[Posted on March 13, 2008 - 3:56 PM]
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DiggEarly Salesforce.com Inc. [CRM] employee Tien Tzuo resigned last year to co-found Zuora Inc., a provider of outsourced subscription management services to on-demand software companies. Now, Salesforce founder Marc Benioff has invested in Zuora's first institutional round of funding, a $6.5 million installment led by Benchmark Capital. New Enterprise Associates partner and WebEx co-founder Min Zhu seeded the company last year alongside an initial investment by Tzuo, but that money has been rolled into the Series A funding.
As more industries adopt the on-demand model, billing becomes more complex, Tzuo says. Zuora will provide an outsourced alternative for companies that don't want to spend time and money supporting a variety of subscription plans with tiered pricing, he adds. The product remains in private beta with a handful of pilot customers, but should be in full release within a few months.
While the startup initially is focusing on software-as-a-service customers, Tzuo says Zuora eventually will target all kinds of companies that use subscription models. "We think people will buy less and subscribe more in the future," he says, mentioning video rental site Netflix, auto sharing company ZipCar and executive jet provider NetJets as companies reflecting that trend. Tzuo expects Zuora to begin by working with middle-market companies, but he notes that Salesforce scaled its business significantly over the years, selling to banks, telcos and other large enterprises. Zuora is aiming to follow that path.
In the meantime, the company is fleshing out its sales and marketing staff in preparation for a full product launch later this year. Tzuo says the company isn't thinking about a Series B round yet, but the new round should provide 18 to 24 months' worth of cash flow while Zuora finds its legs.
The SaaS trend continues, although investors appear to be losing their infatuation with the technology. On-demand human resources software provider SuccessFactors Inc. [SFSF] enjoyed a moderately successful public offering in the fall, but has since lost almost half its value since a mid-December peak. Of course, Salesforce itself lagged out of the gate following its bellwether 2004 IPO, but it now trades at more than five times its offering price. - Paul Bonanos
See March 13 press release from Zuora
For more see GigaOm, BloggingStocks and VentureBeat
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