A Real Life SaaS Case Study: Eloqua. Marketo. Pardot. There Are 3 Different Paths to Success, My Young Padwan.

I don’t know about you, but I really can’t stand case studies.  They always seem either contrived (forcing contrasts in companies that aren’t really there) or else too hypothetical, because we know which way things really worked out in real life (Case Study: Company A had to decide whether to do action X or Y.  Yes, but we already know they did Y … so I really don’t want to talk about X).

But then, lo and behold, the SaaS world presents us with a rather wonderful one in Marketing Automation.  Pardot goes and gets itself acquired by ExactTarget for $100m.  So instead of a horse race, we now have a case study.  Of different paths taken, and different outcomes — all of them successful.  Pretty interesting.

[Disclaimer:  I am NOT an expert in marketing automation software.  I will get things wrong. I am sorry in advance.  And I know some of the folks below have different labels and visions.  I know “marketing automation” is a dated term.  I know it’s about much more than drip marketing and lead scoring.  Apologies again.  You are allowed lattitude in case studies ] With that, let’s line them up:

Case #1:  Eloqua.  The First(ish?) Mover.  Leading by Example.  Going Deep into the Enterprise

Were you around in SaaS in 2006?  If you weren’t, let me tell you, if you wanted to talk about next-generation (post-CRM) SaaS plays, there was just one word: Eloqua.  If you talked to anyone in the partner program at Salesforce in ’06, they said — go copyEloqua.  We even snuck into their Dreamforce party in ’06 just to learn.  Eloqua’s founder, Marc Organ, is a visionary and rockstar.  And Joe Payne, the CEO who came in and took them public, is the epitomy of a SaaS CEO.  Connect the dots, and you get to an IPO in 2012. Results:

• Founded: 1999.
• Capital Raised: $40m?, selling 80% of the company to get it.
• Revenue: $100m+ ARR run rate as of Q2’12.  $85m ttm GAAP revenue.
• Valuation/Liquidity Event: IPO!  $92m IPO in 2012.  $650m+ market cap.

Boom!  A real success story.  Medium capital raised, long journey, IPO’d.

Case #2:  Marketo.  Go Big, Go Hard, Go Strong.   High Velocity

Marketo clearly has been the Go Big player in the space.  Raised $100m+.  From personal experience: rockstar, super hard-charging founder/CEO, a rockstar SVP Sales.  Deep bench.  Rock and roll! Results:

• Founded: 2006.
• Capital Raised: $110m+, selling ???% of the company to get it.
• Revenue: $33min 2011 GAAP revenue.  So maybe we can assume today they are at $70m ARR plus or minus.
• Valuation/Liquidity Event: Let’s just assume they’re in or close enough to the billion dollar club.  Hot IPO prospect in next 12 mos.  DM me with info on the directed shares.

Boom!  A real success story.  Nine figures of capital raised.  Fastest trajectory.  (Correlated or opportunistic?)

Case #3:  Pardot.  There’s Room at the Bottom

It was about a year ago I started to hear a lot about Pardot.  Dell picked EchoSign and Pardot as part of its super-successful Dell Cloud Application offering.  Then, I remember a good friend of mine who is one of the smartest on-line marketers I ever made told me he used Pardot.  Why?  ”It was simply a lot cheaper.”  So there was real room at the bottom, which Pardot clearly took advantage of.  And while I don’t personally know the CEO, he certainly has great insights and taste. Results:

• Founded: 2007.
• Capital Raised: Absolutely NONE near as I can tell.  Self-funded according to the Internet.
• Revenue: $7.4min 2011 GAAP revenue.  So maybe we can assume today they are at $15m ARR plus or minus.
• Valuation/Liquidity Event: $100m acquisition by ExactTarget in October 2012.  Happy Halloween there, boys!

Boom!  A real success story.  Zero figures of capital raised apparently, just some debt from Silicon Valley Bank.  Founders make tens of millions of dollars, I presume.  They did have to forsake a closing dinner with their VCs, though.

Ok — so which path is “best”?

Depends on your goals, and how you look at it.

>> The guys (no gender association intended) at Eloqua had an awesome IPO and a clear win.  Period.  I.  P.  O.   A long slog, but they did it on a moderate amount of capital with great happy customers.  {The dilution is painful though.  Unfortunately, it can be expensive to be early.}

>> The guys at Marketo Went Big.  And are Still Going Big.  With a B for Billions.   Great team, great momentum, huge beta.  This is the stuff of Sand Hill VCs and the Billion Dollar Club.  As long as valuations and the public markets stay where they are, it’s the highest beta, but the highest potential absolute reward.  This should overcome the dilution, as long as they can continue to hyper-execute. Attention Mark Andereesen, or however you spell it — make pre-emptive Series H offer to invest at $4 billion pre-money.  I will continue to cheer them from the sidelines.

>> The guys at Pardot never had to take dilution, deal with VCs, or near as I can tell, do anything other than things just the way they wanted to, and seem to have had a great time doing it.  From Atlanta.  And made tens of millions each as founders, probably.  Who knows, maybe even $30-$40m each.

I dunno which is best.  But as a SaaS founder, take one lesson away — know who you are.  Recognize the track that fits you and the team.  I know Phil Fernandez was going Big and all-in from Day One.  Are you?  Tilt, scramble, make it happen, of course.  But listen to yourself and your market and your customers.  It’s not always binary.

And measure your success by your own yardstick. I’m pretty confident that’s what the Eloqua, Marketo and Pardot guys each do.  Each is a success story.  Don’t listen to Sand Hill Road, or TechCrunch, or Wannapreneurs, or Wannabes, or Hangers On.  At least not too much.   Whatever you do: don’t raise $100m and sell for $100m. A win is a win.  It’s your life, not theirs.

(Cross-posted @ saastr)