This presentation was shared at Dreamforce 2016 to help early-stage cloud business application startup teams understand how investors will evaluate their markets so they can plan the right financing strategy from the beginning.

1. Matt Holleran
General Partner, Cloud Apps Capital
mholleran@cacptrs.com
@cloudappsvc
Bootstrap, Angel or Venture:
Determining the Right Financing Strategy for Your Startup
Judy Loehr
Venture Partner, Cloud Apps Capital
jloehr@cacptrs.com
@cloudappsvc

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3. Speakers
3
Melissa Burnell
Senior Regional Manager,
ISV & Channel Alliances
Matt Holleran
General Partner
Judy Loehr
Venture Partner
Blakely Graham
Product Design and
co-founder
Rupert Mayer
CEO and founder
Ray Hein
CEO and co-founder

4. Agenda
Modern cloud business application startups
The new market landscape
3 financing myths
2 financing realities
3 cloud business application financing options
The new venture financing model for cloud business app startups
Framing your market size
Venture math
Panel discussion
Q&A
1
2
3
4
5
6
7
8
9
10

5. 5
IF multi-billion $ market,
THEN venture to MOVE FAST
IF < multi-billion $ market,
THEN bootstrap and accelerate
The short answer
- someone who’s never built a cloud
business application company
Sounds like a
lifestyle business
“
”

6. Modern cloud business application startups
look different than ten years ago
6
BUILD ON CLOUD
PLATFORMS
ENTERPRISE-READY
 Enterprise customization, security,
reliability & performance
LEVERAGE APP
MARKETPLACES
AWARENESS & CREDIBILITY
 Get in front of Salesforce Admins and users
 Trust from being AppExchange certified
AND SOME THINGS STAY THE SAME
MUST BE GREAT PRODUCT
 Solve a real problem
 Good user experience
MUST SELL YOUR PRODUCT
 Clear messaging & GTM strategy
 Your own sales team
MAKE CUSTOMERS SUCCESSFUL
 Provide great customer support
 5-star ratings matter

7. There are a growing # of
business software markets
7
CRM
HCM/HRM
ERP
Finance & Accounting
Marketing
PLM
Billing
PSA
GRC
IT Management
Analytics
Collaboration & Productivity
Customer Success
Project Management
IP Management
Risk Management
Tax Management
MORE CATEGORIES
Client server
1990’s
SaaS 1.0
2000’s
Modern cloud
business
applications
2010+
Sold
to IT
Sold to
VPs
Available to all
business
users

8. Four ways investors view the different types of cloud business app companies within SaaS
The new cloud business app market landscape
Complex and
mission-critical
enterprise apps
Apps for a broad
range of departments
and specific business
users
Apps and tools that
solve a repetitive
use case and save
business users time
Business solutions
built for a specific
ecosystem of SaaS
users
Enterprise Cloud
New cloud business
application markets
SaaS Tools Ecosystem Apps
8

9. Startup financing myth #1: “IPO or Bust”
9
Series CSeries ASeed
$50M$6 – 8M$500k - $1M
Not the right financing strategy for every
cloud business software startup
Series B
$25M
Series D
$75M
IPO
Modern cloud application companies no
longer need $150M+ capital to get to IPO
TRADITIONAL VENTURE FINANCING PATH

10. Startup financing myth #2:
Angel funding means my company is a
good fit for venture financing
10
“Look Ma – I got
angel funding so
Series A will be a breeze.”

11. Startup financing myth #3:
you can bootstrap your way to a
global category leading company
11
“I’ll just take a little Seed
funding and go win in my
big competitive market.”

12. Reality #1: venture funding isn’t right for every startup
ECOSYSTEM APPS < $ BILLION MARKETS
“Killer Features”
Requires ecosystem expertise
Important functionality
Single ecosystem solutions
Specialized Markets
Real value for specific business
users
Not a big enough market to
support a future public company
12
> $ BILLION MARKETS
Multi-Billion Category
Large global serviceable market
Robust product & roadmap
Path to be a $100M ARR
company
VENTURE-BACKABLENOT VENTURE-BACKABLE

13. Reality #2: Angel or Seed isn’t enough if you’re going after a
big market; big markets require venture to go faster
Can’t go after the global
market quickly enough
Gives competitors a chance to gain
momentum and solidify a leadership
position in the market
13
Frame &
deliver on GTM
strategy
Hire key
executives
Expand your
product
$3-6M
IT TAKES
To hire the right
executives and lay the
right foundation for future
category leadership
17

14. VENTUREBOOTSTRAP “ACCELERATE”
There are different paths to financing modern cloud business app startups today
3 cloud business application financing options
• <$1B serviceable market, or
• Single ecosystem products
• $2B+ serviceable market
• Potential to be a global
category leading company
• Path to $100M ARR
Grow more slowly, but
keep 100% ownership
Seek ~$1M financing to
accelerate customer
acquisition & revenue growth
IMPLICATIONS
Need $3 - $6M to hire key
executives, build full product
and demonstrate customer
success – the foundation for a
future global category leading
company.
13
Founders elbow grease until revenue
can fund hires & GTM investment

15. The new venture financing model
for modern cloud business application companies
Series CClassic Series A Series B Series D
Classic Series A is the
right amount to hire
key executives,
demonstrate customer
success and refine
your CAC model.
Series B goes toward
hiring more executives
and team members
and scaling your
customer acquisition
and success model.
Series C enables you
to invest in large
enterprise customer
acquisition and
success – globally.
Series D is where you
prepare your company
for the public markets.
$8-10m $20m$3-6m $50m
Primary capital Primary capitalPrimary capital Primary and secondary capital
19

16. BOTTOMS UP
Best for clarity & conviction
MARKET RESEARCH
“What do others say?”
% of TOTAL MARKET
How big is your slice?
It’s important to size your market the same way investors will
So how big is your market?
• Analyst firms
• Published research
• Press releases
• Analyst firms
• Published research
• Press releases
• Conventional wisdom
• Government statistics
• Detailed NAICS codes
• LinkedIn research
• Industry-specific research
10%
category spend on analytics
Example:
14

17. Venture math: bottoms up # users example
# users
# sweet spot
users
Avg
Price
TAM
%
Serviceable
SAM
In U.S. 2,078,420 415,684 $1,200
$498,820,800
90% $448,938,720
Global 6,235,260 1,247,052 $1,200 $1,496,462,400 80% $1,197,169,920
User-based approach, apply
reasonable “sweet spot” % for your
product, ex: 20%
Use 3x for global estimates
Use average annual user price
TAM = # users or companies x
ACV $
% Serviceable = those who are able
to buy (aren’t under a rock and don’t
already have something)
SAM = TAM & % serviceable
Bottoms-up approach is the most compelling and actionable
GUIDELINES
15

18. Venture math: bottoms up # companies example
#
employees
# U.S.
companies
$ACV per
company
$ TAM (U.S.)
%
Serviceable
$ SAM (U.S.)
1 to 9 150,000 $3,000 $450,000,000 40% $180,000,000
10 to 49 50,000 $12,000 $600,000,000 50% $300,000,000
50 to 100 35,000 $50,000 $1,750,000,000 80% $1,400,000,000
101 to 499 10,000 $100,000 $1,000,000,000 80% $800,000,000
500+ 5,000 $200,000 $1,000,000,000 80% $800,000,000
TOTAL 250,000 $ 4,800,000,000 $ 3,480,000,000
This approach allows you to be realistic about how much different size companies will pay for
your product and how realistic it is to reach prospects in different segments
16

19. VENTURE
$2B+ SAM
BOOTSTRAP
<$500M SAM
“ACCELERATE”
$500M - $1B SAM
Pursuing the right financing strategy will save you time and result in the best outcome for your startup
Recommended cloud business application financing
strategies
• Get initial customers to fund your
development
• Typically no stock plans
• Founders own 100% of company
• Assume minimal income for first 1
– 2 years
• Self-fund until you can
demonstrate customer success &
revenue
• Take ~$1-2M to grow faster
• Ownership depends on source of
financing
• $2B+ serviceable market
• Path to $100M ARR
• Potential to be a global category
leading company
Revenue-based loans
($15k+ MRR)
High-value angels
17
$3-6m
Classic Series A

20. Panel
20
Matt Holleran
General Partner
Judy Loehr
Venture Partner
Blakely Graham
Product Design and
co-founder
Rupert Mayer
CEO and founder
Ray Hein
CEO and co-founder

21. Bracket Labs: modern productivity apps built on Lightning
21
• TaskRay solves post-sales project and process
management for Salesforce customers
• Top 10 paid app on the AppExchange
• 1200+ customers; 140+ 5-star reviews
Bootstrap
• $40k personal investment
• Privately held S Corp
• Employees have options
• First revenue within 6 months,
now profitable
OUR TEAM CLOUD PLATFORM FINANCING STRATEGY
Sales,
co-founder
Product
Design,
co-founder
Lead
Developer,
co-founder

22. Ipfolio: modern cloud IP management software
22
• Going after $500M IP portfolio software market
• Compete against incumbent on-premise systems
Rupert Mayer
CEO & founder
15 years experience in IP
management industry
“Accelerated” financing
• Personal investment
• Value-add angels
• Revenue-based financing
OUR TEAM CLOUD PLATFORM FINANCING STRATEGY

23. Propel PLM: enterprise cloud product lifecycle management
23
• Going after $17B global PLM software market
• Compete against Oracle and a handful of SaaS PLM providers
CEO
co-founder
VP PM
co-founder
CTO
co-founder
OUR TEAM CLOUD PLATFORM FINANCING STRATEGY
$4.2M
Classic Series A venture financing

24. Panel
24
Matt Holleran
General Partner
Judy Loehr
Venture Partner
Blakely Graham
Product Design and
co-founder
Rupert Mayer
CEO and founder
Ray Hein
CEO and co-founder

25. Thank Y u