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From Surviving to Thriving in the Global Pandemic: How Subscriptions Could be your Magic Pill

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It’s 7.00 am. Billy just finished his 45-minute online fitness session. He takes his fitness seriously. Billy had a routine you could set your clock to. He would hit the gym by 6.00 am and be out in one hour on the dot.

A quick shower and breakfast, he would reach the office by 9.00. While the day would be a blur with non-stop meetings, Billy loved the creative bursts at the huddle around the water cooler or the coffee break that quickly turned into brainstorming for a new marketing campaign. All that went out the window when the global pandemic struck. Now life is a blur of zoom calls with his distributed team, doing the dishes, keeping the kids from climbing off the walls, and yes, online fitness classes. All of us see a little of our lives in Billy’s but spare a little thought to Billy’s gym owner, Peter who runs Complete Fitness. The pandemic took away his thriving business in a matter of weeks. After a few sleepless nights,  seeing his kids take their classes on Zoom gave Peter a solution to stay connected with his customers. Soon, he launched his classes online and even threw in a free beginner’ s session to give new clients a taste of fitness. He ran webinars on nutrition and customized diet plans were an additional offering to clients. Not only did some of his old clients join the online classes,  a whole bunch of new customers were even willing to pay up after they loved his free sessions. Peter is now certain that the online classes will continue even when his gym opens up again. An additional stream of revenue never really hurt anyone.

Just like Billy’s gym, traditional businesses all over the world are using technology to bridge the physical divide. They are quickly realizing that a lot of SaaS solutions will help them adapt to the new normal and stay in business as the world around them changes.

Work from Home: the New Reality

As millions stay home in an attempt to flatten the curve, the way we work, learn, and communicate with each other are seeing drastic shifts. Companies are functioning with remote and distributed teams. Work from home became a reality overnight resulting in a huge surge in demand for virtual conferencing platforms and enterprise tools that help teams collaborate and share. Zoom’s daily participants went up from 10 million in December 2019 to 300 million by late April 2020.  Microsoft’s active daily users saw a 70% increase from 44 million users in mid-march to 75 million daily active users.  Microsoft’s CEO Satya Nadella said in the recent call that they have seen two years’ worth of digital transformation happen in two months.  

Twitter, Square, and Spotify have already extended their employees a permanent work from home option. Companies like Barclays, Mondelez, and Nationwide are exploring a permanent shift to work from home and reduced office spaces. This shift opens up a host of opportunities for enterprise SaaS companies in the global HR & payroll such as Papaya Global, Pilot, onboarding training, and culture platforms such as Rippling, HROnboard, and knowledge-sharing platforms such as Notion and Slack. In its recent earnings call, Slack’s CEO, Stewart Butterfield said the company added 12,000 net new paid customers in the first quarter of 2020, more than any other quarter in the history of the organization.

Getting Schooled

The global pandemic also saw more than  1.2 billion children worldwide staying home as schools shut down leading to a 2x increase in demand for e-learning solutions, be it language learning apps, virtual tutoring, video conferencing, or online learning software.

Both teachers and students have been using collaborative platforms such as DingTalk and Lark which support video conferencing, attendance tracking, instant messaging, and real-time co-editing of project work. They say they will continue to swear by it post the pandemic as it improves the effectiveness of both the teaching and learning process.

The global online education market is tipped to reach $ 350 billion by 2025 from $188 billion in 2019  according to a report by Research and Markets. As concerns on its effectiveness continue to fade as adoption increases, parents and students will warm up to the idea of signing up for more classes online

Doc’s Always on Call

Telemedicine has been around for a while but hadn’t really taken off since patients didn’t bite. Forrester says patients have been slow to adopt because of a lack of awareness, cost and relationships, and availability.  Patients always preferred to see the doctor if he was available to meet them. The global pandemic changed all of that. With patients wary of in-person visits due to the virus, local doctor offices are also switching to a virtual format.

In March, telehealth visits already saw a 50% increase in the US, and analysts now expect the general medical visits to increase 200 million in 2020 from the initial estimate of 36 million visits and coronavirus related virtual visits to touch 900 million. Teladoc Health saw more than 20,000 visits a day in April, which was more than double the number of daily visits it had seen in March. According to Global Market Insights, the global telemedicine market estimated to be around $45 billion in 2019 is projected to grow to more than $ 175 billion by 2026, thanks to the nudge from regulations and increasing adoption.

Expanding the Digital Footprint

The shift to digital subscription is also helping revive the fortunes that the oldest play in the subscription industry. Take for instance, The New York Times success with digital subscriptions is helping it limit the damage from falling ad revenue which is expected to decline by 50-55% in the second quarter of 2020. The Times signed up a record 587,000 net new digital subscribers in Q1 2020 as anxious readers signed up to read up on the latest on the pandemic from reliable news sources. According to Nieman Lab, it took the newspaper about 18 months to sign its first 566,000 users when it launched its paywall in 2011. The fact that the Times earns 3x more revenue from its subscribers than from advertisements will help make up for the fall.  

Digital subscriptions helped the Times understand every stage of the subscriber life cycle including improving retention.  While much of the ad revenue is likely to come back as the economy revives, the new subscriptions are likely to stay on as change in consumption becomes a habit.

Subscription businesses also give traditional businesses an opportunity to keep with the changing consumer preferences. For instance, car sales have been on a steady decline as consumers move away from ownership to the convenience of mobility offered by the likes of Uber and Lyft.  But the concerns over safety of using shared mobility gives OEMs and car rental companies an opportunity to offer an all-inclusive subscription that includes access to the car, insurance, and roadside assistance.

The Shift to Subscription Business

Apart from convenience to the customer,  one of the unique advantages of a subscription business is that it gives deep customer insights as it has a ringside view to the business and how the customer interacts with the product. These insights are invaluable for businesses as they scale their product capabilities, launch a new product, or enter new markets. As both traditional and online businesses scale their digital subscriptions, many of the legacy systems may not be equipped to handle the complexities of recurring revenue. Having a flexible billing and subscription management system can help businesses scale up faster even in the changing landscape brought on by the global pandemic. It not only helps speed up customer acquisitions through free trials but also  ensures higher customer retention by offering flexible subscriptions and customized discounts 

While every crisis is a test to human resilience, it could also act as an inflection point in adoption. For instance, the genesis of the rise of e-commerce in China was a result of the aftermath of SARS in 2003. In the US, it took 10 years to increase e-commerce penetration (as % of retail sales) from 5.6% in 2009 to 16% by the end of 2019. But as the global pandemic forced retail stores to be closed, that figure increased to 27% by April 2020 over a span of eight weeks. Shopify has been helping millions of small businesses go online even before the pandemic. The company doubled down on its initiative as businesses started shutting down in March. According to the company’s COO, the number of new stores on Shopify grew 62% between mid-March to the end of April compared to the prior six weeks.

US e-commerce penetration

According to Gartner while IT spending is likely to see one of its biggest contractions of about 20%, cloud and SaaS businesses are projected to grow by 19-20% in 2020. Most of the SaaS businesses have been far more resilient during these challenging times and as more businesses discover the power of recurring revenue. In a recent  earnings call, Marc Benioff, founder of Salesforce, a company that has seen and thrived through two recessions said:  “Now as we look at navigating a biological crisis when we started Salesforce, Parker [Harris] and I really built a business model that was designed to transcend these situations so that we would have durable growth over time regardless of the crises.” Did someone say ‘Antifragile’?

Source: https://www.chargebee.com/blog/thriving-global-pandemic-shift-subscriptions/

Publications

We need a new field of AI to combat racial bias

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Since widespread protests over racial inequality began, IBM announced it would cancel its facial recognition programs to advance racial equity in law enforcement. Amazon suspended police use of its Rekognition software for one year to “put in place stronger regulations to govern the ethical use of facial recognition technology.”

But we need more than regulatory change; the entire field of artificial intelligence (AI) must mature out of the computer science lab and accept the embrace of the entire community.

We can develop amazing AI that works in the world in largely unbiased ways. But to accomplish this, AI can’t be just a subfield of computer science (CS) and computer engineering (CE), like it is right now. We must create an academic discipline of AI that takes the complexity of human behavior into account. We need to move from computer science-owned AI to computer science-enabled AI. The problems with AI don’t occur in the lab; they occur when scientists move the tech into the real world of people. Training data in the CS lab often lacks the context and complexity of the world you and I inhabit. This flaw perpetuates biases.

AI-powered algorithms have been found to display bias against people of color and against women. In 2014, for example, Amazon found that an AI algorithm it developed to automate headhunting taught itself to bias against female candidates. MIT researchers reported in January 2019 that facial recognition software is less accurate in identifying humans with darker pigmentation. Most recently, in a study late last year by the National Institute of Standards and Technology (NIST), researchers found evidence of racial bias in nearly 200 facial recognition algorithms.

In spite of the countless examples of AI errors, the zeal continues. This is why the IBM and Amazon announcements generated so much positive news coverage. Global use of artificial intelligence grew by 270% from 2015 to 2019, with the market expected to generate revenue of $118.6 billion by 2025. According to Gallup, nearly 90% Americans are already using AI products in their everyday lives – often without even realizing it.

Beyond a 12-month hiatus, we must acknowledge that while building AI is a technology challenge, using AI requires non-software development heavy disciplines such as social science, law and politics. But despite our increasingly ubiquitous use of AI, AI as a field of study is still lumped into the fields of CS and CE. At North Carolina State University, for example, algorithms and AI are taught in the CS program. MIT houses the study of AI under both CS and CE. AI must make it into humanities programs, race and gender studies curricula, and business schools. Let’s develop an AI track in political science departments. In my own program at Georgetown University, we teach AI and Machine Learning concepts to Security Studies students. This needs to become common practice.

Without a broader approach to the professionalization of AI, we will almost certainly perpetuate biases and discriminatory practices in existence today. We just may discriminate at a lower cost — not a noble goal for technology. We require the intentional establishment of a field of AI whose purpose is to understand the development of neural networks and the social contexts into which the technology will be deployed.

In computer engineering, a student studies programming and computer fundamentals. In computer science, they study computational and programmatic theory, including the basis of algorithmic learning. These are solid foundations for the study of AI – but they should only be considered components. These foundations are necessary for understanding the field of AI but not sufficient on their own.

For the population to gain comfort with broad deployment of AI so that tech companies like Amazon and IBM, and countless others, can deploy these innovations, the entire discipline needs to move beyond the CS lab. Those who work in disciplines like psychology, sociology, anthropology and neuroscience are needed. Understanding human behavior patterns, biases in data generation processes are needed. I could not have created the software I developed to identify human trafficking, money laundering and other illicit behaviors without my background in behavioral science.

Responsibly managing machine learning processes is no longer just a desirable component of progress but a necessary one. We have to recognize the pitfalls of human bias and the errors of replicating these biases in the machines of tomorrow, and the social sciences and humanities provide the keys. We can only accomplish this if a new field of AI, encompassing all of these disciplines, is created.

Source: https://techcrunch.com/2020/07/03/we-need-a-new-field-of-ai-to-combat-racial-bias/

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As Q3 kicks off, four more companies join the $100M ARR club

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Welcome back to our $100 million annual recurring revenue (ARR) series, in which we take irregular looks at companies that have reached material scale while still private. The goal of our project is simple: uncovering companies of real worth beyond how they are valued by private investors.


The Exchange is a daily look at startups and the private markets for Extra Crunch subscribers; use code EXCHANGE to get full access and take 25% off your subscription.


It’s all well and good to get a $1 billion valuation, call yourself a unicorn and march around like you invented the internet. But reaching material revenue scale means that, unlike some highly valued companies, you’re actually hard to kill. (And more valuable, and more likely to go public, we reckon.)

Before we dive into today’s new companies, keep in mind that we’ve expanded the type of company that can make it into the $100M ARR club to include companies that reach a $100 million annual run rate pace. Why? Because we don’t only want to collect SaaS companies, and if we could go back in time we’d probably draw a different box around the companies we are tracking.

$100M ARR or bust

If you need to catch up, you can find the two most recent entries in the series here and here. For everyone who’s current, today we are adding Snow Software, A Cloud Guru, Zeta Global and Upgrade to the club. Let’s go!

Snow Software

Just this week, Snow Software announced that it has crossed the $100 million ARR mark, according to a release shared with TechCrunch. The Swedish software asset management company has raised a few private rounds, including a $120 million private equity round in 2017. But, unlike many American companies that make this list, we don’t have a historical record of needing extensive private capital to scale.

Source: https://techcrunch.com/2020/07/03/as-q3-kicks-off-four-more-companies-join-the-100m-arr-club/

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U.S. Fintech Saas Company HighRadius Continues European Expansion with Opening of New Frankfurt, Germany Office

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HighRadius, a U.S.-based fintech enterprise Software-as-a-Service (SaaS) company specializing in integrated receivables, announced on Thursday it has continued its European expansion efforts by opening its new Frankfurt, Germany office.

Founded in 2006, HighRadius claims its HighRadius Integrated Receivables platform optimizes cash flow through automation of receivables and payments processes across credit, collections, cash application, deductions, electronic billing and payment processing.

“Powered by the Rivana Artificial Intelligence Engine and Freda Virtual Assistant for Credit-to-Cash, HighRadius Integrated Receivables enables teams to leverage machine learning for accurate decision making and future outcomes. The radiusOne B2B payment network allows suppliers to digitally connect with buyers, closing the loop from supplier receivable processes to buyer payable processes.”]

HighRadius reported it had a 250% increase in bookings, 25 new customers, and a fourfold increase in employees in EMEA in the last 12 months. HighRadius noted that the new office will it to support more customers to accelerate their recovery from the impact of COVID-19.

“The pandemic has increased demand for agile and intelligent credit and collections solutions as organizations focus on maintaining cash flows and strengthening business resilience.”

Speaking about the expansion, Jon Keating, HighRadius’ Vice President and General Manager, added:

“Frankfurt’s position in central Germany makes other parts of the country readily accessible, and its status as the financial center of the country opens up a gateway to a deep pool of talent and relevant partnerships.”

Source: https://www.crowdfundinsider.com/2020/07/163566-u-s-fintech-saas-company-highradius-continues-european-expansion-with-opening-of-new-frankfurt-germany-office/

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