subscribed uk: ceo's keynote

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L O N D O N October 2012

W E L C O M E T O

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Zuora Receives £36m For European Expansion

“ ” November 17th, 2011

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It all started with a simple idea That there is a shift from products to services

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The global market for cloud computing will grow from $40.7 billion in 2011 to more than $241 billion in 2020.

“ ”

Is  there  a  way  to  convey  that  it  started  with  Salesforce,  and  then  led  to  this  huge  industry.    Same  with  the  others,  it  started  with  

Zipcar/whipcar,  and  now  it’s  changed  the  world.    It  

started  with  Spo=fy,  and  now  it’s  changed  the  world.  

 Fist  Dominoe,  Race  Start  Gun,  Star=ng  Blocks,  

Timeline,  ripples  from  first  drop  

Forrester

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Carsharing subscriber base to be 14 Million in EU by 2020; 32 Million worldwide

“ ”

Frost & Sullivan

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“ By 2015, more than 40 percent of media and digital-products companies around the world will use subscription services for their fulfillment, billing, and renewals

Gartner ”

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The Past! The Future

BUY NOW

We  Call  this  Shi,  the  Subscrip2on  Economy™  

Subscribe

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Why  the  Subscrip2on  Economy  ?  

Technology  Trends   Smart  Money  Business  Model  Demand  

Mobile

Social Businesses want to

subscribe to services

Consumers want to subscribe to services

Wall St. and Sand Hill Value Subscription-Based

Companies

It’s a better business model for growth

Cloud

Subscribe

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The    Subscrip2on  Economy    is  a    Green  Economy  

“ The average car is idle 92% of the time ”

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Product Focused Rela2onship  Focused  

BUY NOW Subscribe

The    Subscrip2on  Economy    is  about  Customer  Rela2onships  

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The    Subscrip2on  Economy    Requires  a  Completely  Different  Approach  to  Building  Businesses  

Subscription Economy

Mone2zing  Customer  Rela2onships  

Pay-­‐as-­‐you-­‐Go  Pricing  Plans  

Mul2ple  Orders  Over  a  Life2me  

B2Any:  Sell  to  Consumers  &  Businesses  

Complex,  Interrelated  Bookings,  Billings,  &  Revenue  

The image cannot be

Sell  Units    

Forced  to  Pick  a  Customer  Segment  

Price  Per  Unit  

One-­‐Time  Orders  

Simple  Financial  Metrics  

Product Economy

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The Media Industry is Moving to the Subscription Economy

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The Tech Industry is Moving to the Subscription Economy

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The Telecom Industry is Moving to the Subscription Economy

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The Retail Industry is Moving to the Subscription Economy

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Dollar Rubber Club

Condoms

Craft Coffee

Coffee

Steepster

Fine Teas

SweetBox

Chocolate

The Fruit Guys

Fruits & Veggies

BirchBox

Beauty

GuyHaus

Guy Supplies

Focus N Fly

Fitness

Test Tube

Beauty Samples

Wonder Sitter

Baby Sitting

Babbaco

Kids Toys/Activities

Crafts & Books

Kiwi Crate

Hoseanna

Hosiery

Put This On

Men’s Accessories

Bag Borrow or Steal

Handbags

Rent the Runway

Women’s Dresses

Bespoke Post

Luxury Items

Sweet Petula

Soaps

McSweeneys

Shirts

Meundies

Underwear

Mystery Tackle Box

Fishing Equipment

Spice Guides

Date Idea Guide

Clothing

FabKids

Spotify

Music

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As Web businesses embrace subscription business models, the benefits are clear: reduced customer acquisition costs and steady cash flow

“ ”

June 12, 2012

Making the Web’s Subscription Economy Hum

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The new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to what might be called a Rentership Society, far from being a drag, will unleash a wave of economic efficiency that could fuel the next boom.

“

” May 4, 2012

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“

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Consumerism is being redefined for the mobile age, and the model is spreading among professionals and families in ways that were little anticipated, even by the venture capitalists funding this new era of cooperative capitalism

Mar 4, 2012

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C.E.O.’s are beginning to appreciate the value of recurring revenue in a way never before … the software industry adopted it, which caught people’s attention. Now you’re seeing companies in just about every kind of industry embracing it

“

” Mar 7, 2012

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Customer Satisfaction Graph – pie chart of 95% customer satisfaction

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Exponential Growth In Transaction Volume

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Educa2on  

Travel  Services  

Cloud  Services  

Media  

Strong Adoption in Large Enterprises

Telecom  

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Q1'08  

Q2'08  

Q3'08  

Q4'08  

Q1'09  

Q2'09  

Q3'09  

Q4'09  

Q1'10  

Q2'10  

Q3'10  

Q4'10  

Q1'11  

Q2'11  

Q3'11  

Q4'11  

Q1'12  

Q2'12  

Q3'12  

Q4'12  

Q1'13  

Q2'13  

ARR

“ ” In short order, Zuora has become the dominant player in cloud-based subscription systems.

The Fastest Growing SaaS Company

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$12 Billion Total  Invoice  Volume  

25% Europe Total  Invoice  Volume  

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YOU Are The Subscription Economy

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One Year Later We are at the Tipping Point

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In 2008, We Launched Z-Billing

In 2010, We Launched Z-Commerce

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Last month, we introduced our third major product

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1494  A.D.    

Luca  Bartolomeo  Pacioli  

invents  the  system  of    Double  Entry  Bookkeeping  

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To  the  CFOs  of    the  modern  era    

Double  entry  accoun=ng  becomes  the  cornerstone  of  modern  accoun=ng  

For over 500 years, the system has worked…

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Until Now

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A $100 is a $100 is a $100. The rules say it all goes in the same account.

You Need to Differentiate Between One-Time and Recurring Amounts

The Problem:

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The rules don’t allow me to spread these amounts over time. Now you’re just being a rebel.

You Want To Spread Revenue Over Time The Problem:

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I don’t have a rule for that. You’ve got yourself into quite a mess…

Your system doesn’t know what to do when subscriptions change

The Problem:

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•  Revenue  Recogni2on  

•  Complex  Recurring  Billing  •  Changes,  Adjustments,  Credits  

Revenue managers are drowning in spreadsheets

The Result:

•  Subscrip2on  Metrics  (MRR,  ARR,  CLTV)  

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“We  need  more  2me”  

The Result: It takes Weeks for finance teams to close the books

- Finance Team

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Actually  run  the  business  here.  Appease  the  auditors  here.  

AR  

Revenue  

600M  

600M  

Debit   Credit  

CFOs are maintaining 2 sets of books

“PwC  will  love  these.”  

The Result:

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CMOs are prevented from implementing new innovations

The Result:

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CEOs have a hard time explaining their success to Wall Street

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The Result:

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And Wall Street fails to value Subscription Businesses correctly

“ CRM shares look heavily overvalued because rising revenue growth has actually translated to falling net income.

“ Maybe CEO Marc Benioff will one day be able to translate all of this low-margin selling into huge profits, but for now it kind of looks more like the Napster model than the iTunes model, and that concerns us.

The Result:

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The world of Finance is broken…

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Introducing Z-Finance

The World’s first finance application built for the Subscription Economy

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Z-Finance is built on a new foundation

Mul2  dimensional  Ledgers  

Intelligent  Algorithms  

Revolu2onary  Data  Model  

Spread  revenue  over  2me  

Powerful  Rules  Engine  

Differen2ate  between  one  2me  and  recurring  revenue  

Calculates  key  subscrip2on  metrics  

Adapts  to  subscrip2on  changes  

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Accounting Close Tools tools to accelerate your month end close

Define  rules  to  manage  complex  revenue  recogni2on  policies      Tag  charges  with  revenue  revenue  and  deferred  revenue  GL  accounts      Tag  charges  with  with  revenue  recogni2on  rules      Control  revenue  recogni2on  trigger  dates      View  earned  and  deferred  revenue  reports  

✔

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Revenue Recognition Tools that handle complex revenue rules

Define  rules  to  manage  complex  revenue  recogni2on  policies      Tag  charges  with  revenue  revenue  and  deferred  revenue  GL  accounts      Tag  charges  with  with  revenue  recogni2on  rules      Control  revenue  recogni2on  trigger  dates      View  earned  and  deferred  revenue  reports  

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Chart of Accounts to track charges through the revenue lifecycle

Create  or  import  your  chart  of  accounts        Tag  charges  with  GL  account  codes        Tag  transac2ons  such  as  payments,  credits,  refunds,  adjustments  etc  with  GL  account  codes    

✔

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Easy Accounting Integration to unburden your IT team

Generate  debit  and  credit    journal  entries  to  simplify  your  general  ledger  updates      Align  journal  entries  with  GL  accounts  

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Tight Security Controls for audit peace of mind

Create  custom  user  roles      Associate  roles  with  granular  user  permissions      Control  visibility  and  user  ac2ons  on  sensi2ve  financial  data  

✔

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Reuse the audit peace of mind screen shot from the website

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Tames your revenue recognition processes

Upgrades,  downgrades,  cancella2ons,  refunds  etc.  are  all  taken  care  of!  

We use SAP. We run our broadband business on Zuora … we get all our journal entries from Zuora … without time consuming and expensive customization

“ ” Vignessa Moorthy, CEO of ViewQwest

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Unburdens your finance team, enabling your growth

Unleash  your  growth  strategies  without  burdening  finance  

Vince Zumbo, CFO of Autotask

…Z-Finance makes it easier for us to scale as our business grows “ ”

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Gives you audit peace of mind

Rapidly  review  details  of  any  transac2on  from  closed  accoun2ng  periods    

Bruce McFadyen, CFO of Firehost

…they have nailed it with Z-Finance, providing the next level of audit friendly automation … “ ”

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•  300 accounting periods created

•  Over 5 million financial transactions analyzed

•  207 accounting periods closed

Get up close and personal with Z-Finance Join Z-Finance PMs at 3pm in the Colonnade

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Subscribe

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Chasm  

The Present

The Future

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Why is it so hard to GROW my business

Why Can’t I Make My Processes FLOW Why Can’t I Find

What I Need to KNOW

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Product Relationships

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Goal: Ship More Units

Goal: Build Valuable Relationships

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The Strategies Required to Grow a Subscription Business are Very Different

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Design Product

Make Product

Sell Product

Product Business

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Acquire New Customers

Increase the Value of Your Customers

Reduce Churn

Subscription Business

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Packaging  &  Pricing  Strategy  

Acquire  New  Customers  

Increase  Value  Per  Customer  

Reduce  Churn  

Launch  First  Product   X  

Add-­‐on  Op2ons   X  

Monthly  vs  Annual  Op2ons  

X   X   X  

Higher  Edi2ons   X   X  

Lower  Edi2ons   X   X  

Product  Bundles   X  

Pricing  Tiers   X   X  

Usage  &  Overage   X   X   X  

Mul2ple  Currencies   X   X  

Renewals   X  

Pricing  Changes   X   X  

Regional  Pricing   X  

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Can’t Support the Pricing & Packaging You Need to Grow

Your Existing Systems Spacing  feels  all  off  on  this,  and  the  other  “Can’t”  slides.    

Also  feels  too  high  up  

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The Processes Required to Make a Subscription Business Flow are Very Different

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Quote-To-Cash

Product Business

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Subscription Business

Quote-To-Cash Renewals Payment Failures Account Suspension Amendments Account Management

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Commerce      

Billing      

Finance      

Book Order & Ship It

Invoice & Collect For It

Recognize It

Product Business

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Subscription Business

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Subscription Business

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Subscription Business

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Subscription Business

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Subscription Business

Commerce

Billing

Finance

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Can’t Support the Processes Needed To Make Your Business Flow

Your Existing Systems

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What you Need to Know with a Subscription Business Model is Very Different

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Traditional Income Statement

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Revenue ARR

$0

$100

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Subscription Economy Income Statement

ARR $100 Churn (10) Net ARR 90 COGS (20) G&A (10) R&D (20) Recurring Profit 40 Growth (40) Net New ARR 40 Ending ARR $130

Retention Rate

Growth Efficiency Index

Recurring Profit Margin

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The Three Key Metrics of the Subscription Economy

ARR  less  Churn  less  Non-­‐Growth  

Spend  

Recurring Profit Margin

How  much  of  your  ARR  you  

keep  every  year.  

How  much  does  it  cost  you  to  acquire  $1  of  

ACV    

Retention Rate

Growth Efficiency

“ The metrics for Cloud computing is fairly different from traditional enterprise software. ” Bessemer  Venture  Partners  –  Top  10  Laws  for  Cloud  Compu=ng  

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Don’t Have the Metrics You Need to Know

Your Existing Systems

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I Need a System That Helps me Grow , Flow and Know in the Subscription Economy

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Your Systems Today

CRM   ERP   GL  

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Products Relationships

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Goal: Ship More Units

Goal: Build Valuable

Relationships

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Enterprise Resource Planning

Relationship Business

Management

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We’re Here Today to Announce Z-Business,

The World’s First Relationship Business Management System

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Z-­‐Business    Is  Built  On  a  Founda2on  For  the  Subscrip2on  Economy  

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Z-­‐Business    Solves  Your  Rela2onship  Commerce  Needs  

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Z-­‐Business    Automates  Your  Billing  and  Payment  Processes  

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Z-­‐Business    Revolu2onizes  your  Finance  Opera2ons  

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Z-­‐Business    Plugs  Into  Your  CRM  and  GL  

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Our  Mission:    Help  you  succeed  in  the  Subscrip2on  Economy    

FLOW:    Run  and  flow  your  subscrip2on  business  processes  efficiently.  

GROW:    Build  and  grow  your  subscrip2on  business    and  revenue.    

KNOW:    Have  the  right  metrics  to  op2mize  your  subscrip2on  business.    

Z-­‐Business    Helps  You  Grow,  Flow  and  Know  

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thank  you.