WoW:  VCs see hundreds if not thousands of pitches every year. In order to be remembered, you need to start with a ‘wow’ moment. This video from Bill Gates at TED Talk is a great example:

The talk focused on curing malaria, and to start the talk, he releases mosquitos into the audience. Gates made his talk unforgettable and it went viral.

What is unique about your company, and how can you show it as such? Is it a product demo, a number/performance, a big technical problem you have cracked? Illustrate with a video or picture to make it snappy and unforgettable. When I first met Algolia, the pitch was simple: “we are Google instant search for any website, with 260B API calls”. That got my attention.


In short, approach your pitch as a way to establish a trusted relationship with the VC. If all goes well, this trust will grow and crystallize into an investment. But, trust (as seen in the equation below) takes time, so nurture it.

This post illustrates some of these points. More to come in Part 2!

  • Credibility: has to do with the words we speak.  Think "#Wow/Backdoor/Alignment " 

  • Reliability: has to do with actions, be responsively engaged before and after the meeting and deliver what you said you will deliver when you meet again. Think "#Be prepared"
  • Intimacy: relates to how much does the VC knows you after the meeting. Think “#Advice”