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Software-as-a-Service: Our tech industry’s secret sauce

SaaS businesses like Netflix and Spotify are responsible for some of the most revolutionary digital business models in the world today. They operate by offering cloud-based software through a subscription model, while also often disrupting an industry that has done things in a non-digital, archaic way for decades.

But while these companies are world famous, New Zealand isn’t getting left behind, either. Businesses such as Pushpay and Xero are dominating their industries globally, while closer to home, many local businesses in the SaaS space are carving out their niche and growing fast in size and scale such as Vista, which provides tools for the cinema industry, and Parkable, which lets users find short-term or monthly parking. It’s predicted that New Zealand’s next ‘unicorn’ company is likely to be from this community.

Callaghan Innovation works with more than 700 New Zealand SaaS businesses. To build the community and capability it takes a large delegation to the SaaStr Annual conference in San Jose, California every year, while hosting a conference in Auckland called Southern SaaS annually. The 2019 event hosted recently sold out for the second year in the row.

Callaghan Innovation group manager of digital and health Bruce Jarvis says what the agency is trying to do with local SaaS businesses is build a community that can help propel these businesses forward.

“The reason we’re doing that is there’s a lot of experience where people learn off each other,” Jarvis says. “From an agency perspective we can do so much, but as one of our clients said, ‘I wish I knew five years ago what I know today’. One of the key pillars around why we create this event is we want to have those conversations, to inspire, connect and to upskill.”

Callaghan Innovation group manager of digital and health Bruce Jarvis

Jarvis says in New Zealand, we have no problem with creating businesses, as we’re very inventive.

“What Sir Paul Callaghan talked about is we’re good at doing the weird stuff,” he says. “Ten years ago he said ‘We’re going to have a company here sending rockets into space’. Everyone said ‘Have another drink Paul’ and he was laughed out of the room. But what he meant is we’re very good at finding a global niche, finding a problem and solving that problem. What on a global stage is a small niche, you can create a massive business within New Zealand.

“Where our weakness lies is around the commercialisation piece. That’s about how to scale but also commercialisation, hitting market, getting good product market fit and building your sales team.”

That’s why the focus of the Southern SaaS event – and Callaghan Innovation’s SaaS support and programmes– is focused around sales and commercialisation.

“It’s not about the technology, it’s about sales and customer success,” Jarvis says. “Product market fit is the biggest problem for SaaS companies, so we want to make sure we wrap enough love and services around it so we can increase our nation’s success.”

What makes SaaS businesses investment and expansion ready

Marvin Liao (left) and David Downs during a Q&A session at Southern SaaS

Silicon Valley 500 Startups partner Marvin Liao was one of the speakers at the 2019 Southern SaaS event and brings a blunt but refreshingly honest perspective to New Zealand businesses.

Liao has invested in New Zealand company Melodics, a platform that teaches people how to play instruments digitally, founded by ex-Serato employee Sam Gribben. Liao agrees with Callaghan’s Jarvis that commercialisation is the most important aspect to grow a successful SaaS business, and that Kiwi businesses can’t just rely on having a great idea.

“From a product perspective, Kiwi companies are really good in some ways. The sad thing is though – and this is why American companies dominate – is the product doesn’t really matter,” Liao says.

“A lot people care and talk about the tech and the product, and you know what, maybe that mattered 10 years ago where there wasn’t that many products, whereas now it’s so crowded. It’s now more about distribution and how to get the product into the hands of the customers.”

He says rather than be put off by sales and looking at it as if it’s a grubby job, founders should be aware that when done right, it’s an honourable profession.

“How I think about it is you’re meeting and having conversations with people about their problems, and seeing whether your service or product is a good fit for them. If it isn’t, no problem, then you’ll go somewhere else. Sales is consultative, and once you have that understanding, you end up falling in love with it,” Liao says.

With his investor’s hat on, he says companies shouldn’t be worried about trying to change and shape their companies so that investors will be interested in it.

“The way to think about it if you’re a SaaS company is, are you serving customers well? From an investor perspective, we’re looking at that and whether there’s a lot of these customers, or whether the potential is very, very big.

“Anytime I talk to a founder, they’re like ‘How can I change so investors will invest in this?’ I’m like, ‘That’s a dumb question.’ Focus on finding the right customer, serving them well and if there’s lots of them, then an investor will be interested in it. Don’t worry about that.”

His other tip for New Zealand SaaS companies is to make sure they have a global mindset right from the day of the business’ conception.

“When Kiwi companies say I’ve dominated New Zealand, it’s like, who cares? You need think global and big from day one. If you think about how many super successful, interesting companies actually come out of here, I think humility actually works against them.

“Here you have Pushpay – an amazing business – but nobody knows it’s a Kiwi company. Rocket Lab, nobody knows. Xero, nobody knows. I look at Australia there’s been a wave of really interesting niche SaaS businesses. New Zealand has the same opportunity and I don’t get why we’re not hearing more about them.”

Another side of software: The New Zealand SaaS social enterprise

Humanitix CEO Georgia Robertson

One of the other speakers at the Southern SaaS event was Georgia Robertson, the CEO of Humanitix. The business is a not-for-profiti events platform that has turned ticket fees into something that can do some good in the world. It directs 100 percent of the profits made through ticket booking fees into education projects that tackle global inequality.

Robertson defines it as a charity for the tech generation, but says it’s also a social enterprise as it’s 100 percent self-sustaining in its operations. 

“The way it works is simple: we work with event organisers to ticket for their events, then redirect the profits,” Robertson says. “Everybody resents paying booking fees, so the opportunity we saw was to transform those booking fees into a force for good and a sustainable fund for education projects. Event organisers get to own the impact and are responsible for creating the impact as without them, we wouldn’t exist.”

Humanitix was founded in Australia, but New Zealand is the first company outside of Australia it’s expanded to, with Robertson heading up the local operations. It has tickets on its platform for everything from cooking classes, to yoga workshops, to conferences, to gala dinners.

She says the SaaS model has allowed Humanitix to have a bigger influence than it could have had being run as a traditional charity.

“We knew we could either invest our time raising millions of dollars for a cause, or we could invest our time disrupting a massive market that generates billions of dollars in funding to cause massive impact,” she says.

“We needed massive impact, we needed a charitable model, we needed a way to earn recurring revenue and we needed something our customers could promote on our behalf and speak about as well. That’s why events ticketing is such a happy marriage with SaaS.”

However, she says Humanitix hasn’t been able to rely on being the most ethical product for its customers – it also has to be a world-class ticketing platform.

“If we rely on being the most ethical solution we know we’ll fail, we have to be the best platform with the best human service in this industry – and the most ethical – and directing all these booking fees to education projects.

“That’s the beauty of tech, for the first time ever it doesn’t cost more to do a good thing, it actually costs less with Humanitix. We actually save organisers up to 25 percent of the cost of their booking fees.”

She says what she’s learnt in her journey in SaaS is sales is the crux of being a successful company.

“The core thing everyone should be mindful of are what are your key metrics for success and how do you choose that? So for us it’s really simple. It’s how many tickets are we selling? The reason that’s important is the more tickets we sell, the more impact we have. Sales is the crux of it – we’ve almost exclusively grown using a direct sales model, so it’s really important for us to be focused on what shifts the needle, which is our customers.”

Are you a SaaS business looking to join a community of like-minded founders? Check out Callaghan Innovation’s website and social media pages for SaaS community updates.

Elly is Idealog's editor and resident dog enthusiast. She enjoys travelling, tea, good books, and writing about exciting ideas and cool entrepreneurs.

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