As the software industry has evolved from a perpetual license model to SaaS pricing models, companies have evolved in how they approach working with their customers. Delivering a wonderful customer experience is no longer limited to building a good product but extends to all customer touchpoints and ongoing customer engagement. For the best SaaS companies, these customer interactions are not a cost center but rather a critical component of a larger revenue growth and optimization strategy. These companies have an intimate understanding of where, when, and how customers find value in their product as well as how to drive additional value to their customers through strategically-timed actions.
Increased sophistication around analysis of SaaS companies has brought into focus such industry standard metrics such as net dollar retention, lifetime value, and customer acquisition cost. Success in these critical metrics separates great SaaS companies from the merely good ones. At DVC, we monitor net dollar retention as a measure of a company’s ability to retain and grow their existing customers relationships. Companies with high net dollar retention (115%+) trade at a meaningful premium to the overall SaaS market as shown in the chart below. It is not enough to make the sale on day one – you must make the sale everyday with continuous product improvement and highly engaged, empowered customer success teams. Additionally, revenue optimization has been underinvested historically, especially relative to the large amount of investment into sales and marketing enablement tools that tend to focus on adding net new logos rather than increasing the depth and breadth of existing customer relationships. This is why we are so excited to announce our newest investment in StepFunction.ai (“StepFunction”).
StepFunction is a Revenue Intelligence platform that leverages AI to discover customer intent before it becomes a decision. StepFunction works with SaaS companies to ingest their data and generate meaningful revenue growth opportunities by pinpointing upsell opportunities, predicting at-risk customers, providing pro-active warnings, and recommending precise actions for Customer Success teams to act upon.
Companies interact with their customers across various channels and the relevant data of those customer interactions is stored across various tools: CRMs (such as Salesforce and Hubspot), support tools (such as Freshdesk and Zendesk), analytics tools (such as Pendo and Mixpanel), feedback tools (such as Qualtrics) in addition to various other databases and customer data Platforms. However, aggregating and making sense of this data with meaningful insights remains an important problem yet to be cracked.
Metrics traditionally used to define customer satisfaction like Customer Satisfaction Score and Net Promoter Score are no longer sufficient for SaaS companies to measure or communicate how their customers are feeling. While there are existing products such as Gainsight, Totango, and ChurnZero that will continue to be a critical component of customer success toolkits of SaaS enterprises, customer health scores in these tools are usually non-predictive, are workflow driven, and do not provide meaningful insights for corrective or preventive actions. StepFunction is able to harness the power of AI to produce timely, impactful insights by leveraging data from the multitude of platforms with customer data.
Stepfunction.ai integrates with and ingests data from the many platforms used by enterprises to predict churn and contraction risks, identify expansion/upsell opportunities, and forecast renewals as well as recurring revenues. StepFunction goes beyond just providing dashboards and recommendations by integrating with core tools used by Customer Success professionals, generating calls-to-action within those tools and easily incorporating into an organization’s customer success processes and workflows.
StepFunction has gained significant traction with Fortune 500 enterprises and has showcased proven results for its customers with up to 50% reduction in churn, 5%+ increase in NDR, up to 80% better risk predictions, and 500% improvement in accuracy of identifying at-risk accounts. Customer feedback on the impact of StepFunction has been superb – both on the impact of their product and the quality of their team.
StepFunction is led by experienced founders Navneet Singh and Tej Kohli who have decades of experience in enterprise software and have worked in leadership roles at Google, Cisco, Vantiv, and Avaya prior to founding StepFunction in 2020. With over a decade of SaaS and AI focused expertise, they have personally experienced the enterprise pain points they are now solving at StepFunction.
StepFunction has successfully deployed its Revenue Intelligence platform at several Fortune 500 customers and grew its revenue 8x in the past 12 months, and the team is now focused on executing a growth strategy to become the category-leading revenue intelligence platform. We are confident that that the talented team at StepFunction is well positioned to capitalize on the opportunity to serve the ever-growing SaaS market with the leading revenue optimization tools.
We at DVC are excited to help accelerate StepFunction’s growth through our “DVC Advantage” program. Through our decades of experience and large advisory network, DVC is able to act as an extension to our portfolio companies’ team across companies’ needs in multiple areas such as product & technology strategy, executive mentorship, corporate governance, business development, and talent acquisition.
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