Type

Thesis

Published

May 2021

Reading time

4 minutes

Stop Dropping the Baton

Why We Hatched Baton

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Last month, Baton announced its $10MM Series A and exited stealth as they build the system of record for software implementations. We at Activant are proud to have led the round alongside Global Founders Capital with participation from Hybris founder Carsten Thoma.

Type

Thesis

Published

May 2021

Reading time

4 minutes

At Activant, we’re investors in growth-stage software companies. By the time companies reach this stage, many would assume that most of their operational problems have been ironed out and that growth capital is primarily to scale their marketing and sales processes. Yet over the years, we have found only half of that to be true. While many companies had found product-market-fit and were growing their top line quickly, they were also accumulating what we call “Ops Debt”: processes and solutions developed in the early days to get to market that don’t scale with the business.

As we investigated further, we found Ops Debt accruing most urgently in the implementation process, as software companies bring their customers from a signed contract to “live” on their product. For many businesses, the methods used to get customer number 10 live persist until number 100 and become a drag on the organization as it grows.

In theory, implementation is straightforward, but in practice, it is much messier. For most core B2B software applications, additional development work needs to be done to get a customer up and running. Because every customer has unique needs and a different set of existing systems, these builds are different every time.

Implementation is just as much a part of the customer experience as sales, support, and using the product itself, but has long been ignored because there’s never been a scalable discipline built around it. Today, companies take one of three approaches to solve the implementation process:

  1. They build a large professional services organization to manually handle it, which gets expensive.
  2. They build a multitude of connectors and integrations that come “out of the box” but still always require extra integrations and effort to work.
  3. They hack together Asana or other project management tools, which ultimately end up as impediments to scale, as these tools don’t have a direct hook into the customer and so can’t provide real accountability. Every Monday someone is still herding cats to provide an update.

Ultimately, each approach hurts the customer experience and delays the time to value. They keep the software company from collecting revenue, and when coupled with manual processes, this Ops Debt hurts margins while increasing burn.

As we looked for root issues, we kept coming back to the lack of systems and standardization for implementation. On one side, you have CRMs like Salesforce, which own the customer record from initial contact through signing. On the other, you have customer success management platforms like Gainsight, which do a great job of managing customers for health and renewals, but only once they’re live. There’s simply nothing in between.

We talked with hundreds of executives, professional service teams, and customer success leaders and repeatedly heard the same thing: existing solutions were inefficient, piecemeal, and worsened as companies scaled. To avoid this pain, many large startups and enterprises enlist the help of third-party Systems Integrators (S.I.’s). But outsourcing your core product knowledge takes away an important avenue for customer feedback and just like the other solutions, isn’t scalable. Industry spend on SIs was far bigger than we imagined: in 2018, B2B software vendors spent $278 BN on SI services — a number expected to nearly double to $528 BN in just 5 years. SaaS is supposed to be easy to deploy and manage, but this enormous spend suggests the exact opposite is true.

By all accounts, cloud software has been “eating the world,” but the companies selling B2B SaaS need a better way of managing getting customers live — or they too will be eaten by their cost structures.

We looked for a company that was building a platform to solve this problem for software companies and their customers, and knew it needed a few key attributes:

  • The team needed to be completely user experience and product-obsessed, because we saw this as a human problem, not a technical one.
  • The product needed to be self-provisioning and natural to use, because the software itself couldn’t require weeks to learn and launch.
  • The company needed to have an aspirational brand that said, “you’re better with us,” and to put out world-class content and thought leadership to build a community. We saw that this problem, shared by so many across the software world, was missing a community and voice. Integration teams were hungry for experts to learn from and peers to brainstorm with, but there was no brand they trusted.

We searched, but couldn’t find a product out there with all of these qualities. So we at Activant partnered with a great entrepreneur we knew — Alex Krug — to build it from scratch. Alex previously helped and found and scale Behance, the LinkedIn of the creative world, which is now the largest ecosystem of creative talent and content on the internet. After several years at Adobe after Behance’s acquisition, he saw firsthand that even with Adobe’s near-unlimited resources, they too struggled to efficiently manage integrations of their products. He brought on fellow Behance veterans and new folks from places like Convoy, LVMH, and Huge — organizations known for delivering great experiences — and started building Baton with Activant.

We’re excited to announce Baton’s Series A and as they give the software world a system of record for implementations.

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