From a little farmhouse in York to sleek offices in Silicon Valley, the business management software company is now a successful British import in the start-up capital of the world.
Anaplan is a real-world British unicorn with humble beginnings.
Paul Melchiorre, Anaplan’s recently appointed chief revenue officer, spoke with GrowthBusiness on their business growth journey and why enterprise technology is ripe for disruption.
American tech companies often expand to the UK, but Anaplan’s westward move is really unique. Why Silicon Valley?
It was a couple of guys in a farmhouse in the UK that started it all. Being in this space for a long time, working at different large companies like IBM, they really started from the ground up. When I spoke to Michael (Gould), our founder, he said he looked at the market and he saw a lot of companies weren’t innovating anymore. They were bought by larger companies like IBM, Oracle, and SAP, who haven’t innovated for years. It was a great opportunity to start something from the ground up.
They did, and of course getting money may be a lot easier in Silicon Valley than it is around the rest of the world. The rest is kind of history. It really got started from that concept and idea in the farmhouse, and the moneyed folks were (in San Francisco), so the team put the two together. For the first couple of years it was building the product and making sure the technology was sound. Then a few of the large companies here in the Valley started to experiment with Anaplan, and really put it on the map.
What can growing businesses in the UK can learn from Anaplan?
If you have the right model and the right business metrics early on, I think you can get money anywhere. I don’t think you have to run to Silicon Valley to get money. I think the beauty today is you can grow a business, regardless of where you’re at, to a critical mass because there is so much money available everywhere. I don’t think you have to necessarily build the company in Silicon Valley. If I look at the way we’re distributed people-wise, most of our developers are either located in York or Paris.
I think you can grow a business in the UK. I think you can fund a business in the UK, as long as you have solid metrics to show the path to profitability and the opportunity for a large market. Those are the things that investors tend to look for, regardless of location.
Do you think the Silicon Valley branding helped?
This is my second stint in Silicon Valley. I’m an east coast boy from Philadelphia, but things out here obviously do help, because just as the UK is a centre for financial institutions, large banks, and insurance, and brokerage, Silicon Valley is the venture capital of the world.
I believe that having the venture money from California is a huge help. If you really think about the companies we’re selling to, it doesn’t really matter. We’re selling to the global 2000 – large hyper-change or hyper-growth companies. They tend not to really care about the funding as much as what they’re buying. I think the Silicon Valley branding helps in the early stages of a business. But once you’re to our size, you’re no longer a start-up, and people are looking at your customer base, your value proposition, and your growth story, less than the “funded in Silicon Valley” label.
What about speculation of another tech bubble?
I would preface that I’m a head of global sales and my economic background is limited to my years in college, which are many years ago. But being in this business for 30 years, going through the tech bubble, living out here in San Francisco in 2000, 2001, I do see a lot of similarities, but I also see a lot of differences between then and now.
Back then the tech bubble burst because there was really no substance to a lot of the companies. They were built on PowerPoint and raised a lot of money, but had no real business value.
When I was a founder at Ariba, we actually had real business, real business value, and that’s why we survived for 15 more years after the bubble burst, eventually selling to SAP. I think this time around, there is some level of over-valuation and that is obvious. They need to get on the path to profitability.
What we talk about at Anaplan is that we’ve raised money, and done an amazing job at that. We’ve done a fair evaluation, we’re well funded, and most importantly we’re lucky, because a lot of folks are not. We’re generating real revenues. We have an incredible business model and good growth.
I think we have a discipline here unlike other Silicon Valley companies, and maybe it’s because of our humble roots in the farmhouse of York that we’re not overspending all this ridiculous amounts of money on parties and events; bringing movie stars to our user conferences and so on.
How can these businesses ensure they’re profitable?
I think there’s just an attitude of spending in these companies because of their high valuation, and if you don’t have a path to profitability like we do there, speculation could become reality. I believe there will be some of these unicorns that fizzle out, or are acquired and do not succeed. It’s just a regular business cycle. I think what is different about Anaplan is, firstly, we’re selling transformational technology to the very large Fortune 500 companies. Once that technology is put in places like Gatwick Airport or Schneider Electric or Chevron or Tata Steel or AXA, it’s very difficult to rip out. It becomes part of the fabric of that transformation within these large global organisations and it actually goes viral.
With that, we have a solid revenue base within very large global complex organisations so that it’s very difficult to unseat that.
Secondly, it starts to grow. That’s where we’re seeing almost half of our business now. It’s coming from existing customers that are expanding the use of Anaplan.
Why is Anaplan known as the spreadsheet killer?
I don’t want Microsoft mad at me or anything, they’re a pretty big company! I think spreadsheets do a great thing, and there are uses for them, but when you start thinking about large global organisations, trying to run their business and be agile and collaborative in an environment with the changing economy and the disruptors they face, spreadsheets just don’t do it.
It’s not really about killing spreadsheets, it’s about transforming the way people plan. I think that’s what’s very different about Anaplan. Companies plan in silos, they plan in non-integrated ways, and don’t collaborate because it’s done on someone’s hard drive, with a spreadsheet, and they send that spreadsheet to someone with a version, and emails get floated around the company. One division does it one way, another division does it another way.
What Anaplan does uniquely is bring all those silos of people together in an integrated business planning environment that allows the to collaborate.
What’s next for Anaplan?
Obviously we’re still a very young company when you think about longevity. There’s a lot of things for us to do. We’re obviously relevant across industries, divisions, business units and lines of business, as a holistic planning tool. We will start looking at certain industries and driving very specific use cases in those industries.
When I was in London, I met with a large number of insurance companies, banks, brokerage houses, and other financial services firms. I am confident that we will have 90 per cent of the world’s financial institutions using Anaplan in the next couple of years to handle workforce planning and other very specific things in addition to the traditional financial and budgeting components. I think you’ll see us doing that in every industry.
What is also next is our App hub, which I think is just the future of planning. Think of it as your iTunes store. You go on the iPhone and you want to buy and app. You download that to your phone and it’s maybe specific by industry or specific by use case. Our partners have built these predetermined, pre-populated applications that you can use right off the internet. I think you’ll see a lot of that.
I guess eventually we will be the spreadsheet killer.
Will we see greater sophistication of enterprise software with the creation of an ecosystem?
I’ve been in enterprise software for 30 years, and I believe this is the next frontier of disruption. If you think about what happens today in these large companies with the big three, IBM, SAP, Oracle, and the large legacy enterprise systems that these firms have, the challenge that they’re having is that the cost structure is just too much. You talk to these companies and they’re spending US$4 billion to integrate SVP systems that are three decades old.
If I’m the CEO of a Fortune company and they say they want to spend US$2 billion to fix stuff that is 25 years old, I’d get fired. It’s only a matter of time when companies like ourselves will just come in and really change the game by making enterprise software just as exciting. Alright, we’re maybe not at the iPhone, iTunes level just yet, but that’s where we’re heading.