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1
S A N F R A N C I S C O September 2012
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The Past! The Future
BUY NOW
We Call this Shi, the Subscrip2on Economy™
Subscribe
3
Why the Subscrip2on Economy ?
Technology Trends Smart Money Business Model Demand
Mobile
Social Businesses want to
subscribe to services
Consumers want to subscribe to services
Wall St. and Sand Hill Value Subscription-Based
Companies
It’s a better business model for growth
Cloud
Subscribe
4
The Subscrip2on Economy is a Green Economy
“ The average car is idle 92% of the time ”
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Product Focused Rela2onship Focused
BUY NOW Subscribe
The Subscrip2on Economy is about Customer Rela2onships
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The Subscrip2on Economy Requires a Completely Different Approach to Building Businesses
Product Economy Subscription Economy
Mone2zing Customer Rela2onships
Pay-‐as-‐you-‐Go Pricing Plans
Mul2ple Orders Over a Life2me
B2Any: Sell to Consumers & Businesses
Complex, Interrelated Bookings, Billings, & Revenue
The image cannot be
Sell Units
Forced to Pick a Customer Segment
Price Per Unit
One-‐Time Orders
Simple Financial Metrics
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The Subscription Economy Foretells
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One Year Later …
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The Media Industry is Moving to the Subscription Economy
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The Tech Industry is Moving to the Subscription Economy
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The Telecom Industry is Moving to the Subscription Economy
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The Retail Industry is Moving to the Subscription Economy
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Dollar Rubber Club
Condoms
Craft Coffee
Coffee
Steepster
Fine Teas
SweetBox
Chocolate
The Fruit Guys
Fruits & Veggies
BirchBox
Beauty
GuyHaus
Guy Supplies
Focus N Fly
Fitness
Test Tube
Beauty Samples
Wonder Sitter
Baby Sitting
Babbaco
Kids Toys/Activities
Crafts & Books
Kiwi Crate
Hoseanna
Hosiery
Put This On
Men’s Accessories
Bag Borrow or Steal
Handbags
Rent the Runway
Women’s Dresses
Bespoke Post
Luxury Items
Sweet Petula
Soaps
McSweeneys
Shirts
Meundies
Underwear
Mystery Tackle Box
Fishing Equipment
Spice Guides
Date Idea Guide
Clothing
FabKids
Spotify
Music
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As Web businesses embrace subscription business models, the benefits are clear: reduced customer acquisition costs and steady cash flow
“ ”
June 12, 2012
Making the Web’s Subscription Economy Hum
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“ ”
By 2015, more than 40 percent of media and digital-products companies around the world will use subscription services for their fulfillment, billing, and renewals
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The new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to what might be called a Rentership Society, far from being a drag, will unleash a wave of economic efficiency that could fuel the next boom.
“
” May 4, 2012
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“
”
Consumerism is being redefined for the mobile age, and the model is spreading among professionals and families in ways that were little anticipated, even by the venture capitalists funding this new era of cooperative capitalism
Mar 4, 2012
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C.E.O.’s are beginning to appreciate the value of recurring revenue in a way never before … the software industry adopted it, which caught people’s attention. Now you’re seeing companies in just about every kind of industry embracing it
“
” Mar 7, 2012
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One Year Later We are at the Tipping Point
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YOU Are The Tipping Point
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Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
Q2'10
Q3'10
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
ARR
“ ” In short order, Zuora has become the dominant player in cloud-based subscription systems.
Your Success Has Powered Our Growth
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Your Success Pulses Through Our Servers
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$12 Billion Total Invoice Volume
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Customer Satisfaction Graph – pie chart of 95% customer satisfaction
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But We’re Only Just Getting Started…
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1494 A.D.
Luca Bartolomeo Pacioli
invents the system of Double Entry Bookkeeping
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To the CFOs of the modern era
Double entry accoun;ng becomes the cornerstone of modern accoun;ng
For over 500 years, the system has worked…
32
Until Now
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A $100 is a $100 is a $100. The rules say it all goes in the same account.
You Need to Differentiate Between One-Time and Recurring Amounts
The Problem:
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The rules don’t allow me to spread these amounts over time. Now you’re just being a rebel.
You Want To Spread Revenue Over Time The Problem:
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I don’t have a rule for that. You’ve got yourself into quite a mess…
Your system doesn’t know what to do when subscriptions change
The Problem:
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• Revenue Recogni2on
• Complex Recurring Billing • Changes, Adjustments, Credits
Revenue managers are drowning in spreadsheets
The Result:
• Subscrip2on Metrics (MRR, ARR, CLTV)
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“We need more 2me”
The Result: It takes Weeks for finance teams to close the books
- Finance Team
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Actually run the business here. Appease the auditors here.
AR
Revenue
600M
600M
Debit Credit
CFOs are maintaining 2 sets of books
“PwC will love these.”
The Result:
39
CMOs are prevented from implementing new innovations
The Result:
40
CEOs have a hard time explaining their success to Wall Street
Page 11
The Result:
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And Wall Street fails to value Subscription Businesses correctly
“ CRM shares look heavily overvalued because rising revenue growth has actually translated to falling net income.
“ Maybe CEO Marc Benioff will one day be able to translate all of this low-margin selling into huge profits, but for now it kind of looks more like the Napster model than the iTunes model, and that concerns us.
The Result:
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The world of Finance is broken…
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It’s time to fix it
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Introducing Z-Finance
The World’s first finance application built for the Subscription Economy
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Z-Finance is built on a new foundation
Mul2 dimensional Ledgers
Intelligent Algorithms
Revolu2onary Data Model
Spread revenue over 2me
Powerful Rules Engine
Differen2ate between one 2me and recurring revenue
Calculates key subscrip2on metrics
Adapts to subscrip2on changes
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Accounting Close Tools tools to accelerate your month end close
Define rules to manage complex revenue recogni2on policies Tag charges with revenue revenue and deferred revenue GL accounts Tag charges with with revenue recogni2on rules Control revenue recogni2on trigger dates View earned and deferred revenue reports
✔
✔
✔
✔
✔
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Revenue Recognition Tools that handle complex revenue rules
Define rules to manage complex revenue recogni2on policies Tag charges with revenue revenue and deferred revenue GL accounts Tag charges with with revenue recogni2on rules Control revenue recogni2on trigger dates View earned and deferred revenue reports
✔
✔
✔
✔
✔
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Chart of Accounts to track charges through the revenue lifecycle
Create or import your chart of accounts Tag charges with GL account codes Tag transac2ons such as payments, credits, refunds, adjustments etc with GL account codes
✔
✔
✔
49
Easy Accounting Integration to unburden your IT team
Generate debit and credit journal entries to simplify your general ledger updates Align journal entries with GL accounts
✔
✔
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Tight Security Controls for audit peace of mind
Create custom user roles Associate roles with granular user permissions Control visibility and user ac2ons on sensi2ve financial data
✔
✔
✔
Reuse the audit peace of mind screen shot from the website
51
Tames your revenue recognition processes
Upgrades, downgrades, cancella2ons, refunds etc. are all taken care of!
We use SAP. We run our broadband business on Zuora … we get all our journal entries from Zuora … without time consuming and expensive customization
“ ” Vignessa Moorthy, CEO of ViewQwest
52
Unburdens your finance team, enabling your growth
Unleash your growth strategies without burdening finance
Vince Zumbo, CFO of Autotask
…Z-Finance makes it easier for us to scale as our business grows “ ”
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Gives you audit peace of mind
Rapidly review details of any transac2on from closed accoun2ng periods
Bruce McFadyen, CFO of Firehost
…they have nailed it with Z-Finance, providing the next level of audit friendly automation … “ ”
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• 300 accounting periods created
• Over 5 million financial transactions analyzed
• 207 accounting periods closed
Get up close and personal with Z-Finance Join Z-Finance PMs at 3pm in the Colonnade
55
Logos are fuzzy Also worried
white on yellow will get washed
out
56
Our Second Big Announcement …
57
Subscribe
58
Chasm
The Present
The Future
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Why is it so hard to GROW my business
Why Can’t I Make My Processes FLOW Why Can’t I Find
What I Need to KNOW
60
Product Relationships
61
Goal: Ship More Units
Goal: Build Valuable Relationships
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The Strategies Required to Grow a Subscription Business are Very Different
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Product Business
Design Product
Make Product
Sell Product
64
Acquire New Customers
Increase the Value of Your Customers
Reduce Churn
Subscription Business
65
Packaging & Pricing Strategy
Acquire New Customers
Increase Value Per Customer
Reduce Churn
Launch First Product X
Add-‐on Op2ons X
Monthly vs Annual Op2ons
X X X
Higher Edi2ons X X
Lower Edi2ons X X
Product Bundles X
Pricing Tiers X X
Usage & Overage X X X
Mul2ple Currencies X X
Renewals X
Pricing Changes X X
Regional Pricing X
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Can’t Support the Pricing & Packaging You Need to Grow
Your Existing Systems
67
The Processes Required to Make a Subscription Business Flow are Very Different
68
Product Business
Quote-To-Cash
69
Subscription Business
Quote-To-Cash Renewals Payment Failures Account Suspension Amendments Account Management
70
Commerce
Billing
Finance
Book Order & Ship It
Invoice & Collect For It
Recognize It
Product Business
Order Invoice Revenue
71
Subscription Business
Order
Invoice
72
Subscription Business
Invoice
Revenue
73
Subscription Business
Invoice
Orders
74
Subscription Business
Orders Invoices
Revenue
Center symbol needs to convey much more
chaos
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Subscription Business
Commerce
Billing
Finance
Order
Invoice
Revenue
Could use beFer treatment for those
arrows
77
Can’t Support the Processes Needed To Make Your Business Flow
Your Existing Systems
78
What you Need to Know with a Subscription Business Model is Very Different
79
Traditional Income Statement
Need beFer way of displaying text (needs
to be consistent across the three
slides)
80
Revenue ARR
$0
$100
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Subscription Economy Income Statement
ARR $100 Churn (10) Net ARR 90 COGS (20) G&A (10) R&D (20) Recurring Profit 40 Growth (40) Net New ARR 40 Ending ARR $130
Retention Rate
Growth Efficiency Index
Recurring Profit Margin
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The Three Key Metrics of the Subscription Economy
ARR less Churn less Non-‐Growth
Spend
Recurring Profit Margin
How much of your ARR you
keep every year.
How much does it cost you to acquire $1 of
ACV
Retention Rate
Growth Efficiency
“ The metrics for Cloud computing is fairly different from traditional enterprise software. ” Bessemer Venture Partners – Top 10 Laws for Cloud Compu;ng
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Don’t Have the Metrics You Need to Know
Your Existing Systems
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I Need a System That Helps me Grow , Flow and Know in the Subscription Economy
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Your Systems Today
CRM ERP GL
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Products Relationships
87
Goal: Ship More Units
Goal: Build Valuable
Relationships
88
Enterprise Resource Planning
Relationship Business
Management
89
We’re Here Today to Announce Z-Business,
The World’s First Relationship Business Management System
90
Z-‐Business Is Built On a Founda2on For the Subscrip2on Economy
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Z-‐Business Solves Your Rela2onship Commerce Needs
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Z-‐Business Automates Your Billing and Payment Processes
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Z-‐Business Revolu2onizes your Finance Opera2ons
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Z-‐Business Plugs Into Your CRM and GL
95
Our Mission: Help you succeed in the Subscrip2on Economy
FLOW: Run and flow your subscrip2on business processes efficiently.
GROW: Build and grow your subscrip2on business and revenue.
KNOW: Have the right metrics to op2mize your subscrip2on business.
Z-‐Business Helps You Grow, Flow and Know
96
thank you.