SaaS case study: 10x increase in enterprise valuation

In the span of two years, an up-and-coming ecommerce company went from a valuation of 2.5x revenue to 12x revenue, from a low nine-figure valuation to an acquisition price nearly ten times that, nearly $2B in fact. What decisions did the company make in that time to increase its valuation by almost a magnitude? The big one was switching from an enterprise license product into an SaaS-based cloud offering on Platform.sh.

SaaS false start

Before their acquisition, the company had attempted to transition from its open-source, PHP-based platform to a software-as-a-service implementation. However, the new platform failed to gain market traction due to the constraints of its infrastructure management capabilities. It didn’t allow larger shops to customize it to the extent they required, and for smaller shops it was too complex. Small business owners were unable to easily configure, and development teams in larger companies were unable to enhance!

Second time round, and seeking a better option for implementing a global SaaS offering, the company met with Platform.sh to discuss buy-versus-build options. We showed them how platform-as-a-service could offer them a managed hosting option that would give them immediate access to an advanced container management platform able to propel their new SaaS offer worldwide.

An abundance of business value

By partnering with Platform.sh, the company secured a problem-free cloud infrastructure to support their SaaS application at the right cost per client. The new Platform.sh cloud service proved immediately attractive to the company’s clients. It solved some large-scale hosting challenges for them, whilst also offering a huge step change across the entire ecommerce building experience.

As well as raising customer satisfaction, the SaaS vendor gained considerable internal business value from the PaaS, achieving:

• Faster time to market for the SaaS offer and much lower costs. This spurred early reference sales and brought substantial revenue forward by several months.
• Superior development and deployment experience. Tens of thousands of the ecosystem developers created buzz that influenced client-side decision makers.
• Tangible business agility. Maintaining a constant stream of changes into the live service became a game-changer for online shops, enabling them to react to events, analytics, or peak demand and make changes to optimize revenue.

Even more client problems solved with Platform.sh

The SaaS vendor also found that partnering with Platform.sh allowed them to solve several stubborn problems clients were wrestling with:

• Soaring cost management issues associated with self-hosting. Solved by instant scaling and usage-based billing.
• Complex process and tooling for continuous integration. Simplified by Platform.sh cloning, build system, and API.
• Understanding cloud infrastructures and performing DevOps. Abstracted and automated away by the PaaS.
• Budget planning for containerization and Kubernetes build. Provided by the PaaS, out of the box.
• Effort required to make changes. Reduced number of tickets by 90%; developers make their own changes to config files.

Assisting SaaS vendors with changes to the business model

Eliminating the time, resources, and costs that would have been consumed by building/operating a complex cloud infrastructure freed up energy and funding for other equally critical aspects of the business model, such as improving the SaaS application architecture, accelerating the feature roadmap, and enhancing support to marketing and partner sales. Platform.sh offers our PaaS for SaaS bundled with expert services:

• Optimizing application architecture for the cloud
• Putting forward a revenue bearing functionality through a roadmap acceleration program
• Leveraging the Platform.sh team for global first-line triage, speeding launch
• Bringing elements of infrastructure support back in-house through later-phase training
• Managing risks associated with disrupting the partner ecosystem (productivity and sales versus hosting revenue loss)
• Enforcing a cloud-first mentality throughout the company and marketplace
• Integrating the Platform.sh pre-sales team globally
• Training sales teams and partners to sell PaaS/cloud value, supporting the sales process globally
• Realigning incentive schemes to the cloud offer

Learn from their success

A few years after launch, more than 85% of this SaaS vendor’s new enterprise customers purchase the cloud offering. Tens of millions of dollars in incremental annual recurring revenue are derived from the new non-software-licence components of the cloud offer, including hosting compute, application support, embedded technologies like CDN, and code performance tools.

In the following weeks, Kieron Sambrook-Smith, chief commercial officer for Platform.sh, will continue to share our experiences and insight through a series of articles that offer lessons on how your organization can also maximize the potential of its business model by transitioning to a PaaS cloud infrastructure. Check back soon for the next article!

If you'd like to connect or open a conversation about your SaaS business model or the value of a PaaS cloud infrastructure on the rest of your business model, you can find me on LinkedIn or you can contact me directly: kieron.sambrook-smith@platform.sh.