00:00welcome this is Scott Cooper from
00:01andreessen horowitz and we're here with
00:02Ron Gill the CFO of NetSuite among other
00:04you know phenomenal accomplishments in
00:06his career and we're gonna talk a little
00:08about sass and in particular since we've
00:10got the benefit of Ron being here a
00:11little bit of kind of you know the
00:13intersection and some of the differences
00:15potentially between how public companies
00:16think about sass and and managing their
00:18businesses and also you know kind of how
00:20private companies think about running it
00:21so maybe just to get the conversation
00:23started let's talk a little bit about
00:26kind of the valuation environment today
00:28and you know unless you want to you
00:30don't have to tell us whether you think
00:31you know things are wildly over or
00:33undervalued but but probably it more you
00:35know high-level kind of you know what's
00:37the argument for why SAS businesses
00:39actually you know ought to have
00:40valuation premiums relative to kind of
00:42what their traditional you know you know
00:44subscription or sorry if you know
00:45perpetual license businesses have right
00:47yeah I think there are some fundamental
00:50reasons why dollar SAS revenue is more
00:53valuable than a dollar of non recurring
00:55revenue I mean there's the the
00:57fundamental aspect that it recurs is is
00:59vibin sites that's probably the first
01:01thing I would say it's just the annuity
01:02aspect is so is so valuable if you look
01:05at a company like NetSuite at a high
01:08rate high retention low churn SAS
01:11company and you do a cohort analysis
01:13you'll get a you get a year-over-year
01:16increase in value of the entire install
01:19base of customers so more than more than
01:22a hundred percent even after attrition
01:24after churn a year later the install
01:26base is worth more than it was the year
01:29before and that means that acquiring a
01:31customer is a huge value you're
01:33acquiring better than a perpetual
01:35annuity every time you acquire a
01:36customer so that dollar of revenue
01:38that's on the P&L this year this quarter
01:41represents better than a perpetual
01:43annuity of that revenue which is which
01:45is fantastic so that's the first reason
01:47the second reason is really because that
01:51annuity is not very expensive to
01:53maintain a company like NetSuite has a
01:55as a gross margin on recurring revenue
01:57that's 86 percent so it's a very
02:00profitable annuity the portion you know
02:03the big biggest portion of sass P&L is
02:04spent on sales and marketing but I would
02:06argue that that is being spent on
02:07acquiring growth and a small portion of
02:11the sales and marketing is going
02:13to maintaining that annuity and so what
02:16we see is that whenever a SAS company
02:18turns down the growth we get
02:20profitability and cash flow falling out
02:22of the model very quickly very
02:24dramatically for NetSuite it was 2009
02:27the worst recession any of us have ever
02:30revenue growth slowed for recurring
02:33revenue slowed from in the 40s to about
02:3516% in 2009 but that was the year we
02:38became net income positive that was the
02:40year we became operating cash flow
02:41positive that was a year success factors
02:43became operating cash flow positive in
02:45the middle of the worst recession any of
02:47us have ever experienced and is because
02:49nobody in 2009 was planning for 40%
02:53growth the following year everybody was
02:55in a much more conservative place then
02:56and in that environment all the sudden
02:58get profitability all of a sudden you
02:59get cash flow so I think that's the
03:00second reason is that the I believe that
03:03the SAS companies really are inherently
03:05quite profitable quite cashflow
03:07generating and that that the profit and
03:10cash flow is being used currently to
03:12purchase for future growth to purchase
03:14more of those better than perpetual
03:16annuities which is certainly worthwhile
03:17and then the third reason I think that
03:19the SAS company valuations are high that
03:22makes sense is there there is a
03:24fundamental transformation taking place
03:26I I lived through the the mainframe -
03:30client-server transformation that
03:32happened in the 90s I was at sa P when
03:34r3 was coming out and sort of taking
03:37over the world then nobody survived that
03:39transition it was it was just a
03:41architecture or just a technical
03:43transition from the mainframe model to a
03:45client-server model there was no
03:47business model transformation it was
03:49perpetual license to perpetual license
03:51and yet no vendor survived that
03:54transition you ended up with all of the
03:56three-letter acronyms ERP CRM supply
04:00chain management all of those emerged in
04:02the client-server market with nobody
04:04really making the transition from
04:05mainframe to client-server and I think I
04:08believe very much that that's what's
04:09happening again that's that's what I
04:11believed in when I came to NetSuite in
04:13the first place and I really see that
04:15it's really see that happening so I
04:16think the third reason of the the
04:18the high valuations in sass is because
04:21there really is a transformation and I
04:23really believe that the sass companies
04:25really are going to take over a lot of
04:27the markets it's a much harder
04:28transition this time it's not just I
04:31need to build a similar solution on a
04:33new architecture it's I've got to do
04:35that and transform the business model
04:37from everything up front to defer it
04:39over time and that's a very hard
04:41transition for companies to make so I
04:43think a lot of the sass companies are
04:44really going to take over the space that
04:46they're that they're entering yes that's
04:48that's interesting maybe just to tease
04:49out a couple of those things so you know
04:50one one thing that you mentioned right
04:53is this idea of the inherent leverage
04:55and scale on these businesses and that
04:56sales and marketing expense which is
04:58really kind of a forward-looking measure
04:59of where that growth can be is a lot of
05:01what when people complain about gee
05:02these sass businesses are great but
05:04we're not seeing anything drop to the
05:05bottom line it sounds like you know one
05:07of the one of the you know things that
05:08you believe is we could inherently get
05:10these businesses profitable tomorrow if
05:12we decided we didn't want to grow at 25
05:13or 30 or 40 percent a year and so the
05:15leverage is there just that the future
05:17growth opportunity is so high that you
05:18know the investments in sales and
05:20marketing are you know are scaled so
05:22that we can actually get to you know
05:23what we think is long-term market
05:25dominance in these companies yeah that's
05:27exactly right and you certainly want to
05:28make sure that you're investing in such
05:31a way that you're getting the yield so
05:33there's there's a whole bunch of other
05:34metrics that you're going to use to make
05:36sure that the money that you're spending
05:37in sales and marketing is doing what
05:39you're trying to do with it and it is it
05:41is turning on a bunch of perpetual are
05:45better than you know better than
05:46perpetual annuities it that it is really
05:48yielding yielding as it has before maybe
05:51maybe even that yields increasing you
05:53don't want to be just spending money
05:54foolishly so you're gonna use other
05:55metrics to tell that but fundamentally
05:57if you're looking at the sales and
05:59marketing expense on the P&L of a SAS
06:01company you're comparing that to the
06:02revenue this period on the P&L of the
06:05SAS company you're comparing the wrong
06:06thing right your comparing an investment
06:09that's being made in future annuity to a
06:12revenue that's that's just today if we
06:14if you have an extremely successful
06:16quarter in SAS you may turn on a lot of
06:19annuities you'll see none of that rocky
06:21NL right in the quarter that you do that
06:22yeah that makes sense I want to come
06:24back to the metrics comment you made
06:25earlier some people would be interested
06:26to hear about that but one other one of
06:29their comment I would just
06:31also mention is you described obviously
06:33you know what's different this time and
06:35you mentioned kind of transformation
06:36from mainframe to client-server and now
06:37obviously from client-server to cloud
06:39and clearly there is a technological
06:40transformation as you talked about
06:41absence is you know how do you think
06:42about the architecture how do you think
06:44about multi-tenancy the other thing
06:46which you alluded to also which i think
06:47is happening also is there's a
06:49difference in terms of how IT is
06:50purchased and deployed within companies
06:53that actually has a big you know big
06:54ramification so one of the things that
06:56we talked for example with some of our
06:57companies about is you know in the
06:59client-server world the gating item to
07:01deploying multiple applications in a
07:03company was how many applications could
07:05the IT organizations support and deploy
07:07and integrate and so because you had
07:09on-premise stuff you know the IT
07:11organization really was that kind of
07:12gate both from a budget perspective as
07:14well as an ultimate support perspective
07:15for in-house applications and one things
07:18I think that people under appreciate on
07:19SAS is we've eliminated one of those big
07:21gates which is we've now said look you
07:23IT organization aren't responsible for
07:25the day-to-day management and you know
07:26you know kind of deployment of this
07:30and therefore you know we we can have in
07:32theory many more applications deployed
07:34in a enterprise environment than we had
07:36historically in the client-server era I
07:38think that also in some respects you
07:40know causes budgets to get you know
07:42moved out from the CIO in the
07:43departmental level things which allow
07:45kind of bottoms up selling so I'm
07:47curious whether you know as you think
07:48about your business you know you think
07:50that's a real transformation and you
07:51know does that mean that we ought to
07:52expect overtime you know just more
07:55applications in the SAS world in an
07:57enterprise than we had historically seen
07:58and kind of you know broader dislocation
08:01of budgets potentially from centralized
08:03purchasing much more out to departmental
08:05level purchasing fundamentally yes I
08:09think the the the phenomenon you're
08:10talking about is very real and it it
08:12really started with Salesforce you know
08:15years ago sort of emerging the initially
08:18not even the head of sales initially
08:19somebody down in the sales organization
08:20emerging that person as a buyer of IT
08:23when that person had never been a buyer
08:25of IT before and they weren't before
08:27because they had to go through not just
08:28the CIO but the CIO and the CFO together
08:31and the CFO and the CIO together were
08:33the probably the primary purchasers and
08:35certainly the primary gateway you had to
08:37get through to purchase IT so you get an
08:40emergence of a new buyer there and
08:42certainly then they're making
08:43Asians differently they're getting more
08:45point solution-oriented and you're
08:47exactly right you don't need the IT
08:49department to then maintain that
08:51solution especially if you get if it's a
08:55true multi tenant SAS model where well
08:57you're constantly running on a current
08:59version and where customizations can be
09:01perpetuated through multiple versions
09:03without additional work there's a much
09:06less need for the IT department there so
09:09I think that that absolutely continues
09:11we're seeing the emergence of additional
09:13buyers in the organization as the head
09:15of HR or the head of marketing emerges
09:18buyers as well so I definitely think
09:20that phenomenon is true at the same time
09:22I wouldn't completely eliminate the need
09:25for the IT department they're certainly
09:27maintaining integrations between systems
09:29I think that can be underestimated
09:30there's you know SAS systems in terms of
09:35a multi-tenant SAS system up you know
09:38being constantly updated itself not
09:40requiring a reimplementation when
09:42there's a major upgrade that type of
09:43thing wonderful but fundamentally if you
09:47integrate two of them somebody will have
09:49to maintain that integration somebody'll
09:51have to do that integration and somebody
09:52will have to maintain that integration
09:53and there's no guarantee that as you
09:56upgrade the two systems that you don't
09:58break that integration so you don't
10:00completely get away from it but
10:02certainly in terms of the scale of the
10:04IT function I needed to do this it's
10:06vastly yeah I think I think the IT
10:08organization I agree is not going away
10:09the nature of what they do might be
10:11changing which is more heavy emphasis to
10:12your point on integration and also
10:13things like security user administration
10:15you know stuff like that that might be
10:17more relevant so let's come back to kind
10:20of the one of the fundamental concepts
10:21we talked about right which is you know
10:24the idea of sales and marketing and
10:25investing in the future for growth and
10:27you know that that you know when you
10:28look at the P&L today obviously you
10:30might be you know people might be over
10:33extrapolating in terms of what the
10:34actual expense base is relative to what
10:36the growth opportunities are right how
10:38do you so we've talked a lot about
10:39metrics and I'd love to hear how you
10:40guys use them so there are metrics at
10:42least in theory that are supposed to
10:43help inform that decision process like
10:45things like CAC and LTB and what the
10:47relative ratio is between those you know
10:49a lot of commentators talk about kind of
10:50these magic numbers right which is
10:52what's the kind of you know you know
10:53magic triangle for how these things
10:55look at you know as someone who
10:56obviously you know kind of manages you
10:58know a public you know SAS company how
11:01do you think about those to help inform
11:02decisions about investing in sales and
11:04marketing and kind of how slavish or not
11:07do you get to magic numbers versus kind
11:09of you know understanding the underlying
11:10economics that you're dealing with sure
11:12and and in in one sense I'm a big fan of
11:17that of that fundamental metric the the
11:20Lt Vedic said the lifetime value of the
11:21customer compared to the cost of
11:24customer acquisition I'm a big fan of
11:26that metric because I like how holistic
11:28a metric it is I think it captures
11:30because it has within it the gross
11:32margin on recurring which really speaks
11:34to the architectural efficiency it
11:36speaks to the quality the operations
11:37team it has in it the retention number
11:39which of course speaks to your ability
11:41to satisfy customers the ability to keep
11:42customers it has the the sales
11:45effectiveness metrics in it what is it
11:46what does it cost to acquire a customer
11:48and so because it has so many of those
11:50which are such core SAS success metrics
11:53sort of rolled into it I'm a big fan of
11:55the metric overall I'm not a giant fan
11:59of the absolute so that the number has
12:01if the number is this to hit the
12:03accelerator if it's this you know slow
12:05down I'm not a big fan of those
12:07necessarily because I think there's just
12:09too much variety and models and there
12:11been too many times when somebody's been
12:12able to build a base and then shift and
12:14turn on something in a very dramatic way
12:16the way we use those metrics internally
12:18is first we certainly measure them
12:20longitudinally we're always looking at
12:21ourselves against our past with almost
12:24any metric we do and trying to get
12:26better at what we've done and so our is
12:28the metric tracking better than it's
12:30been in the past do we know how to make
12:31it track better in the future is
12:33probably the fundamental way we use
12:34almost any metrics so longitudinally we
12:37also fairly regularly do a regression
12:39analysis on LTV to CAC again because
12:42there's so many component pieces that
12:44drive it I really want to understand if
12:47things have been getting better why have
12:49they been giddy here which one of the
12:51drivers has been the driver that's been
12:52driving that improvement our lifetime
12:54value of a customer has improved
12:56slightly more than doubled in last two
12:58years at NetSuite and if you looked at
13:00that for the last two years and did that
13:02regression analysis you'd find a very
13:03different driver than if you looked in
13:05the sort of 2010 to 2013 period and
13:08drivers then if you looked back in say
13:112009 10 11 you would have seen improving
13:15retention rate as being a dramatic
13:17driver in improving the improving LGBT
13:19CAC and then we could see that that was
13:22getting very very good it was probably
13:24getting as good as it could the
13:25remaining churn that we had is primarily
13:28companies going out of business
13:29companies getting acquired things that
13:30are going to be very hard to address
13:31with a better product or a better
13:33support and so you start to look for
13:36what's gonna be the next lever I know
13:37this one can't take me to the next step
13:39where the levers going to be if you
13:41looked more recently you'd probably see
13:43average deal size as being as being a
13:45significant lever and so we're
13:47constantly doing a regression to sort of
13:49see what are the drivers that are moving
13:50the needle today we do a sensitivity
13:52analysis see what's the where could I
13:55get the most bang for the buck by
13:57tweaking something now and so that's
13:58that's the way we use those metrics and
14:01I increasingly see private companies
14:04getting more and more sophisticated
14:05about these metrics really using them
14:07internally a lot I see the management
14:09teams the board's having more experience
14:10with them and I think they're just being
14:12more and more widely used the other way
14:14that they're very useful of course is
14:15segment analysis if you've got very
14:17clear segments that you can separate in
14:19your business and look at this it is
14:21very informative there about where where
14:24the where the investments yielding the
14:26interesting so what's interesting and
14:29presumably you know you've got the
14:30challenge which is you're a public
14:31company obviously so all the things
14:33you're talking about are its data and
14:35access that you have certainly internal
14:36to the company that you can I used to
14:37manage the business but presumably you
14:39know you spend a significant amount of
14:40your time kind of managing you know
14:41research analysts in the street you know
14:44how do you kind of compare contrast or
14:46what are the things that they care about
14:47that they're looking to for measures of
14:49health of the business whether those are
14:50things like deferred revenue or other
14:52aspects how do you think about kind of
14:54managing both internal metrics that you
14:55haven't yet you know kind of we'll
14:57probably can't really you know a very
14:58you know logical way exposed to the
15:00street versus what the street can
15:01actually access by looking at your
15:03financial statements and trying to
15:04conclude about the health of business
15:05that's right and and certainly you know
15:07internally you're going to be much much
15:09much more granular much much much more
15:12detail than you then you're going to be
15:14externally both because of just the the
15:17information that's visible externally
15:19and because probably the appetite
15:20for digesting that information so ex
15:23externally you know it's really evolved
15:26that the street pays a lot of attention
15:27to calculated Billings for better or
15:29worse you can spend some time talking to
15:32the street about I spend a great deal of
15:34time talking to the street about why the
15:36calculated Billings number is not very
15:37meaningful nobody pays any attempt for
15:39the audience maybe just give people a
15:40sense of kind of what calculated feeling
15:42sure and why people why the research
15:44analysts care about that absolutely so
15:45calculated Billings is a number that
15:47research analysts can get from the
15:49public financial statement so they do it
15:50by taking the change in deferred revenue
15:52plus revenue and and in a in a
15:56completely stagnant booking billing
15:59environment that would be a great
16:00approximation of billing it wouldn't be
16:02a great approximation of booking
16:03necessarily but a good approximation of
16:05Billings so they said they take that and
16:07and for SAS companies like ourselves who
16:09don't provide a bookings number
16:10externally they're gonna use that as a
16:12proxy for the bookings number and so but
16:15it gets affected in strange ways by
16:17billing term it gets affected we you
16:20know we we have made an intentional
16:23effort to do for example more time and
16:26materials professional services work and
16:27we make that decision because it's the
16:29right decision for the business because
16:30of the way those projects are managed
16:32work better for that type of project the
16:34result is though that you know fixed
16:36price projects are build up front timing
16:38materials projects are billed monthly in
16:40arrears they look very different from a
16:41capitation Billings point of view
16:42frankly we don't care we're gonna manage
16:45the business the way the right way we
16:46think for the business but it means I
16:47need to do some explaining sometimes as
16:49to how those things impact right what
16:51can be seen externally right which is
16:53calculated Billings you know from
16:54different revenue do you think do you
16:55think there's a scenario do you think
16:57there's a scenario in the future as SAS
16:58becomes you know presumably more
16:59mainstream as a software platform that
17:01the actual public metrics change and or
17:04you know you know god forbid but maybe
17:06GAAP actually you know figures out
17:08internal metrics that the companies use
17:10actually might become you know ought to
17:11be standardized and ought to be external
17:13GAAP metrics that people can use for the
17:14business or do you think that's just a
17:15crazy idea it's it's it's it's a good
17:17question the certainly one of the
17:20challenges today and there are some
17:22companies that that publish some of the
17:26what you would think of as SAS metrics
17:28whether that's our average revenue per
17:31or retention metric or a cost of
17:33customer acquisition there are some
17:35companies that publish those things the
17:37real challenge is a lack of
17:38standardization of definition right and
17:41so you know I think the good news is as
17:43long as as long as people are
17:46intellectually honest they can define
17:47those metrics in a way that makes sense
17:49for their business they can define the
17:50churn metric in the right way for their
17:53business so for us we only ever look at
17:55a dollar based churna metric for example
17:57never look at a customer base churn
17:59because we've got you know we have
18:00customers anywhere between a few
18:02thousand dollars a year to several
18:03million dollars a year the churn rates
18:05significantly higher and the smaller
18:07customers again because going out of
18:08business and getting acquired is the
18:10number one way one in two ways to churn
18:12and so to look at a customer count churn
18:15is not particularly meaningful to look
18:17at a dollar churn as meaningful for a
18:18different company though maybe the
18:20dollar I mean maybe the customer account
18:21number way would be right so you're able
18:23to define those metrics in the way that
18:25makes sense for your for your business
18:26the challenge with having to file them
18:28publicly is a lack of standardization
18:31right and so I don't know because they
18:34are non directly financial so they don't
18:38impact the statement of operations the
18:40balance sheet of the cash flows in an
18:42indirect way I'm not sure whether it
18:44will get that standardization but that's
18:45the challenge where companies have filed
18:48those today they typically come with
18:50several sentences of explanation of how
18:53the calculation is done and it's still
18:55often still not clear how the
18:57calculation is done and there's and
18:58there's a real danger of having complete
19:02diversity of calculation method for
19:04something that everybody gives the same
19:05name right and there's actually more
19:07confusion than clarity yeah this is the
19:10fundamental challenge of course Ron one
19:11of the things that at least we look at a
19:13lot in this market is you mentioned kind
19:15of the transformation from mainframe to
19:16client-server and kind of you know that
19:18there was a lot of companies that could
19:19make that transition in part because the
19:21architectural changes and we've been
19:22talking a little bit this morning about
19:23how significant the architectural
19:25changes are from client-server to SAS as
19:26well as kind of the sales and go-to
19:28motion go to market motions that happen
19:30in these companies you know when I look
19:32at kind of a lot of the big income
19:33players out there whether it's an Oracle
19:35or an S AP or others and they're
19:37competing against you know market
19:39segments that NetSuite and others have
19:40you know how do you think about kind of
19:42you know if you're inside those
19:44difficult is it to move the business
19:45from a perpetual license business to a
19:47SAS business you know how do you think
19:49about engineering cycles how do you
19:50think about sales cycles what are some
19:52of the kind of you know if you were
19:53running those companies you know how
19:55would you actually manage a transition
19:57like that you know if at all yeah it's a
19:59it's a really interesting question I
20:00think it really is a difficult
20:02transition and it's funny because I
20:05there's so there's sort of two aspects
20:07of it there's the engineering side we
20:08need to rebuild a product rebuild a
20:10functionality set in a multi-tenant SAS
20:13model and then having done that we need
20:15to then transition the business to
20:17delivering that way instead of the old
20:19way and I have I had been thinking for
20:24so long that the engineering part of
20:26that was the easy part and that these
20:29are big technology companies they know
20:31how to develop software they'll develop
20:33cloud solutions and then they'll really
20:36be challenged on the sales side
20:37I've been largely wrong about that
20:39because it's been it's taken much longer
20:42than I expected for those companies to
20:43really come up with good cloud solutions
20:46we see a lot of acquisition but we don't
20:48see a lot of perpetual license companies
20:50really growing solid cloud solutions
20:52in-house once they have cloud solutions
20:56then the real challenge becomes how do
20:58you transition the business and that's
20:59the difference the last time this
21:01happened just an architecture change no
21:03change in the fundamental licensing
21:05model now you've got the architecture
21:07change plus a business model change such
21:11that a deal that sold last year for a
21:14hundred thousand dollars that hit the
21:16P&L the quarter that you sold it now
21:17shows zero on the P&L and is going to
21:20show eight thousand dollars a month for
21:22the next twelve months and so you get
21:24it's very difficult to manage especially
21:27for a public company that transition and
21:30it's very difficult everyone always
21:32wants to say how do I incentivize my
21:35sales rep to get through that transition
21:36and the first question you really need
21:38to get crystal clear on is what exactly
21:41do you want because usually the
21:43conflicted part of the organization is
21:46actually much higher than the sales rep
21:48so do the CEO and CFO really have a
21:52clear understanding of how much of the
21:54business they want to transition how
21:56because that's very much going to affect
21:58the way the earnings calls look for some
22:00time if they're crystal clear on that
22:02then I think it's fairly straightforward
22:04to give incentives to do that to the to
22:06the sales organization so they make the
22:08transition but it's it's it's the
22:10challenge to get crystal clear on
22:11exactly how fast you want to make the
22:13transition because it's a painful
22:14transition right right maybe just one
22:16more question just on that topic which
22:18is around sales commission and sales
22:20organization so you know in a SAS model
22:22obviously we're you know there might be
22:23you know there might be a tendency for
22:25people to want to do multi-year deals
22:26either coming from the customer side or
22:28from the sales side you know how do you
22:30at NetSuite or how do you think about
22:31kind of in the canonical case you know
22:33what's the right compensation
22:34you know structure for sales guys how do
22:36you think about separating potentially
22:37you know hunters from farmers you know
22:39in the you know kind of overall you know
22:42scheme right so we we primarily measure
22:45our sales measure bookings on annual
22:49contract value and so we're gonna we're
22:52gonna look at we do primarily one-year
22:54deals but even when we do a multi-year
22:56deal we're really going to look at its
22:58one-year value and not there's no reason
23:00for me to think of a three-year deal as
23:02more valuable than a comparable one-year
23:05deal our retention rates are very high
23:06we're gonna get we're going to get the
23:08second in third year even if even if
23:12it's not locked into that initial
23:13contract so that's the way we look at
23:14the business we very much use one-year
23:16contract value as the way to measure
23:18thing that is the fundamental basis for
23:20sales comp as well that's the
23:21commissionable amount that's what quotas
23:23are set on so new business reps are
23:25really there to sign up new accounts
23:26they'll own that account for a certain
23:28length of time to make sure the
23:29customers up and live and happy and then
23:32we're gonna hand it over to an account
23:33management rep different compensation
23:35model for an account management rep to
23:37keep to keep customers happy and in the
23:39long term and keep that renewable base
23:41going you know I had one question for
23:44you and that is given some of the things
23:46that we've talked about and sometimes
23:48the challenges of getting the street to
23:50understand the SAS model the amount of
23:52time a public company CFO spends talking
23:55with the street and some of the some of
23:57the difficulties of operating as a
24:00I wonder what what you guys are thinking
24:02we are seeing private companies sort of
24:05stay private longer we're seeing later
24:08would have traditionally been public
24:09company investors the fidelity's of the
24:11I wonder what what kind of advice you're
24:13giving your portfolio companies in terms
24:14of when they should be thinking about
24:16going public and and how compelling it
24:18is to be a public SAS company yeah it's
24:21a really it's a really good question and
24:22you know right now the advice we're
24:23giving our companies is in general quite
24:25frankly is to stay private you know as
24:27long as they have access to the capital
24:28resources they need to grow the business
24:30in the private markets and I think the
24:32reason for that is a lot of stuff you
24:33mentioned which is it gives them the
24:34ability to think longer term it gives
24:36them the ability to think about you know
24:37CAC and LTV and other metrics that
24:38hopefully give them you know a broader
24:40base for growth without having to deal
24:42with some of the issues that you know
24:43you have to deal with in the public
24:44markets I think the reality of it though
24:47is at some point in time kind of the
24:48companies will go public probably for a
24:50couple reasons one is that we do think
24:52you know at some point there has to be a
24:53more formalized liquidity market
24:55particularly for employees and what we
24:57see in the private markets today is you
24:58do see some kind of you know small
25:00tender offers that companies are doing
25:01where they're saying gee if you've been
25:03here for a couple years you know we're
25:05gonna let you once a year or sell up to
25:07ten percent of your stock at you know
25:08some predefined price and you know so we
25:10kind of take a little bit of the edge
25:11off and give people some liquidity and I
25:13think that's a good interim solution but
25:15my sense is at some point in time you
25:16know you kind of probably have to have
25:17them more fully formed
25:18you know the quiddity opportunity for a
25:20broader employee set and then the other
25:22area is to the extent acquisitions are
25:23important for these companies you know
25:25it's still very hard to do private to
25:27private acquisitions where you know you
25:28spend so much time fighting about my
25:29relative value versus your relative
25:31value and you know the one thing that
25:33the public markets do well is look they
25:35give you a report card every day right
25:36so we know what the price is and at
25:39least it does make it easier if you're
25:40particularly different on the
25:41acquisition side to think about
25:43acquisition so those are really I think
25:44probably the most compelling drivers
25:46that will ultimately get people to go
25:47public but I think the phenomenon we're
25:49seeing is something that's not going to
25:50go away for a long time which is you
25:52know as long as capital is available -
25:54they sent that it has been in the
25:54private markets there's gonna be a
25:56strong tendency for companies to stay
25:57private as long as they can so we're
26:00gonna wrap for today thank you Ron again
26:02for spending time with us this has been
26:03great and hopefully we've you know
26:05demystified some of the SAS questions
26:07people have out there thanks very much
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