Business data protection software company Druva's down-market move is paying off. The company this month reached the $100 million mark in annual recurring revenue (ARR), a milestone for an organization that pivoted to a SaaS-based business model only a few years ago.
"We’re a little bit atypical in the sense that we started up-market and now moved down-market to a degree," Druva CFO Mahesh Patel told CFO Dive last week. "We have 50 of the Fortune 500 as customers, four of the Fortune 15, so we sell up to the largest companies in the world, but we think we need to go down market because of the velocity opportunity."
Patel talked about his role collaborating with Druva's other c-suite executives to help the company reach its ARR milestone.
Targeting mid-market enterprises
The company is betting on enterprises moving away from operating their own data centers to putting everything on the cloud and then having a data protection system in place.
"Companies don’t want to be experts in managing hardware," said Patel, who joined Druva five years ago and helped the 9-year-old company move from a premise-based software to a cloud business model. "So we’ve become a platform for those enterprises to play off of, whereas five years ago we were primarily focused on just your end points."
Druva’s market sweet spot today is an enterprise of between 500 and 5,000 employees. To attract customers, it stopped selling solutions separately a few years ago and instead bundled them together in high-value packages. The change was key to the company’s ability to grow from $10 million to the $100-million milestone because it stopped what Patel calls the cannibalization of its technology.
"Our per-user price increased by around 20% to 30% immediately," he said. "If we didn’t do those steps early on, I think we would have actually slowed down our growth, and now we’re in a position to launch more products. We would not have been in a position to get these products out into customers’ hands and sell that value. We’d still be in that commoditization mode of just providing technology to get them over the finish line versus true value-selling."
The company offers the same technology to customers regardless of their size; a company with 500 employees gets access to the same solution as a Fortune 10 company, although the larger companies tend to get packages with solutions on governance and compliance, for which smaller companies have less use.
"Maybe the feature sets will be reduced for mid-market and the feature sets are a little more higher level for the larger organizations, but for the large part, 90% of the technology is the same," he said.
Patel says he shares metrics and works closely with the chief revenue and technology officers so the company can track sales performance, tweak compensation, and identify deficiencies that are causing software sales to lag projections.
"With SaaS, it’s really hard to separate the sales function from the finance function," he said. "With a hardware sales organization, it’s, 'Here’s your product. Go sell. Go figure it out.'
"But from the SaaS point of view, it’s a different world, so when I sit down with the head of sales, we go down to the level of, where do we want our reps spending their time? And is it efficient? And where are you going to see that leverage? And then it comes down to whether we invest more in marketing or more in channel, and we go down the entire funnel. I’m giving him additional resources to drive additional growth."
There’s a similar dynamic with the chief technology officer. By looking at the usage metrics closely, he and the CTO can work together on how to allocate funds to address deficiencies in existing software and investing in the blue sky solutions that underlay the company’s plan to grow into a $1 billion company, its next milestone.
"We’re always allocating dollars to the next product to be launched," he said. "These we always hold dear. That’s an investment we have to think about. Especially at our scale. If we were a $500 million company, I would argue we might pivot more to investing today versus the future, but at our scale we’re still investing in the future because we think the opportunity is so great ahead of us."