Softbank, Hard Cash and Warm Hearts 

Softbank, Hard Cash and Warm Hearts 

Looks like Goliath investor Softbank may place yet another huge bet on the WeWork. Softbank already put nearly $4.5B into the real estate play that has been rumored to be preparing for a public offering. According to filings, WeWork losses continue to mount as they race to expand the footprint of the co-office business.

I was struck months ago when David Galvan, a longtime friend of LSA and TAI, said to me, in effect, “Maybe instead of being in technology, we should be in real estate like WeWork.” Dave has always been an astute observer. His take was that the co-office model was the big winner in the start-up ecosystem. Seems like Softbank agrees.

What interests me about the seriously high valuation — around $40 billion — is that the WeWork model seems relatively easy to replicate. Sure they’ve built a brand that has become a noun and maybe that alone is the reason for the considerable valuation. But finding vacant office space around the country and the world to develop into co-office space is easy.

WeWork has focused on major metro markets and even major streets. You know, the ones we all recognize instantly — Mission Street in San Francisco, 23rd Street in NY, Michigan Avenue in Chicago, Barton Springs in Austin and so on. Yet they’ve only covered a small portion of the U.S. market. According to this blog post shared space represents only 1% of the total office market. And WeWork does have a large competitor in Regus, which is now almost 30 years old has 3,000 locations in 900 cities and 120 countries. There are other competitors as well.

What is driving this? Perhaps it is as simple as the thirst entrepreneurs, business owners and professionals of all shapes and sizes that want to feel connected to other like-minded individuals. As you scroll through the listings of all these co-office options the common theme is one of community and connection.

As much as technology enables us to be digitally connected, the truth may be that humans still desire interaction with other humans. I saw this up close last week when I attended a gathering of high-performing Managed Service Providers (MSPs) at a Robin Robins event in Las Vegas. When I asked the MSPs why they fly hours to be part of the event, they universally said something along the lines of “the opportunity to connect with other business owners.”

I guess what I am saying is that community and connection are really what’s at play here. WeWork recognized this human need and turned it into a multi-billion dollar business. How is your business providing a platform for customers (consumers or business owners) to connect? If your platform isn’t, maybe you should examine how it can.

A Day Around Dreamforce: The Growing Power of Sales Enablement

A Day Around Dreamforce: The Growing Power of Sales Enablement

A luxury of living in the Bay Area is that I don’t have to spend $500 to $1,000 a night to sleep in an average hotel near the annual Dreamforce gathering. So I took advantage of the easy commute and attended an offshoot of the nearly 200,000-person Salesforce annual gathering — the Sales Enablement Soiree at the Four Season Hotel.

The Sales Soiree is put on by Highspot — a leader in the important area of Sales Enablement that operates adjacent to the CRM space. It was interesting enough last year that I decided to go again this year.

My first observation is that sales enablement is growing in importance and gaining in stature. The definition of sales enablement is a bit fuzzy but think of sales enablement as a cadre of software tools that can, when implemented correctly, raise the overall professionalism and success of a sales organization. Below are some of my takeaways from a day in the City.

  • We will see guided selling and prescriptive sales management in the coming years as machine learning is leveraged — this may mean fewer salespeople overall but more sales analysts and technicians.
  • 81% of B2B buyers make their buying decision based on their customer experience along the sales process and only 19% make it based on features and price — this ties to my view that we are living in the age of commoditized products and the differentiator is the customer experience.
  • Leading sales companies train more on sales skills than on products and features — this ties to delivering a great customer experience.
  • NPS scoring — companies should have their salespeople score their managers, trainers and sales enablement people on an NPS score — in other words, treat the sales rep like a customer.
  • 17.3 pieces of content are shared before a close — this could include emails, eBooks, webinars, brochures — those content initiatives better be first-rate.
  • The best sellers know to review and share more content with a prospect in the early stages of the sales process — while the weakest sellers don’t do this until much later in the sales process.
  • More than 30% of the best sales reps are already looking for a new job — and they evaluate opportunities based on the quality of the sales managers and sales tools and tech — this makes the job of recruiting even more challenging for companies that don’t invest in sales management and enablement.
  • Customer obsession — successful companies put the customer at the center of everything they do — companies that do not are likely to fail in today’s ultra-competitive environment.

A final observation. Sales and marketing functions are drawing closer and closer every year as data and technology have become more and more important. And while things are converging, it won’t stop marketing leaders from complaining that sales leave hot leads on the floor and sales leaders from complaining that the leads are lousy. So where does that leave us — focus on the customer experience — it just might be the ultimate sales tool.

Square’s Mobile Payroll App = More Disruption?

Square’s Mobile Payroll App = More Disruption?

Yesterday I saw a bunch of news alerts, emails and tweets regarding Square’s announcement extending its existing desktop small business payroll service to its mobile app. Reading through some of the news, Square’s announcement moved its stock favorably and trimmed a little from the valuations of ADP and Paychex – a combined $91 billion.

A story on CNBC suggested that an “S” be added to the FANG acronym (for Facebook, Amazon, Netflix and Google) due to the considerable disruption that Square is causing.

Square is slowing but surely building out a mobile app platform that could one day do most, if not all, of the important business functions that SMBs rely upon. Yet when talking to SMBs, as I often do, I almost never hear about Square — my dentist doesn’t use it, my dry cleaner doesn’t use it, my favorite wine store doesn’t use it and my contractor (yes, an older guy) still only takes paper checks. Sure I see Square at the Marin Farmer’s Market and the upstart food truck and hot new ramen shop — but its not yet pervasive. And further, most Square users do not engage will all the elements of its platform. Payments volume is still its key revenue driver.

In fairness, this is an issues across the board among companies offering the “full stack.” Speaking at LSA ’18 this past spring, Zoho President Raj Sabhlok admitted that the typical Zoho One user actively used about four of the suite’s 40 business applications.

If we looked at the SMB dollar value of transactions processed by Square vs. the rest of the SMB dollar volume, we’d probably see chart that suggest Square does a high volume of low value transactions. In Q2 2018, $21.4 billion in GPV (gross payment volume) passed through Square’s platform. In Q1 2015, that figure was $7.1 billion.

And while that’s a great foothold into the SMB market, time will tell if Square is as disruptive across the entire SMB ecosystem as it’s $39 billion valuation would suggest. Don’t take that as a shot against Square — but perhaps a caution against moving from FANG to FANGS just yet.

Square’s deeper moves into payroll intensifies its competitive position vs Gusto, the leading challenger in the crowded SaaS HR and payroll space. Gusto’s head of marketing, Tolithia Kornweibel, will be a featured speaker at the LSA’s Tech Adoption Summit, Nov. 6-7 in San Francisco. We’re confident Square will come up in Q&A. The event has limited seating and is expected to sell out, so be sure to act soon if you are planning to attend.

 

A Peek into the World of MSPs and IT Providers

A Peek into the World of MSPs and IT Providers

I recently attended an event outside of Boston put on by the team at ChannelPro – ChannelPro SMB Forum. Like many trade shows or conferences, there were presentations and workshops and exhibits. Overall it was a super interesting mix of Managed Service Providers (MSPs) business owners, software distributors and consultants.

Some of the big players at this event — IngramMicro, datto, Synnex, CompTIA — are not household names to those in the local media space. But these companies play a critical role in helping SMBs run efficient businesses from a technology and communications point of view.

I’ve been exploring this IT ecosystem as it relates to small businesses. Specifically, I’ve been curious about the of world of MSPs. These are the businesses that help SMBs with technical support for cloud storage, security, data back up, SD-WAN (software defined Wide Area Networks) and other IT needs that small business cannot or would rather not handle themselves.

Estimates suggests there are roughly 40,000 MSPs operating in the U.S., with the majority being SMBs that service other SMBs. One of my emerging observations is that the communities of marketing solution providers and IT providers (MSPs) are on a collusion course.

Here’s why. Both communities are looking to gain a larger portion of their customer’s monthly budget — more wallet share. As many of their existing products and solutions become commoditized, they will need to find new solutions that place more and deeper hooks into the business owners systems. Hence the possible outcome could be that each begins to offer the solutions usually offered by the other community. Simply said – the IT guys may well offer marketing solutions and the digital agencies may well consider VoIP and security solutions to extend their customer ARPU.

Time will tell but this is an area I’ll be helping the LSA and Tech Adoption Index team explore over the coming months, quarters and years. Do you have a point of view on this? We would love to hear from you.

Gusto Sees Big Opportunity in Fragmented Payroll Space

Gusto Sees Big Opportunity in Fragmented Payroll Space

For sometime now I have been pointing to Gusto as the poster child for disruption in the SMB cloud space. Many of you have heard me talk about how Gusto has been squarely focused on taking market share from the two largest SMB payroll providers – ADP and Paychex.

In a recent interview in Pymnts.com – Gusto CEO and Co-founder Josh Reeves talked about how taken together ADP and Paychex have perhaps 20 percent of the SMB market for payroll and have a combined market valuation of about $85 billion. So for Gusto to be very successful they don’t even need to take share from the big two in the space. They can simply convert those millions of SMBs using paper and pencil to their cloud-based platform.

Gusto made big news last week when it closed a $140 million Series C round, brining its fundraising total to $316 million since it was founded in 2012.

In the Pymnts.com interview, Reeves talks about the challenges they face in selling to the SMB market. Like many SMB SaaS players, Gusto struggles with the daunting challenges of acquiring customers at a reasonable cost. Gusto relies heavily on word of mouth and platforms such as Captera, where Gusto is among a number of SaaS payroll companies for SMBs with 5 star reviews. They also use paid advertising to drive warm leads to their inbound channel.

One of Gusto’s newest initiatives FlexPay – essentially a cash management opportunity for employees of Gusto customers. As Reeves describes it, the kid who cuts the grass on a hot summer day for Dad doesn’t have to wait for two weeks to be paid. Applying the same logic to payroll, Gusto will enable a employer to pay an employee when they need the cash which isn’t often in sync with when the bi-weekly check is cut.

In the longer term, Gusto is positioned to go up market, to larger companies and enterprises where the sales cycles will be months and years instead of days and weeks. But, like companies such as DocuSign, those deals can solidify a company’s position in marketplace that is worth billions of dollars.

When we last wrote about Gusto in March, the company had topped 60,000 customers and had added a free service called HR Basics that handled simple HR functions for SMBs. The idea behind basics was to use the free service as a leads channel to upsell SMBs to a paid service.

Gusto’s Marketing Director Tolithia Kornweibel will give a headline talk at the LSA’s upcoming Tech Adoption Summit, November 7 in San Francisco. She will also be featured in an upcoming Above the Cloud podcast. We encourage you to register soon for this event. Space will be limited at The Laundry San Francisco, so the event is expected to sell out. Early bird rates expire on August 31.