Everyone knows that hindsight is 20/20. Back in 2003 when we were deciding whether or not to sell Expertcity (GoToMyPC and GoToMeeting) to Citrix or continue fighting the fight and attempt to take the company public 1 year later, it was quite a gut-wrenching decision. Ultimately we decided that the risk/reward ratio to sell at that time was better than going for the public offering. As it turns out, we all did quite well and it is great to see that a few years later that Expertcity (now known as Citrix Online) is continuing to drive the numbers that we believed we could do. When most people think of the poster children of SAAS, they think of Salesforce.com, WebX, and RIghtNow. As Phil Wainewright of ZDNet mentions in his blog, let's not forget about the powerhouse that is now Citrix Online. According to Phil Wainewright:
Acquired as Expertcity in February 2004, the Citrix Online division is an on-demand giant in its own right, with trailing twelve month (TTM) revenues of $121.6 million to June 30th this year. That makes it even bigger than the number 2 on-demand CRM vendor RightNow Technologies, which reported a TTM of $99.3 million for the same period, and more than a third the size of web conferencing leader WebEx, with a TTM of $343.7 million (for comparison, on-demand poster child salesforce.com posted $396.6 million TTM with its latest results).
Even more impressive is the fact that the company grew from $35mm in revenue from the end of 2003 to around $121mm in revenue 3 years later - not too shabby for an on-demand play going after the SMB market. In addition, at the time of the sale, the company had raised around $30mm in financing but still had $16mm on the balance sheet when the transaction was completed. So it is hard to argue that the SAAS model if done right can be capital efficient and offer tremendous growth opportunities. In my mind, there are two ways to look at SAAS offerings - vertical market applications or horizontal plays. Of course the challenge is that many vertical market app plays may not be big enough and the horizontal plays have probably been done already and are quite competitive. All that being said, I am still quite interested in looking at companies offering a SAAS platform for Prosumers and SMBs. If you have any of these types of companies that you want to show me, I am all ears. I love the model and numbers like this show that the SMB market is really ready for these types of offerings. As Brett Caine, head of Citrix Online says:
"Companies such as Citrix Online and salesforce.com and lots of others are starting to demonstrate in a very real way that companies of all sizes are able to use services to meet their needs in a cost-effective manner," Caine told me. "I think SMB has fully embraced the services model. There's no doubt about that. Companies of all sizes have started to seriously embrace the software-as-a-service model."
I know I am preaching to the choir as none of this is new, but I must admit that the growth is pretty impressive. As you know, SAAS will only get stronger as broadband penetration increases, as our wireless devices gain more processing power and better connectivity, and as the tools to access, share, and deliver timely data get even more powerful and easier to implement (think AJAX, enterprise mashups, lightweight integration with other apps, RSS for simple data delivery).
Going back to the earlier point on deciding to hold and go public or to sell at that time, with perfect information it is easy to conclude that we should have held on to the company and continued building it up. However the decision is not that easy as there was lots of uncertainy at the time - we were only a two trick pony at the time and had not launched GoToMeeting and did not know how successful it would be, we did not have a sales channel to leverage like a Citrix, the IPO window was virtually shut for 2 years and we did not know when and how big you had to be for it to open (Google was one of the few Internet companies to go out in 2004), our growth rate was slowing while our subscriber churn was slowly increasing from just the remote access product, and the price was quite attractive. Once again you can always question your decisions looking back with perfect knowledge but I can honestly say that everyone still feels that we chose the right path given what we knew in 2003.