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

[note: Updated Modestly in 3/14 with post-IPO data:]

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 copy Eloqua.  We even snuck into their Dreamforce party in ’06 just to learn.  Eloqua’s founder, Mark 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 and subsequent acquisition by Oracle, both 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.  Update:  Acquired by Oracle for $811m on December 20, 2012.

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

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 a lot  (%) of the company to get it.
  • Revenue: $33m in 2011 GAAP revenue.  So maybe we can assume today they are at $70m ARR plus or minus.
  • Valuation/Liquidity Event: $1 billion+ IPO in ’13.  

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

Screen Shot 2014-03-03 at 2.10.55 PM

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

In 2011 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: $7.4m in 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.  Update:  And $800m+ Acquisition By Oracle, All In the Same Year.  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, the highest reward.

>> 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.  And they had the lowest opportunity cost: they’re already off to the next Great Thing, pouring many of their millions into an amazing Tech Village in Atlanta that has already funded a dozen or more promising nextgen SaaS start-ups.

I dunno which is best.  And Hubspot, with its coming IPO, will add a 4th entry to the case study.

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.

19 comments

  1. Mohammad Ocean

    Great post; it begs the question of which VC firm throws the best closing dinners! Sounds like an article for TC :)

  2. Chad Hoke

    I really like the Pardot product and they have been a great company to deal with. Sounds like a great outcome for the founders and hopefully the employees as well. Hopefully they will continue to thrive under ExactTarget.

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  8. RK

    Awesome post!
    I am new here, and have been reading some posts in the last couple of hours – great work.
    As a founder that sold an VC backed enterprise business for ~$100M I completely agree with your approach. Wish more first-time entrepreneurs had the knowledge to design their path to best suit them.

  9. Mark Organ

    Great, insightful post! Something every SaaS founder should read. Eloqua’s path was that of an innovator, and marketo’s and pardot’s the paths of fast followers, each with their own successful strategy from the perspective of a founder. Although I would bet from my experience at Eloqua that there was a lot less careful planning from those on each path – and a lot more of founders doing what they could to first survive and then grow.

    Check out my new SaaS project at Influitive. I think the next great marketing platform will be based on mobilizing advocates. It looks like I am taking path 1, hopefully with less dilution this time around.

    - Mark

    • That’s another version of the case study, same actors: Innovator vs. Fast-ish Followers. What’s interesting to me is Marketo and Pardot (and Genius and some others) clearly competed with Elouqa. So the paradigm changed. Eloqua competed with … what I’m not sure … but some sort of enterprise email tools perhaps, I don’t know. But not the Eloqua before Eloqua, I don’t think. It’s interesting when follower strategy can work, and when it can’t. I suspect a big part of it is that the space seems to be the dynamics of Oligopical Competition.

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  13. Now that a year has gone by since you wrote this, I wonder how you’d include Hubspot in this story? Their trajectory in this market seems worthy of its own mini-case study. They have carved out their own thought leadership and unmatched content marketing machine, while getting a ton of traction first in SMB then apparently moving up into Marketo’s and Eloqua’s mkt segment.

    • Yes Hubspot could be in the story for sure. But Eloqua-Marketo-Pardot were direct competitors. Hubspot is close, but not 100% direct competitors in every deal. And while less important, it hasn’t had a liquidity event yet (although $100m+ ARR is good enough for the case study).

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