💊 Veeva - Bringing the Healthcare Industry to the Cloud
Overlooked #131
Hi, it’s Alexandre from Eurazeo. I’m investing in seed & series A consumer and consumer enablers startups all over Europe. Overlooked is a weekly newsletter about venture capital and underrated consumer trends. Today, I’m digging into another vertical SaaS called Veeva which has built a c.$1.5bn ARR empire by bringing the healthcare industry in the cloud.
Today, I’m adding another vertical SaaS to my collection of deep-dives. I previously covered Shopify, Toast, Procore and Olo. It’s probably the most iconic vertical SaaS. It’s a company called Veeva. Founded in 2007, it raised only $7m, went public in 2014 and is now trading at a $24.5bn market capitalisation (9.4x EV/NTM Sales). Veeva has built a c.$1.5bn ARR empire selling cloud-based solutions to pharma and biotech companies with products around sales and R&D.
I divided this blog-post into several sections:
Part I - History
Part II - Product Description
Part III - Financial Profile
Part IV - Main Insights
Part I - History
In 2007, Veeva was founded by Peter Gassner as a verticalised CRM built on top of Salesforce and custom-made for the healthcare industry. Peter had the original insight while working at Salesforce as VP of Technology and seeing Salesforce’s limits as an horizontal platform.
In 2007, Veeva raised a $3m seed round with angel investors.
In 2008, Veeva raised a $4m series A led by Emergence.
In Apr. 2010, Veeva started its commercial expansion in Europe.
In 2011, Veeva launched Veeva Vault (content management system that will become the backbone of Veeva Cloud Development with a first product around sales and marketing content), Veeva CLM (closed loop marketing to present multimedia content on mobile) and Veeva iRep (iPad app for Veeva’s mobile sales rep).
In 2012, Veeva expanded Veeva Vault to the R&D process with an application to streamline the drug approval process. Veeva’s product expansion into R&D has been a massive commercial success. Today, it accounts for 60% of total revenues. It has also reduced Veeva’s dependency to Salesforce.
In 2013, Veeva released Veeva Network which is a unique healthcare database that is directly accessible within Veeva’s CRM.
In Oct. 2013, Veeva went public raising c.$200m and registered a $4.4bn valuation on its first trading day.
In Sep. 2015, Veeva acquired Zing Ahead, a content management platform for commercial assets. Zinc was founded in 2001 in the UK and was used by 120 healthcare companies.
In Sep. 2019, Veeva acquired Crossix. It was founded in 2005. It had 200 employees, 200 customers, $70m in revenues (40% growth YoY) and a 20% operating margin. Crossix had a patient database with 300m patients in the US that was leverage to measure and optimise marketing campaigns while staying compliant with regulatory and privacy constraints in the healthcare sector.
In Jan. 2021, Veeva became a public benefit corporation. It’s a status in the US in which you remain a for profit corporation but you claim to have a positive impact on all the stakeholders (employees, shareholders, customers, suppliers) involved in your industry.
In 2021, Veeva acquired Learnaboutgmp which provides compliance training services for healthcare organisations with 170 courses and 450 micro-learning assets.
Part II - Product Description
Veeva’s vision is to build “the industry cloud for life sciences”. In other words, Veeva wants to create the most compelling verticalised platform to digitise companies in the healthcare sector.
Veeva started as the ultimate CRM for pharma companies built on top of Salesforce’s developer platform. It was a smart shortcut for Veeva to build on top of Salesforce because it accelerated both product development (Veeva had just to customise Salesforce for the healthcare industry instead of rebuilding a CRM from scratch) and commercial expansion (Veeva leveraged Salesforce’s brand which was key to sign its first enterprise customers in a highly regulated industry). Veeva’s second product act was to build a comprehensive platform for R&D teams. It was a contrarian product decision because Veeva decided to sell to other personas in healthcare organisations (R&D teams vs. sales teams) and to go after a market segment that was larger than its first segment ($7bn TAM vs. $3bn TAM) when the natural product evolution would have been to add modules to better serve sales teams in healthcare organisations.
Veeva breakdowns its platform into two main blocks: Veeva Commercial Cloud serving customer facing teams and Veeva Development Cloud serving R&D teams. Commercial Cloud is centred around Veeva’s first product launched which is a CRM. Development Cloud is centred around Veeva’s second product launched which is a content management system called Vault to share content with third parties while ensuring full compliance with regulations.
Veeva has the following products under its Commercial Cloud offering:
Customer Relationship Management (CRM): manages relationships with potential and existing customers. Veeva’s CRM is built on top of Salesforce with a set-up adapted to the healthcare industry. Veeva’s CRM is used by over 80% of pharmaceutical sales representatives in the world. It has industry-specific features such as regulated content management or compliance drug sampling.
Digital Events: clients can engage with healthcare professionals via online or hybrid events. The product’s strong integration with Veeva’s CRM enables Veeva to track results and to stay compliant with marketing expenses reporting requirements in the healthcare sector.
Vault for Commercial Content Management: content management system to produce and use marketing and sales content while staying compliant with healthcare regulatory requirements.
Link & Compass & Open-Data: rich proprietary database on healthcare professionals (Link), on longitudinal patient data (Compass) and on open healthcare data (Open-Data) in order to improve sales and marketing targeting.
Nitro: data science and analytics platform to enrich the CRM. It can help with specific use cases like customer segmentation or contract optimisation.
Crossix: digital marketing platform tailor-made for the healthcare vertical for both direct to consumer and healthcare professionals campaigns (e.g. social media, TV, web). It’s a product dedicated to the US market. Veeva acquired Crossix in 2019. Since then, Crossix has grown its revenues by 70% and Crossix has been integrated with Veeva’s CRM.
Veeva has the following products under its Development Cloud offering:
Digital Trials Platform: supports healthcare companies in the execution of their clinical trials with an end-to-end platform usable by all the stakeholders involved (patients, sites and sponsors).
Regulatory Information Management (RIM): platform to streamline the processes related to becoming and staying compliant with healthcare regulations everywhere in the world (measures regulatory impacts of a product change, of having a drug being approved).
Vault Quality: manages quality processes and content on a single platform between all the stakeholders involved in manufacturing and distributing a drug.
Vault Safety: product to remain compliant with safety processes once a drug is released.
Veeva uses a quadrant to present its product with two axes which are product maturity and market share. In Veeva’s product suite, CRM and Commercial Content are the only two products combining both high product maturity and high market share. Besides them, all other products have a strong growth potential because they have a low product maturity and/or a low market share. Veeva says it takes 5-20 years to bring a product from low maturity and market share to high maturity and market share.
Part III - Financial Profile
In Jan. 22, Veeva generated $1.48bn in ARR growing at 26% YoY; had a Saas Gross Margin of 84.8% and a total business EBIT Margin of 27.3%.
Veeva sells to enterprise customers. As a result, it only has 1.2k customers, a $1.2m ACV and spends 15.6% of revenues in sales & marketing. To onboard these customers, Veeva has large professional services operations which are generating c. 20% of total sales and on which Veeva has a 24% gross margin.
It onlt took Veeva 7 years to generate more than $100m in ARR (2007-2014). It achieved this milestone with less than 200 customers.
Veeva was started as a CRM built on top of Salesforce. As a result, it started with a SaaS gross margin that was way below average (72.3% in 2010) and that has massively improved overtime (84.8% as of today). It now has the scale to be able to renegotiate terms with Salesforce and has been able to diversify away from the Salesforce developers platform with the development of Veeva Vault. Today, Veeva generates only 30% of its subscription revenues from products built on top of the Salesforce’s developer platform.
Veeva’s growth durability is impressive. In the past 5 years, Veeva has maintained an annual growth rate above 25% even if the company was already generating more than $500m in annual revenues. During covid (2020-2021), growth even accelerated.
Part IV - Main Insights
It’s a capital efficient business. Veeva raised only $7m and burnt only $3m to become a public company with over $100m in ARR 6 years after inception. At IPO, Emergence had a 31.1% ownership in a business trading at $4.4bn in market capitalisation having invested only $4m in the business (325x multiple). Veeva was a miss for many VC firms because most of them believe that its market was too small to produce a multi-billion dollar outcome.
It sells to an industry with high profit margins implying higher willingness to pay. Compared to the average vertical, the pharmaceutical industry is much more profitable (26% EBITDA margin vs. 14% average across industries).
It has a noteworthy product launch strategy. Instead of adding adjacent features serving the same function targeted by the initial product (CRM for sales), Veeva started its product expansion by releasing a second product called Vault targeting a different function in healthcare organisation (R&D vs. sales). It was a riskier bet but it paid-off by massively increasing Veeva’s addressable market (from $6bn to $13bn). Today, Veeva has built two products platforms around its two initial products (CRM & Vault).
A vertical solution was needed in the healthcare industry because the tool-stack was fragmented and not interconnected. Moreover, healthcare is a regulated and global sector requiring industry specific features.
Veeva has great company values: do the right thing (display integrity), customer success (extra-mile on customer support, positive ROI on the short and long term for them when they pay for Veeva, becoming a long term strategic partner for the entire pharma industry), employee success (promote internally, build the place in which people can do their best work) and speed (preserve execution velocity despite Veeva’s size). Veeva is also a public benefit corporation implying that it serves not only shareholders but also all the stakeholders around the company (employees, customers, suppliers, partners, the life science industry).
“I'll start off with our vision and values this a very important slide for Viva. I presented it at the start of every important meeting like this [investor day] meeting or during board meetings.” - Peter Gassner (CEO and cofounder at Veeva) during Veeva’s latest investor day in Nov. 22
Thanks to Julia and Antoine for the feedback! 🦒 Thanks for reading! See you next week for another issue! 👋
Nice one !