1. PAUL PHILP, FOUNDER & CEO paul@getamity.com Evolving SaaS Economics: The Strategic Role of Customer Success An analysis of the Pacific Crest 2013 SaaS Survey. SEPTEMBER 2013

2. Analysis Selected Slides from the Survey 2013 Amity Pacific Crest, along with David Skok of Matrix Partners, has conducted an annual survey of private SaaS companies since 2010. Pacific Crest is an investment banking firm with a strong focus on SaaS. David Skok is a highly respected authority in the SaaS industry. http://www.pac news.com/saa You can download the original survey at: http://www.pacificcrest-news.com/SaaS/ 3. Pacific Crest Survey Analysis Industry Growth Acquisition Channels ACV: New customers vs. renewals vs. upsells Trial-based ACV Commissions Average Deal Size Contract sizes and billing cycles Pricing Metrics Churn 2013 Amity 4. The SaaS Industrys Growth is Accelerating Driven by broad adoption of the cloud, and mobile. 2013 Amity 5. Use of Low Cost Acquisition Channel is Accelerating Land and expand and organic growth gaining momentum. 2013 Amity 6. Low Cost Channels are Expanding The SaaS model is bifurcating into high cost and low cost strategies. 67% 13% 65% 29% 6% 38% 54% 8% 25% 75% 100% 2011 2013 2011 2013 2011 2013 2011 2013 2011 2013 2013 Amity 7. New Customer Revenue is Expensive Upselling or renewing takes a fraction of the cost. 2013 Amity 8. Renewing Revenue is Highly Profitable Leveraging existing customer base the key to profitability. Remember: $1.00 upsell ACV costs $0.17. $1.00 new customer ACV costs $0.92. If a company is getting 25% of new ACV thru upsells, then for $1MM new ACV: $250,000 costs $42,500; $750,000 costs$690,000. ROI: 588% vs 109%. 2013 Amity Average excluding smallest companies: 20% 9. Fast Growth SaaS Leverages the Customer Base Faster growth at a lower cost. 2013 Amity 10. Trials Generate One Third of All New ACV 1/4 to 2/3 of respondents use trials of some sort. In 2011, trials accounted for ~19% of new ACV. 2013 Amity 11. Renewal Commissions now Standard Practice Recognizing the profitability of renewals and upsells. 2012: 50% 2013 Amity 12. Average Deal Size is Getting Smaller Consistent with the shift to lower-cost CAC. 2011 Median: $37.5K 2012 Median: $24K 2013 Amity 13. Customer cash flow is at increased risk. Average billing period has dropped significantly since 2012. 2012: Average Billing Period was one year. 2013 Amity 14. 2/3 of Revenue is Consumption-based At risk. 2013 Amity 15. Revenue Churn Has Almost Doubled Consistent with lower-cost acquisition, smaller deal size and consumption-based pricing. 2011 Median: 5% 2012 Median: 5% 2013 Amity It is interesting that only 66 out of 94 possible respondents answered this question. Could it be the rest dont know their churn rate? 16. Lower Cost Channels have Higher Churn The industry is moving to lower-cost channels, so churn is rising across the industry. 2013 Amity We suspect that Internet Sales is even higher there were only 5 responses. 17. What the Data Tells Us The SaaS model continues to evolve. 2013 Amity SaaS growth is accelerating Driven by adoption of the cloud, and mobile. 90% growth rate by internet distributors. Use of low cost acquisition is accelerating Model is splitting into high- and low-cost strategies. Trials generate one third of new ACV 1/4 to 2/3 of respondents use trials. Average Deal Size is getting smaller SMB and VSB fastest growing segments. Leveraging customer base is key to profitability and growth Renewing revenue is highly profitable. On average, companies are realizing 20% of new ACV from upsells. The fastest-growing companies are significantly higher: up to 35%. Renewal commissions now standard 50% paid in 2012, increased to 76% in 2013. Revenue churn has almost doubled Lower cost channels have higher churn. Customer cash flow is at increased risk Billing period has dropped from one year in 2012 to 3 months in 2013. 2/3 of revenue is consumption-based. 18. Conclusions SaaS 1.0: Enterprise Complex, top-down, cost- focused. SaaS 2.0: Personal Accessible, engaged, organic. Economic drivers Empowered buyers Empowered users Business strategy Replace on-premise products en masse Land, expand and organic growth Value proposition Reduce costs Collaborate and engage Customer acquisition Complex contracts Easy to try, easy to buy Customer relationship Break/fix: high complexity, low engagement Low complexity, high engagement Customer development Contract-based, negotiated Continuous and organic Business application stack Siloed Product and business alignment We are witnessing an industry transformation: 2013 Amity 19. 1. Generate Product Qualified Leads: Lower barriers to evaluation and adoption. 2. Use Inbound Marketing and Inside Sales: Focus on lower cost customer acquisition methods. 3. Align Product and Business: Horizontal layers over Departmental silos. 4. Focus on Personal Customer Success: High-engagement, personal service builds trust. 5. Scale Customer Engagement: Enable employee-to-people engagement throughout the customer journey. Easy to try, easy to buy, easy to engage. 2013 Amity Competing in the Next SaaS Wave 20. helps SaaS companies keep and grow their customers by: Removing time-wasting complexity from the customer success process, and Enabling customer-facing teams to spend more time engaging customers. Customer Success. Simplified. 2013 Amity provides the only scalable customer engagement platform purpose- built for SaaS. www.getamity.com @getamity 21. For more information contact: Paul Philp, Founder & CEO paul@getamity.com 647.927.8574 Thank You!