How one family built Qualtrics to an $8B exit

I'm not so keen on the marketing fluff either, but there are definitely needs being met. The cases I'm most familiar with are in psychological research, which consists of having people fill in a lot of questionnaires (asking about mood, stress-levels, or testing cognitive skills). Qualtrics provides a service to easily build these questionnaires, send them out to respondents, and collect their response (and export the data for later analysis in packages like SPSS). With a little bit of extra work, you can even do highly interactive tasks like Stroop through Qualtrics. For the average psychologist this would simply be undoable without this type of software.

Similarly, class-action lawsuits often require sign-in through filling in some sort of questionnaire. Previously, these questionnaires would be handled through live phone interview, which is obviously very intensive for both the interviewee and interviewer. The questionnaires are often quite interactive, with different questions being asked dependent on answers to previous questions, or aggregates of previous questions. It would take skilled interviewers a while to learn to interview for any one questionnaire. Qualtrics (and similar survey software) makes this process much, much simpler.

You then also have your regular marketing research, the value of which can be debated... but it is obvious people are willing to pay for the creation and distribution of such questionnaires.

Beyond this, I'm sure there are a bunch of other applications of the software.

There's a few things involved, and they're not all BS!

You want to build a couple new features. You have 60 person-hours at your disposal. Which one do your users want?

Build two quick prototypes and see which one people actually use more.

You need to convince people to give you money (aka "get customers"). You're not sure what the best way to convince them is. Try 3 different approaches (Landing page with tech details? Youtube ads with customer stories? etc) and see which one works before you spend all of your budget on something nobody uses.

Out of a thousand people walking down the street, only one _might_ be interested in what you do. How do you make sure you focus your efforts on that one person?

Or "we have a million f2p video game players. 99% of them will never spend a dime. 0.1% of them will buy a $100 package once. 0.01% of them will buy a $9.99 package three thousand times. When should we present this package to them? Will we sell more $100 packages if we ALSO have a $200 package? Will we sell more $100 packages to Jane Doe who takes the bus to college at 8:45 AM and plays for 34 minutes 5 days a week?" (obviously that one gets a bit more troublesome)

The above comes with some severe implications re: privacy, filter bubbles, etc. but it's not there for no reason. Though there's plenty of people who just want pretty charts for their own sake; having worked in analytics the toughest question is "we have these charts.. umm... so what now?"

MongoDB has a similar 20x ratio.

I won’t argue if this is warranted, but companies like this have:

- Very high gross margins once you take out fixed costs. (80+%) This implies massive profitability once you exceed fixed costs.

- Negative net churn. (Their existing accounts grow more than they lose) This implies if they got rid of their sales force, they could still grow.

- Their payback on sales investments is quick, usually less than a year. This allows them to heavily invest in topline growth.

When you do all this, the math works at 10X in a low interest rate environment, or if you project a very long growth period. Perhaps 20X is Fear Of Missing Out?

The stock market’s reaction to SAP (Knocking off 5 non in value) suggests that 8-10X is more reasonable.

I'm not very familiar with IPOs or buy-outs, but for going concerns it's usual to look at the price-earnings ratio rather than the price-revenue ratio.

Ford, for example, has revenue of $37.67B last quarter but net income of only $991M. With a market cap of $37.31B, that means a price to earnings ratio of 9.5.

Microsoft had less revenue, at $30.08B last quarter, but net income of $8.87B. It has a market cap many times that of Ford, at $841.08B both because it has so much higher earnings and because it has a PE ratio of 23.9, which implies that the market things those earnings will grow at a good clip.

Please remember that Skype was bought by MS for 8.5 Billion (yes, crappy Skype). Of course it was bought for it's prevalence and big existing audience(i'm guessing). Certainly not for it's great UI/UX and Communication capabilities (I hate Skype).

https://www.wired.com/2011/05/microsoft-buys-skype-2/

So anything marginally better could certainly be worth much, much more (as in this powerful Qualtrics products suite).