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Be Careful When Building SaaS Companies In New York

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Michael Brown

November 04, 2015

We at Bowery Capital were excited to hear Chris Dixon’s positive comments on New York City in the coming years and couldn’t agree with him more about seeing multiple billon dollar NYC companies over the next few years. Specifically in SaaS though, we continue to see several challenges with building a billion dollar software company in New York City and talk to our founders a lot about building SaaS companies in New York. Most notably, the sales problem comes up a lot. Several of our New York City-based investments in the business software space are entering a period of rapid growth and realizing they are somewhat outmatched relative to their geography from a sales hiring standpoint. Typically, the concerns sound something like, “it is very, very challenging to hire great sales talent and build a credible enterprise sales organization in New York City.” Fundamentally, New York City has been a great breeding ground for some areas of sales (i.e. advertising sales), but it hasn’t been very successful for helping the next generation of IT winners and founders looking towards building SaaS companies in New York. To explain in more detail, there are two types of sales teams we see day to day in our business and we note here that this is a broad generalization.

Relationship-Driven Ad Sales Teams

New York City has an overload of relationship-driven advertising sales people. They come from agencies like IPG, publishers like AOL, and brands like Red Bull. They work closely with the CMO and can be an incredible asset if your company is focused on media spend. They likely grew up learning the qualitative more than the quantitative approach to selling.

Machine-Operated SaaS Sales Teams

Simply put, New York City has a shortage of more process-driven sales people. These folks generally came out of large IT businesses like Oracle, Salesforce, and SAP. Emerging 2.0 winners like Workday, HubSpot, and LinkedIn taught the next generation of winners in the category and today there are countless other companies successfully operating this model. They work closely with the CTO/CIO and are typically the right fit if your company is focused on selling software. They likely grew up learning the quantitative more than the qualitative approach to selling.

Silicon Valley takes the cake on machine operated sales teams as a result. That said, The Valley is not truly the only geography with a penchant for this approach. Some other great examples include HubSpot, Demandware, and NetSuite’s OpenAir in Boston; Vocus, memoryBlue, comScore, and Eloqua in Washington, DC; and Tableau, Microsoft, and F5 in Seattle. The list is not exhaustive but paints a picture of some of the well known successes in other regions.

As New York City’s business software industry grows, attracting and hiring more process-driven sales teams is going to be critically important for building SaaS companies in New York. Similarly, finding senior leaders who can build the process and data-driven sales organizations that produce repeatable, predictable, and scalable results will also be a challenge and an opportunity to building SaaS companies in New York. Although New York City has not yet seen a born and bred next generation B2B winner in this regard, we at Bowery Capital are hopeful that, along with Chris, we’ll see a big win that will help drive a strong foundational ecosystem and breeding ground for the next generation of IT leaders who are interested in building SaaS companies in New York.