As part of our SaaS Adventure series, focused on successful SaaS founders, we recently sat down with Peter Gassner, the CEO of Veeva. As many of our SaaS-focused readers likely know, Veeva was founded by Peter and Matt Wallach in 2007 to address the lack of purpose-built solutions in the cloud for the pharmaceutical industry.
Nearly nine years later, Veeva has done just that and along the way established itself as one of largest SaaS companies focused on a vertical industry. We spoke to Peter about his personal background and journey as a founder, getting Veeva to a revenue run-rate over $400M and doing so profitably.
Neeraj Agrawal and Logan Bartlett: Do you have some initial thoughts on what makes a successful SaaS company that you’d like to share?
Peter Gassner: In 2007, I was talking a lot about the fact that industry-specific software would represent the next wave of cloud applications, but I didn’t get a lot of buy-in from my peers at that time. My premise was that if you could create a software application that would work very well and in one central place; mix it with some data; and then put some services around it, you could really capture a high percentage of market share at a good price point.
As I said, that wasn’t a very popular idea at the time. In fact, a friend of mine at the time went so far as to draw me a pie chart that showed the size of the entire enterprise-software market and then just the segment for pharmaceuticals and pharma CRM. Pharma CRM was minuscule compared to the overall enterprise software market. He thought, why would I do that? But today, I see a different pie chart – a Gartner one. Gartner’s latest research shows vertical-specific software as a $114 billion market. ERP is the next biggest one at $9 billion. And it’s growing faster than all of the other segments. That pie chart didn’t exist back in 2007.
People are waking up to the fact that there are a lot of applications to be made that can make a critical contribution to a specific industry. And to that point, we are seeing more and more funding of industry-cloud specific companies. I compare it to being at Salesforce in 2002 around the emergence of the cloud. That’s very similar to what we’re seeing now with industry cloud. We’ve come a long way from the very early innings in 2007 when people were saying “what is this industry cloud thing?” to now with the realization of just how large of an opportunity this is.
NA/LB: Let’s get a little personal. Tell us about your background, and where you grew up. How did you get into tech?
PG: I grew up in Portland, Oregon; my parents emigrated to the U.S. from Switzerland. I didn’t always know I would end up in technology, but I always had an affinity for math and solving puzzles. I got my degree in computer science from Oregon State and shortly thereafter began my working career at IBM.
NA/LB: After spending two years at Salesforce, you took some time off before founding Veeva. Was that the time in which you were trying to figure out what vertical you were going to go after? How did you pick pharmaceutical?
PG: I started my career at IBM where I did a lot on the mainframe and learned quite a bit from some really great people, including the inventors of System R and the relational database. That’s where I really got my foundation and a true understanding of what great software is like.
Then in late 1994 I moved on to PeopleSoft because I could see that client server was really taking off, and I helped to build the PeopleSoft platform.
The move to Salesforce.com came about from similar circumstances. After spending nine years at PeopleSoft I could see that the cloud was really going to take off for the basic reason that if you could do things once, centrally, with lots of customers, it was just more efficient.
That’s when I began to think that industry-specific applications were going to be the future. That’s the pattern I saw in client server.
People often ask me, why life sciences? For one, it’s a large industry, and I knew I wanted to focus on big global industries. Life sciences is a $1.6 trillion industry, on par with insurance or banking or retail or airlines. And it’s growing. That’s also quite unique. I also liked life sciences because it’s all about doing interesting things, like getting people out of a wheelchair. In doing my diligence, I met a lot of interesting people who showed me the industry had a lot of specific technology needs that had to do with government regulations, which helped me become convinced that life sciences was a good market segment to pursue.
NA/LB: You mentioned the people you met for diligence along the way – talk a little bit about your partnership with Matt Wallach, your co-founder.
PG: Matt grew up on the East Coast, in Philadelphia. He’s more oriented toward the business side. I actually didn’t know Matt before starting Veeva. Some of the early people I was talking to connected Matt and me. He brought so much to the table beyond my expertise, and vice versa. We just had the right chemistry right away.
Over the next eight-and-a-half years we’ve probably spoken to each other every day.
We use Philadelphia as our hub for sales and marketing as it’s close to the customers, and we run product development from the West Coast. Veeva grew up very distributed—that’s how it started out between Matt and me.
NA/LB: That’s an interesting point – we’re actually seeing more and more bi-coastal companies, mostly due to how competitive it is to hire in certain areas. How did you make it feel like there was one location?
PG: It just has to be in the culture. That’s just how we started it. For our virtual company-wide meetings, for instance, it’s not that I would just stand in front of people at corporate headquarters and they would listen; it’s everybody company-wide listening in. There are probably many, many other small examples of that culture. I think it just has to start out that way. I often tell people Veeva is not a headquarters-driven company. There’s no special sauce there. It’s just being intentional around that, realizing that great people are everywhere. We don’t require that all the management team be in the same building. We use a lot of video conferencing, whenever we can.
NA/LB: I think you were one of the early adopters of building an ISV on top of Force.com. I imagine that decision was probably controversial at the time. Can you talk about that? Building on Force vs. building something independently?
PG: Product-wise, that was our biggest risk. Nobody had built anything sizable on Force.com before.
Since I had previously managed some of that group, I knew its trajectory. I just had the feeling it would come through. It was a big risk, and I thought, with risk comes reward. If we were the first to do it, we’d have early-mover advantage.
There was technical risk, but there was also business risk. There was no force.com OEM program at all, so we would need to control our own destiny. That was the biggest product risk we took.
And yes, it turned off a lot of early investors for sure. That was viewed as something out of the normal, something too risky. But it paid off very well. The Force.com platform did mature, and we did get a good OEM agreement. That toolset fits well as a platform for what we needed to do in pharma CRM, and it helped that I knew a ton about that platform. But it was a big risk and a very unusual thing to do at the time.
NA/LB: If you were giving advice to entrepreneurs, those just starting in that $0 to $10 million ARR phase, would you encourage them to use Force.com now? How should entrepreneurs think about building the next generation of companies on Force.com?
PG: I think technology and platforms are always evolving. When we started in 2007 there were very few cloud platforms. I don’t think Amazon Web Services even existed, or if so, it was extremely nascent. There was nothing like the competitive offerings we see today. I think the point is, you always want to evaluate, what application are you trying to make? What are all the platforms out there and which should you use?
I also think you have to clearly define, if you are going for an OEM-type model, or if you want to sell on top of Salesforce.com. It depends on what market you’re going after. My advice to companies would be not to kick that one down the road. Decide from the start whether you want to be OEM or not. If you think, that doesn’t matter, or, I can do both – that’s quite confusing. Being clear on that is important. The technology you ultimately choose to go with really depends on the individual market.
NA/LB: Tell us about your capital-raising process at Veeva. You’re probably the most capital-efficient SaaS company of all time. Didn’t you achieve a $400M run rate on $3M in capital?
PG: We raised $7 million in capital but only used $3 million of that funding.
NA/LB: How were you able to do that? And was there a lot of debate about that? Now you hear a lot about people raising $50-100 million rounds just because they can.
PG: It’s important to remember the timing for us. We started with angel funding in 2007. Just as we got going, we came into the 2008 financial crisis. It was not the same environment as we saw in 2015 or 1999.
So how did it happen this way? We leveraged Salesforce.com, so that helped us sell to early customers sooner. We had some fortuitous breaks along the way with early customers and early hires. But maybe most importantly, the management team had a mindset that we would just build a profitable business. We had this mindset that this could be done, that a profitable business could be built relatively quickly. We just did it. We knew no other way.
Now, there was pressure along the way. There was some pressure to invest more money around 2009, 2010 and 2011. But Matt and I knew, we had a good thing going here, we were running a profitable business and felt we should just stay focused on customer success. It wasn’t necessarily that we didn’t want to raise more money, but by that time the foundation had already been set for Veeva.
NA/LB: Were you almost competing against yourself?
PG: In the beginning, we had just one product. We had pharma CRM built on top of Salesforce.com, and we were focusing on the U.S. market. Our competition ranged from a small cloud competitor that started a year or so before we did to large incumbent players like Oracle with Siebel’s pharma CRM on-premise and on-demand and Cegedim, a large life sciences CRM provider. At the time, Cegedigm and Oracle had the biggest share of the market.
We were successful by focusing, first and foremost, on customer success and I think we just executed better. We assembled a better team and delivered more innovative products. We had a few lucky breaks, but at the end of the day we had a better focus. We get after it every day, every week, every month, every quarter, every year.
NA/LB: Any nuggets of wisdom you can share on building the team that helped you execute and win the category?
PG: Hire people with range, people who have a real reason to want to work with the company. I like people who can do things in a very hands-on way. They know what they’re doing. They also know where they’re going. I also think diversity is a strength. Get your people from different types of backgrounds, different types of companies. Don’t be too myopic in where you hire from. I’ve got some people I hired from Salesforce, some from Siebel, some people from PeopleSoft, etc. It’s important to have a diverse team and a core set of leaders who know what “good” looks like.
Of course teamwork is also key. The combined efforts of a team will outpace any individual contribution nine times out of 10. Individuals that are stellar but are not team players just aren’t worth it. You have to share a common bond of working well in a team environment.
NA/LB: You worked closely with Dave Duffield, the founder of PeopleSoft, and Marc Benioff, who started Salesforce. Can you talk a little bit about what you perhaps learned from each of them?
PG: I was in my 20s when I first started working for Dave. PeopleSoft was more of a formative experience for me. Dave is an amazing leader–he just knows how to lead people. He’s deeply caring about the customers and knows how that can benefit a company. And he knows how to be very straightforward and honest. I learned many things just through osmosis. Dave is just a tremendous leader of people.
At Salesforce I learned a lot about speed. Marc had a great saying – “tactics dictate strategy.” Meaning, try stuff, fail fast, really listen to what’s going well and what’s not, and do more of the stuff that’s going well. So I think I took away an understanding of the pace of innovation, and the pace of pushing things, and the way to think about markets. That’s something I learned a lot about from Marc and Salesforce. And then of course, we were all learning about cloud technology at that time too.
NA/LB: You’ve been involved in leading companies in mainframe, client/server and cloud. As you look forward and you think about technology trends, where do you think we are in the overall cycle with cloud?
PG: I think we’re really early on in cloud. Most of the industry-specific solutions in use today are still all mainframe, client/server, or custom applications. There’s also this notion of “infrastructure as a service,” like what Amazon, IBM and Microsoft are up to. Amazon is clearly on its way to becoming the biggest computer company the world has ever seen, by far. The trend on the infrastructure side is going to continue for the next 10 to 20 years. There will be more developments around more fine-grained services like Amazon’s S3.
It’s going to be more like the hardware area. For instance, Apple doesn’t make the chips and components in the phone, they assemble them. I think building software solutions is going to slowly morph into that. And you’re already seeing that with startups assembling mini services.
Overall, I think the cloud trend is not nearly done, and people are underestimating it. I also think with this industry-cloud idea, if you can make technology services that are critical to an industry, some industries are going to get disrupted. Uber is doing that, Airbnb is doing that. But I think there are also going to be some big tech enablers. People that help an industry reach their customers, rather than disrupting the industry.
I also think video, broadly speaking, is still under-appreciated and under-valued. Video will continue to really transform things in the next five to ten years.
NA/LB: Any other advice you have for software entrepreneurs?
PG: To be self-aware. I would advise people to be aware of what they know and what they don’t know. If you’re going to open a grocery store, and you’re a smart person, but you’ve never worked in a grocery store, it’s going to be a challenge. That is an established market that requires some background and understanding.
You should choose a market that you know, or you invent a whole new market or approach so you’re the one with all the experience in it. Sometimes people forget that there’s a difference between established markets and new markets.
Also, I think Warren Buffet is right; a bad market will beat a great management team roughly 100% of the time. You’ve got to have the right market, but you also need a great team and some process to execute together. It just doesn’t work if the market is not right. You won’t know that until you get into it, though. You have to get into it and try. If the market is wrong, the team can’t salvage it. If the market is right, the team has to be good enough, otherwise it doesn’t work.