I wrote a while back about Room at The Bottom, and how once a space gets big enough (~$100m) or so … the biggest guys end up abandoning many of the smallest customers and segments in their space. Which once a space is at, say $100m in market size, can open up a $10m hole for new small guys at the bottom of the market. And as the space grows further, that hole and room at the bottom gets bigger and bigger.
Now imagine we’ve talking about a much bigger space, like CRM. Salesforce alone will be at $10 billion ARR in just a few years. $10 billion.
Now at that scale, Salesforce is now working on as many $100m+ deals as it can try to close. Because once you adding > $1 billion in ARR a year, you need a few Really, Really Big Enterprise deals to move the needle. And a handful of $50m-$100m deals are, by definition, the new target to really move the needle at that scale.
Given that … does it make any sense to pursue the $9 a month market? Or the $2000 ACV market? I mean, not really. And Salesforce isn’t.
So the bottom 10% of this $10 billion market, or $1 billion, isn’t even being addressed by Salesforce.
And the next bottomest 10% of this $10 billion market, maybe is being addressed, but isn’t being prioritized. It can’t be. There’s too much to do to get to $10 billion in ARR.
>> So what that means is there are 10-20 $100m+ ARR opportunities in CRM that exist, either today, or Will Very Soon.
We’ve seen Veeva IPO as a Pharma-specific CRM. But that unicorn didn’t even come from the bottom of the market, but rather, an adjacent piece of it, a vertical. We’ll see SugarCRM IPO this year, but while that’s partly the bottom of the market, it’s really more of a vertical (open source + highly customizable + international) play in a sense. And Zendesk will IPO this year, a CRM focused on supporting existing customers instead of potential ones. All three are already > $100m ARR. And we haven’t even seen a Bottom-of-the-Market play IPO yet.
And we’ll see another 10-20. It’s just the basic math of the $2 billion in market space that Salesforce isn’t really addressing. And with today’s multiples — all 20 Can Be Billion+ Market Cap Unicorns.
CRM got a little sleepy for a while. It seemed pretty tapped out around ’08/’09, in fact. But the interesting thing is it’s just Getting Good.
My take-aways:
- The idea there is Only One Big Winner in a Space is getting Pretty Dated — Even If It’s True. Maybe Salesforce will continue to capture 80% of the market cap value in CRM over time. But goodness, even if that’s true, the other 20 all can be $1 billion+ Unicorns. The fact that all SaaS markets are exploding means there are far more ways to get to $100m in ARR than ever before.
- Never Quit if you have Real Customers in a Good Market and Something Potentially Great. Because TAM is What You Make of It. Everyone thinks TAM is smaller than it ends up being — if you have a great and long-term committed team. You’ll add features, extensions, new product lines. Salesforce grew into Marketing Cloud and Service Cloud. Where will you grow? Probably somewhere great over the long-term.
- You Don’t Have Dethrone the Winner to Win. Got a better take on Box? Don’t fear its $10 billion IPO and $200m run rate. Relish it. Because just the wake behind that can create another Billion Dollar Winner. You don’t even to take anything away from Box. Just win in the Bottom 20% of the market, and/or ride the next wave in the segment. Again, because it’s just a huge market. See, e.g., Egnyte which is now killing it.
- All These Categories Are Going to Turn Over Again. Secret and Medium are just the next versions of Twitter and Quora, Tumblr supplants Blogger and grows perpendicular to WordPress. These consumer-y ones all are sort of themes of the same thing, with a new spin as the web changes (mobile, social, etc.). The themes change much more slowly in the Enterprise, but they do change every 3-5 years. Mobile is, eventually, going to totally change CRM. It’s starting to happen already. And that will create huge new opportunities for new players. Etc, etc.
- Net net my #1 point: Judge Yourself By Yourself. There’s more than one way to Build a Unicorn — at least these days. It used to be there was only one unicorn (if any) in a space, in enterprise software. But today, the SaaS markets are simply exploding. We’re only in the second or third inning of an incredible change in the way enterprises buy and use software. You can build a $100m ARR and Billion Dollar (Market Cap) Business by riding the next wave. And Salesforce, DropBox, Successfactors, whomever — they really can’t do anything about it.
Carpe Diem, my friends.

(Cross-posted @ saastr)
(Cross-posted @ saastr)
Hmmm… you make a good point for the hosted SaaS applications market, but when we move to platforms-based solutions in an open three-tier cloud model the small as well as the large will be served by either the same vendor providing the platforms, or the vendors providing the services for the functionality required.
in other words, i think you are right in what you are saying for the next 4-6 years at most, after that – a very different model applies.
this means that SFDC, as ti moves to become more of a platform play than an application play, will plug those “unicorn holes” rather quickly and leverage their open tech to do so – and this is within the next 3-4 years if not sooner.
so, as long as i think you are correct on what you are saying for now – this is a short- to near-term case with a very different model in the long run.
thanks for the opportunity to think through this, makes sense.
Very interesting post Jason. Esteban, Jason: Would you say that Customer & Employee Advocate Marketing, a field of a couple of dozen players at present: http://socialmediagovernance.com/social-employee-advocacy-software-buying-guide/, is a type of CRM? And if so, (Esteban) how might the future three tier cloud affect them? What do you ll think, in general, about the market need/opportunity for Advocate Marketing specialists?