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Interview with Brian Donahoo, AppFolio

Story by Benjamin F. Kuo

 

Brian Donahoo is the CEO of AppFolio (www.appfolio.com), a Santa Barbara-based firm which recently closed $22M in funding for its software-as-a-service offerings. The firm's founders and executive team are formerly from ExpertCity (now Citrix Online). We spoke with Brian yesterday to get some better insight into what the firm is doing, and where he sees opportunities in the Software-as-a-Service market.

What is AppFolio?

Brian Donahoo: As the name implies, AppFolio is about a portfolio of applications. We're really focused on business management software for vertical industries, and delivering them as software-as-a-service. Our first product is AppFolio Property Manager, which is in beta now, and will be released in May. This is a product that really focuses on revolutionizing workflow software for the property management industry. We have tried to make it complete, easy to use, and easy to implement, with no training, so that it can improve property managers' lives without a lot of cumbersome IT constraints. The goal with the product, is that a typical property manager can use it with little or no training. Since we're coming to the market now, we can also take advantage of the latest technologies--like mashups, and other web applications--and be completely web based. We'll be taking advantage of the latest generation of applications, as opposed to what's mostly out there now in the vertical spaces, which is legacy client/server software.

What's the story behind the company, and how did it start?

Brian Donahoo: This company has lots of people, with lots of experience in Software-as-a-Service. There are lots of ExpertCity and Citrix folks-- you might know people like Klaus Schauser. We've got lots of folks who are very passionate about Software-as-a-Service. We believe Software-as-a-Service is in its infancy, and will be crossing the chasm. We looked at what was happening in the SaaS space, and saw a number of broad horizontal plays. We also saw that there were lots of verticals, what we thought of as a multi billion dollar cottage industry. The vertical providers are very ripe for Software-as-a-Service, and there's not lots of Software-as-a-Service solutions out there. We used a process of market validation--there's a Santa Barbara guy, Frank Robinson, who teaches you to practice selling before you have a product, to find out what was available, and so we could figure out where others were positioned, and validate our ideas before building our products. That's how we found these vertical market opportunities.

What's the idea behind the property management software--is this something which you could also apply to other verticals?

Brian Donahoo: The premise is to have a platform which can be extended into other verticals. The first product is for residential property managers. There are 30,000 of them in the US, and we think it's a $100 million dollar opportunity. There is about $500 million in the U.S. spent on property management software, and we fully see making it a $100M opportunity for us. But, the key here is to use that software platform to expand into other vertical markets. Our goal is to build a multi-billion dollar company. We think of it as SAP for the SMB, but better. It's a play off what SAP has done in the enterprise market, but for small and medium sized vertical applications. Certainly, in the first year, we will only have one product on the market, but behind the scenes we will be building out our software for other verticals and bring out additional products.

What's your background and how did you get involved?

Brian Donahoo: For the last 8 years, I worked at ExpertCity and Citrix as Vice President of operations at ExpertCity, and after that as VP of Products and Services at Citrix Online. I came to a strong appreciation on how to create an operating Software-as-a-Service company. I decided the best jumping off point for me, was a startup in the Software-as-a-Service area. And, Santa Barbara is sure a great place to do that.

Where are you going with the product now?

Brian Donahoo: The beta product is out there now, and we are going through our final run of bug fixing right now. We'll release at the end of May, and then go through a more limited launch and a decent pipeline of customers. Through June and July, we'll go through a limited launch in a couple of markets, to get to twenty to thirty customers installed, then we'll go a lot broader with our marketing and reach. For the last year, we have really been more of a development organization. We're filling out our sales, service, and marketing organization right now.

Having just raised this round, are you looking to hire more people?

Brian Donahoo: We've got about 20 full time employees now, mostly in engineering. We're continuing to hire in engineering, and also actively filling out our sales, service, and marketing.

Finally, what's your view on the Software-as-a-Service market. You made some allusion to it being early, where is the market going?

Brian Donahoo: I am a firm believer that we're still early in the growth cycle. I think larger companies are beginning to embrace it, although smaller companies definitely see the benefit before the larger companies. It's very much in its infancy. If you look at the growth rates for typical Software-as-a-Service companies today, it's growing phenomenally fast. It shows no sign of slowing in various industries. That's what is happening in several markets. We are looking to take all the learning we've gathered over the last eight years, and really apply it to a new company, by doing it better, smarter, and more capital efficiently. Software-as-a-service is very early in its growth rate, and in market penetration.


 

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