Investing time and money in SaaS start-ups

Q and A with investor and CEO of GeoOP, Leanne Graham

Leanne Graham left her role as country manager for Xero in December last year to invest in small businesses in the SaaS space, through her company, Cloud Rainmakers. She spoke with Stephen Bell during a visit to Wellington to scope out new investment opportunities.

How did Cloud Rainmakers come about?

I've spent 25 years in the industry working in the application space. I've seen the massive cost of taking applications successfully to market in the mid-tier; that's where I've typically been, working with Enprise and Solution 6.

I'm talking about [customers] with turnovers of up to $50 million. It's the space where people will spend between $10,000 and half-a-million on ERP solutions. We had a fantastic business in the service side of Enprise doing that type of work.

When I left there, Rod Drury asked me to join Xero, to become general manager of sales and to design their go-to-market strategy, I felt it might be a risk -- they'd already IPOed; I thought 'is this thing going to work?' But I saw it as a huge opportunity for me to see whether it was possible to truly revolutionise a cloud-based accounting system by building an ecosystem of apps around it so that it really could eat into that mid-tier market.

I put the channel structure in place; I designed it in a scalable way to enable Xero to get to market very quickly to small business in New Zealand; then I replicated that in Australia, the UK and the US.

What were the main features of this strategy?

Obviously in the SaaS space you're charging very little per month, so you need a high volume of customers. Some people put an app online and just expect people to come. That's not going to happen. You need a sales force to take it to market; but [SaaS vendors] can't afford a traditional sales force; it's too expensive.

So I chose a channel that had a need to assist their clients to change -- in an industry that was being forced to change. Instead of trying to create a channel we set out to educate a channel. We went about not trying to get accountants and bookkeepers to sell Xero, but recruiting them to educate [their clients] on the change and how they could do business differently in the cloud.

Within one-and-a-half years every accountant in New Zealand was partnered with Xero and we got it up to more than 60,000 customers. Then it was just a case of replicating that model around the world.

Now you're intent on doing it for other companies, through Cloud Rainmakers -- beginning with GeoOP, in the job-costing and mobile workforce area.

A lot of those companies, especially the local ones, have come up with a good idea; they're very technical and smart; they've built a piece of software and put it online; but how do they scale it? I think there's massive lack of knowledge in these small startup SaaS companies on what they need to turn themselves into successful scalable organisations.

So you will be supplying that sort of expertise yourself?

Yes, the investment is not just money. It's a mix between money and time. I think my time and expertise is far more valuable. Between time and money, I've invested half a million, and I've taken 20 percent of the organisation.

Who's leading that organisation?

It has been led by Nick Bartlett, who's one of the founders. [Now] it'll be led by me; I'll be the CEO and do two-and-a-half days a week. I'll continue to work with Nick and the team to get the people and partnerships in place to get it to scale.

How long do you think that'll take? When will you be looking to exit?

I've committed to the next two years with the team. I absolutely want to see it through to being the standard for mobile workforce; I' m committed to that.

How does the GeoOP application work?

When you go into GeoOP, you get a schedule, a map and it shows you where your jobs are and where all your people are. You pick up a job and drop it on a person because they're in that area; it comes through to the person and straight away on their phone they can see exactly what's going on -- they know the time they need to start.

Actually 50 percent of the take-up is not using them on [smartphones] because they're big-fingered men; they're more comfortable with tablets.

We've developed [the application] native to the device -- either Apple or Android. That's allowed us to put smarter features around the GPS integration, automatic notifications and audio and video on-site.

It's a rich application; and it's straightforward so the tradie who's not technically minded can use it.

What else are you planning to participate in?

I'm down here in Wellington talking to another company. I'm doing my best to space them out a bit, because there's a lot of effort in getting the base structure right. I kept my departure from Xero very quiet but I was still inundated. That's exciting, but frustrating. It's shown me there are awesome products out there and they're screaming for help.

I had a more pessimistic view from a recent discussion at developers' forum Unlimited Potential. They said there's too much emphasis on the consumer market; developers are trying to produce the next Instagram or FourSquare.

I disagree with that. In the Xero ecosystem they've all gone and found little pieces of the business process and built some great things. And they all do it differently; there are 12 job costing products in Xero's add-on portfolio and they've all got very different approaches in how they go to market.

What are you looking for?

I'm looking at cloud software that takes advantage of the mobile app. It's where everyone is going to do business; it's the next generation of cloud, I think. I'm choosing markets where use of the technology will change the game of the industry [concerned] -- markets where there hasn't been anything before at a price that's put these facilities in then hands of small businesses. So we can do some really game-changing stuff.

How many companies per year can you afford to invest that time and money into?

I plan to do three over the next two years [including GeoOP]. That's me as a solo investor; I'm talking to other investors in this space.

It really is a race this year; a year for the add-on, the business-process solution. Over the next 18 to 24 months, the leader in each industry is going to show up.

Xero has shown up as the standard for accounting; I'm banking on GeoOP as the standard for global job management. There'll be a retail lead -- Vend is leading in that space today with an online PoS system; you've got Unleashed as a distribution, stock, warehousing system integrated with Xero. They're all about leading at the scale where they can go global.

I'd like to be an investor in all the leaders; I can't do that, so I'm going to hand-pick.

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