Will Price of Hummer Winblad in a recent blog points again to the higher costs involved in starting a successful SaaS operation compared to a pre-SaaS software company. Price’s numbers are similar to those found by others (see here and here).
There’s a lot of talk that startup costs have dropped dramatically, but it’s interesting to see that to be successful and to achieve strong recognition / dominance, the costs have risen.
Price’s analysis found the following:
- Salesforce, for example, raised $64.52m in equity, to Peoplesoft’s $10
– Websidestory raised $43m to Business Object’s $5m
For the industry to build out, SaaS platforms will emerge that will drop the barrier to entry. Pre-SaaS models were driven by platforms developed by companies like Oracle and Microsoft. SaaS models will be driven by platforms being developed now by companies like Salesforce Apex, Amazon EC2/S3, and other players that don’t yet exist.
