Zuora’s Shawn Price on Disruption and the Tech Bubble

Shawn Price is Zuora’s President; he is responsible for the company’s strategic direction and operations. Prior to Zuora, Price worked with early-stage growth companies in enterprise tech, SaaS, Cloud, and consumer as an “Entrepreneur in Residence” at Battery Ventures and served as CEO, president and chairman at Savvion, a global leader in business process management.

Before Savvion, Price was Senior Vice President and General Manager Americas at Vitria where he was part of the initial team helping drive the company from zero to $135 million in revenues, overseeing more than 75% of the company’s revenues, and guiding the company to one of the most successful IPO of 1999 resulting in a $10 billion market cap. Today, in addition to Zuora, Price sits on the board of Datameer, funded by Kleiner Perkins, and is a Charter member of the C100, a Silicon Valley non-profit organization for Canadian entrepreneurs. 

Mr. Price gave two presentations in Montréal this week; one for Accelerate MTL and one for the CVCA annual conference.  He argues that startups innovate more than incumbents because they can afford to fail many times (see this shining example).  “Innovation is made through experimentation,” said Price. Plus, incumbents must deal with the pressures of quarterly financial performance and are more bureaucratic. 

Price proposes that an important disruptive shock is presently affecting the global ICT sector: “Commerce has evolved. In the last 10 years, there’s been a dramatic shift in the way both consumers and companies want to do business. Today, people would rather subscribe to services than to buy products. It’s happening everywhere. And it will have a dramatic effect on your business.”

Disruptors are taking over incumbents with the help of three major metrics:

1. Attractive retention rate.

2. Recurrring profit margin.

3. Growth efficiency (reinvestments of profits).

Thus, the tech battles are fierce, including Box vs. EMC, Zendesk vs. BMC, and Zynga vs. Electronics Arts. Disruptors are relying on momentum to gain market shares and a slow reaction from incumbents.

According to Price, disruption aims to answer three particular questions:

1. How can we help you grow?

2. Do we make your process better?

3. Do we use our data to make better decisions?

Presently, the market is providing high premiums to tech firms relying on a highly growing compounding revenue model. For example, the acquisition of Autonomy, a  software company bought by HP, represented an 80% stock premium.

There is a big dilemma for fast growing tech start-ups: raising more money or selling the firm? When a firm obtains a huge valuation through a takeover, it is more a case of “being bought rather than being sold.”

According to Price, some sub-sectors of the tech industries are in a bubble, such as the acqui-hire transactions. Several deals are made in 5 to 10 days. “It is not rare to obtain a term sheet on the first day of negotiation,” he says.