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Years from now, if Silicon Valley’s glitterati were ever to gather to celebrate the opening of a National Cloud Computing Museum, CFO Raman Kapur would make an excellent tour guide for the facility’s finance wing. In fact, he could just chart the trajectory of his career from the dot-com bubble forward to help the world at large to better grasp how the cloud opportunity has grown and reshaped the finance business function.
Our tour could begin at Intuit, the accounting software developer that Kapur joined in 2001 while seeking shelter from the dot-com bubble burst, where he quickly found his footing as a controller inside the company’s fast-growing QuickBooks division. Looking back at his Intuit career chapter, Kapur recalls a loud internal debate that would ultimately determine the fate of a money-losing unit known at the time as “QuickBooks on the Web.”
“I’m proud to say that I was among those who helped to make the decision not to close it. There was still a lot of talk around the question, ‘Should we just close it down?,’” explains Kapur, who says that while the answer may seem obvious now, there was still room for debate back then, in light of the unit’s early losses.
Kapur’s controllership savvy propelled him into the cloud-friendly Big Data era at Splunk, where for nearly a decade he helped the data-hungry company to chart new growth paths as he himself advanced into the role of vice president of finance—capping a tenure that exposed him to the likes of Godfrey Sullivan, a Silicon Valley stalwart who served as Splunk’s chairman and CEO.
Today, Kapur recalls a quarterly meeting at which Sullivan surveyed Splunk’s senior executives about the future direction of the company. According to Kapur, the discussion focused mainly on two areas where the company’s offerings had been experiencing some extra traction.
Still, not everyone viewed the new areas of traction as resources-worthy, at which point Sullivan remarked: “Your successful tactic becomes your strategy”—an insight that Sullivan used to open the minds of his management team and which led the company to double down on one of the two areas – a space Splunk has since grown exponentially.
Meanwhile, Kapur is able to quickly validate the insight as he reflects back on his own experiences: “More often than not, you try a couple of things and one of them becomes the bigger part of your business,” says Kapur, who exited Splunk in 2018 to step into the CFO office at Moogsoft –Jack Sweeney
Guest: Raman Kapur
Headquarters: San Francisco, CA
CFOTL: When we ask you about metrics that are top of mind – we suspect you will likely tell us about annual renewable revenue (ARR) and lifetime customer value – but can you be more specific for us?
Kapur: One of our key metrics is upsell. How much upsell do you get out of a customer? This helps you to calculate the lifetime value of the customer. Why is this so important? Because if you want to have a business that grows fast, you cannot land customers fast enough to grow at 50%, 60%. The only way to do it is to have 80% of the business come through upsell. Eighty percent of the growth comes through upsell and the other 20% comes through new business. If you have a business model wherein once you acquire a customer, the customer buys more and more every year, that is a very sustainable business model that eventually will deliver great results because (1) your cost of doing business as you become a bigger company is lower, and (2) you are selling more software to existing customers instead of having to spend money to acquire new ones.
It’s a predictable model, too. I can easily forecast that a big chunk of my next year’s revenue is going to come through upsell, and the remainder, through new orders. That is the business that I need to worry about. I don’t need to worry too much about the upsell business because I have historical patterns that tell me that if I have X amount of bookings in this fiscal year, next year, about 40% or 50% or 60% of revenue is going to come through renewals and upsells. Then I just need to worry about the remainder of it, which in a well-run company or a good business model would be less than 20% that is coming in through new business, with the remaining 80% coming from renewals and upsell, as I’ve said.