Looking to build a business plan for your cloud company, but don’t know how to create the right financial model? This session features best practices and actionable tips from cloud finance experts and investors on what financial metrics matter—and how they affect your business plan, ability to raise capital, and long-term profitability.

1. Cloudonomics 101: Creating a Financial Plan for Your Force.com Startup Tour de Force: Cloud Entrepreneurs Byron Deeter, Bessemer Venture Partners Philippe Botteri, Bessemer Venture Partners

2. Byron Deeter Partner Philippe Botteri Vice President VENTURE CAPITAL

3. Content of today’s discussion Who we are Get Instrument Rated: the Bessemer’s “6Cs” of Cloud Finance Preparing your 2010 flight plan

5. The longest standing track record in the Venture Capital Industry with 150+ M&A and IPOs

6. Strong Global Platform with over $2 billion under management and six offices worldwide

7. One of the most successful software and Cloud investors in history

9. Current Board member of several SaaS companies, including: Eloqua, Intacct, Cornerstone OnDemand, & Retail Solutions

10. Founding CEO of Trigo Technologies, an early Bessemer-backed SaaS business acquired by IBM in 2004

11. Strategy consulting at McKinsey & Co.

13. Actively involved in Bessemer investments in Eloqua, Cornerstone OnDemand, Intego, and Intacct

14. Close to 10 years with McKinsey & Company (Europe, US) in the Tech and Software practice – pioneered McKinsey efforts on SaaS

15. Masters from EcolePolytechnique (Physics) and Ecole des Mines (Engineering)

16. Venture and SaaSBlog: www.cracking-the-code.blogspot.com

18. Content of today’s discussion Who we are Get Instrument Rated: the Bessemer’s “6Cs” of Cloud Finance Preparing your 2010 flight plan

19. Don’t fly blind – trust your gauges…

20. …or be ready to face the consequences!

21. The Bessemer’s “6Cs” of Cloud Finance CMRR: Committed Monthly Recurring Revenue Cash Churn CAC: Customer Acquisition Cost CLTV: Customer LifeTime Value CPipe: CMRR Sales Pipeline

23. Multi-year bookings

24. Non-recurring revenues

26. Employee assessment

27. Operational planning

28. Financing

29. ValuationUpsell CMRR Q1 CMRR Q2

30. Cash is King! Heavy upfront financing… … requiring tight expense management Lines are still not crossing! Complex ERP sales Monthly recurring expenses Freemium model Expected breakeven point Monthly Recurring Revenue Key drivers of cash consumption: Customer Acquisition Costs, Churn, Renewal rate

32. Sales incentive needs to be heavily biased towards annual upfront cash payment in the high growth phaseAdditional $38m burn Additional $52m burn

34. Pricing/ Value

35. UI and workflow complexity

36. Downtime

37. Monitoring

38. Overall application usage (login frequency and time)

39. Application usage (most frequent use case, function used…)

40. Acting

41. Competitive analysis/sales tools

42. Usage monitoring

43. GUI/ workflow redesign

44. Platform stability

45. Increased discount for early payment

46. 5-year cash impact: $12m

47. 12% vs. 20% churnBenchmark = 3% per quarter Gross Churn Net Churn (incl. upsells) Benchmark = 0% per quarter Actual Forecast

50. High: 0.68

52. Productivity is unlikely to improve with scale, so don’t invest and burn your cash if the model is not tunedCash Flow for CAC = 1.0 Cash Flow for CAC = 0.5 Additional $66m burn

54. WACC: 15%

55. Pro. Serv. Rev./COS included in CACCLTV > 0 = Profit!

57. Should not include professional services and support (unless delivered in a subscription)

58. Need to include deal CMRR view into Salesforce.com!Time frame: monthly, quarterly, or rolling? Σ [ deal CMRR x probability] Cpipe = Probability: show the pipeline as a total number or a factored number? Stage: all qualified and above? Probable? Only Committed?

60. Upsell vs. new customers

61. 50%+

63. Payment terms

64. Pro. Serv. GM

65. breakeven @ 50% growth rate

66. 1-year upfront mix > 50%

69. CMRR renewal cost

70. CAC > 1

72. G&A as % of sales

73. R&D as % of sales

74. CLTV>0

75. G&A ~15% at scale

77. 3-5x your CMRR target for the quarterFree Cash Flow at scale: 20%+!

78. Content of today’s discussion Who we are Get Instrument Rated: the Bessemer’s “6Cs” of Cloud Finance Preparing your 2010 flight plan

79. A year ago, the world collapsed… The SaaS 13 Index 5.0x Multiple Base 100 = Jan 1st 2008 -60% 2.3x Multiple

80. …but we are more than half way back! -13% 3-4x Multiple

81. However things have changed …and sales productivity declined Average growth rate is down… SaaS 13 Index, Percent SaaS 13 Index, CAC Ratio Is 15% the new SaaS growth rate? Market recovery? Staff reduction? 08/09 growth projection

83. Sales & Marketing:It might be time to step on the gas…or not! Your CAC ratio will tell you

84. Focus on customer retention: without a low churn, you cannot build a profitable business modelMange your cash carefully but don’t underinvest: capital is available but your metrics will tell you if you can raise outside capital or not in good terms Watch for cheap MRR (M&A, Other structure to avoid buying assets?): you may be able to buy failing competitors. The recession created opportunities

85. Plan your fuel stops carefully Cloud Computing Company Lifecycle All 6 C’s at benchmark level GAAP revenues Cash Flow IPO! $3-5m Series A @$5-10m pre. $8-12m Series B @$20-30m pre. $15-20m Series C @$50-80m pre. Total Cash Burn:~$40m

86. Mind the GAAP! 6 pitfalls to avoid GAAP revenue should be recognized ratably: even if your contract if paid upfront, you need to recognize the revenue ratably over the lifetime of the contract Don’t recognize your professional services too early Don’t forget to amortize your sales commissions Stock options ARE expenses: you need to recognize the fair value of stock option grants as a compensation cost and amortize it over the vesting period in your financial statements Watch out for investors warrants: as your company grow and their value increase, and you need to record the negative impact on your GAAP income statement Exclude your deferred revenues from your “quick ratio” in your debt covenants

88. Small changes (positive and negative) can have massive impact on your cash consumption

89. Sales productivity is the most important lever that will define your cash burn: climbing the sales learning curve is critical before scaling

90. Plan your fuel stops carefully and keep the faith: at scale, there is a pot of gold at the end of this rainbow!

92. Byron Deeter Partner Philippe Botteri Vice President VENTURE CAPITAL More information: www.bvp.com/cloud cloudvc@bvp.com Thank You!