Gavin Baker @GavinSBaker Husband, Becky Painter. CIO, Atreides Management. Former PM, Fidelity OTC fund. investorfieldguide.com/baker/ No investment advice, views all my own. Mar. 07, 2019 2 min read

1) Read the $CRM transcript a few days late. Most striking to me were Mulesoft (obviously), the success with Lightning and Einstein, Block’s statement – 100% true – that enterprises can now spend 50% of their IT budgets on innovation up from 10% pre cloud. Overall good q.

2) Mulesoft revenue was up over 100% to $181 million, which is an acceleration from the 60% growth the company printed in their last quarter as a public company and “far ahead” of guidance. Accelerating at scale is difficult - $CRM clearly adding a lot of value via their channel

3) $6.5 billion seemed like a full price in March 2018, now it seems like a bargain given the company will likely do $1 billionish in 2019 revenue. And it was arguably the most strategic cloud asset available to purchase – even more so than GitHub. Still surprised $GOOGL passed

4) Sidenote – in a previous life, I passed on Mulesoft at $1.4b premoney in 2015 b/c I thought it should have been $1-1.2b and was annoyed at the bankers involved for what I perceived as overly aggressive guidance/valuation. Up more than 300% in 4 years – investing is hard!

5) I’m not the only one with regrets about Mulesoft – I had dinner with one of their former board members several weeks ago, who expressed extreme regret about selling to $CRM. Quite a bit of lost carry there. Also funny to read the notes written about the acquisition.

6) PaaS seems silly these days, but call it “low code” and 🚀. Regardless, $CRM can add a lot of value and be more strategic to their customers with Mulesoft managing the constantly growing web of connections between different clouds and SaaS co’s.

7) Really impressed with the way that $CRM – which was in danger of becoming a “legacy” software company – has modernized their infrastructure. Manifested in Einstein’s success/adoption. And transitioning the customers to Lightning almost as impressive.

8) Cloud is creating massive efficiencies for enterprises and cutting IT maintenance spend significantly. This is both opportunity and risk for traditional SaaS co’s like $CRM. Opportunity in that their TAM is effectively larger.

9) Risk in that enterprises can use the increasingly sophisticated tools offered by AWS/Azure/GCP to build cheaper, better systems than those offered by SaaS co’s and then write to the $TWLO, $SHOP, etc. APIs to create superior, customized solutions.

10) Almost all SaaS co’s need to transition from offering workflow automation tools, “systems of record” and “systems of engagement” to “systems of observation and intelligence” to quote Satya Nadella. I might reframe as “systems of decisioning.” $CRM trying with Einstein.

11) Combination of IaaS co’s moving up the stack with customizable solutions & the API driven SaaS co’s is an underappreciated risk, esp with SaaS valuations where they are combined with unusually low differentiation between co’s based on obvious metrics like marketing efficiency


You can follow @GavinSBaker.



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