There are hundreds of blog posts, each with 5-10 tips on SaaS startup development. However, quite often such articles are impersonated, the ideas in them are quite general and basically can concern any software product (and sometimes any product at all). But in the life of each person there comes a moment when he or she wants to at least formulate the principles to guide them in work and life. And at most to share them with others, and the owners of SaaS platforms are no exception. That is why we have gathered here 5 tips from competent people, which will help you both before and during the launch of SaaS-Startup.
- Base your growth strategy on customer satisfaction
Quokka project team
Quokka is a SaaS product that brings email messages to those, who have not opened them, through other channels, such as Facebook and other social networks. The software is designed for sellers of products/services and helps them to improve sales through email marketing. According to developers, the open rate of emails increases on average from 21% to 83% with their product. The first version of the SaaS-platform was conceived as a link between MailChimp and Facebook. Quokka 2.0 already had 7 integrations with other services, while now there are 13. The project itself is registered in the United States, and the international team is scattered around the world. Maybe Quokka hasn’t reached the sky-high yet, but it has already set its priorities wisely. So, if you are going to work with your SaaS-platform in the B2B segment, the guys recommend focusing not on scaling and investment, but on contacting the target audience and studying its needs.
“At one time, the most important thing was the idea, after that there were many companies that put growth in the first place. Still, some companies took off incredibly well and then fell just as painfully. A striking example is the Homejoy cleaning startup. The team attracted $35 million of investments, but in a year and a half it collapsed. They had many awards, money, and a powerful pool of investors. However, their system of attracting clients was unprofitable. They realized that it was impossible to achieve the goal of actually bringing profit to the startup.”
Pavel Kuznetsov, co-founder of Quokka.
According to the guys from the Quokka project, when a startup ignores the culture and users, focuses only on growth, there is no time left for careful and high-quality communication with each interested person. There is no time to understand their true needs, collect feedback, and find out why people stopped using the product. Even declaring out loud “hell, we have a million more users”, in the long term you can find yourself in a difficult position.
“We work for a specific segment of B2B companies, so we can set ourselves the goal of communicating with each paying customer personally. When you close the needs of millions – for example, in the fitness sphere you have no rational reason to communicate personally with each user. You put them together in huge groups, you communicate selectively, and that’s enough to push money and compete. At Quokka, we can experiment. We want to get to the truth, understand how to satisfy users, how to deliver more value to them. For us, it’s more important than growth, money, and a team of 50 people.”
- Put everything aside for the next 2 years.
Jason Lemkin – Managing Director of the Storm Venture Foundation
Jason Lemkin is a Managing Director of the Storm Venture Foundation, specializing in the development of SaaS-startups. Having lots of experience in creating SaaS startups (he even has a website dedicated to the development and evolution of this type of software), Lemkin is quite tough, but at the same time realistically explains why the creation of such platforms should be taken seriously.
“It seems like everyone wants to be a SaaS founder these days. I meet with great VPs of Sales and Product in particular who are Ready. It’s time. To go out on their own. Start their own SaaS company. Awesome. First, are you prepared to give it a full 24 month commitment to hit initial traction? Not 12. Not 18. But — 24?”
According to Mr. Lemkin, six months is not enough, as well as 12 months. It will take you 9-12 months just to build a more or less high-quality SaaS product. And another 6-12 months to start receiving some significant income.
“Maybe an Instagram or a WhatsApp or a Pinterest or a Meerkat can explode in just 12 months. That just doesn’t happen in paid SaaS apps. Can you “afford” to commit for 24 months just to get to Something, to real Initial Traction? If not, you should pass. Slack went from $0 to $12m ARR in ’14. Woah. But it wasn’t founded on 1/1/14. It took them a year to get to a Minimum Sellable Product. And it was really founded as a company many years earlier. In any event, giving yourself 12 months to get to Initial Traction just won’t cut it. You’ll quit. Because you won’t have enough revenue just 12 months in … if you have any.”
It’s a bit harsh, but it still makes sense. The truth is that most people are not really ready to give up everything for 24 months because of financial, personal, or some other reasons. However, those who are ready do have a better chance of succeeding due to the fact that they have really serious intentions. For about the same reasons, Mr. Lemkin recommends “burning bridges”.
“You have to have Zero Optionality. This is perhaps most important. If you maintain optionality, it never works. ‘I’ll try for a while and go back to Salesforce if it doesn’t work.’ or ‘I’ll do a lot of consulting while I see if it works.’ or ‘I’ll raise $500k and see how it works.’ This just never works. Not for high-growth start-ups at least. Great founders maintain Zero Optionality. Not because they are crazy risk takers. But because they just don’t see the huge risk. They have no back-up plans. They see The Future.”
It’s up to you to decide whether to listen to the experience of the seasoned industry shark or go on your own path. However, it is worth agreeing that a responsible attitude towards a startup as a “work of a lifetime” will definitely add a couple of weighty points to the basket of success of your SaaS project.
- You need the custom functionality
Patrick McKenzie – software engineer in Stripe Atlas
Patrick McKenzie has founded four companies, including 2 SaaS platforms and a startup specializing in engineering recruitment. He is now working on Stripe Atlas, which exists to enable startups to work on a mass scale. Just for reference, Stripe Atlas for $500 in a few weeks registers a user’s business in the U.S. with connected payment acceptance through Stripe. Their services include registering a company in the U.S., preparing and signing internal company documents and documents protecting its intellectual property, registering the company as a taxpayer, etc.
As McKenzie notes, during the development of a SaaS solution, you will somehow have to add custom functionality.
“Depends on the nature of the business, [but] in enterprise software – entirely unavoidable; you can call it “solutions engineering” or something but you’ll be doing it. In my sweet spot of B2B SaaS at the sub-enterprise levels, you generally want to avoid it… [addition of custom features] but I’ll give an exception for the early days. When you’ve got 20 customers you should be killing them with kindness. They should be unable to conceive of a more responsive vendor than you. This is how you justify a very high touch relationship to pull everything they know about the market out of them, and how you get raving fans to help spread you to their networks and close customers 21 through 100. If your mission in life was to satisfy customer #17, and they asked for CSV import… then you build CSV import, by next week, and you deal with the tech debt/etc consequences of that later.”
The statement makes sense, because in the field of SaaS-platforms custom solutions really do win a lot compared to out-of-the-box ones. Adding new features and updating existing ones in a business application can make the work much more convenient. For example, when it comes to the B2B segment, a client company can instantly use new features to make informed business decisions. Startups that chose On-Premise as their business model for software distribution have to spend a lot of money on updates. Businesses benefit from SaaS, as these updates are vendor-defined, allowing them to focus on or take advantage of new features as they become available. In addition, security and functionality improvements are much faster and more convenient, as they are done in the background. You can learn more about cool SaaS custom solutions here. Perhaps you should also take care of finding a team that can provide a custom and, importantly, customizable solution.
- Look for new ideas in unexpected places
Sean Patrick Si – founder of Qeryz
Qeryz is a SaaS platform for receiving and studying feedback from users of different sites. The project was developed and launched in the Philippines. The founder of the startup, Sean Patrick Si, is sure that by carefully studying some aspects of the project, you can find new ideas and then monetize them. For example, this is how he describes his experience of message processing for technical support.
“Support is seen as a ‘dirty’ job. Especially here in the Philippines where we have support centers (a.k.a. call centers) in every city where there’s respectably stable Internet connection. It isn’t something that a project manager or growth director would normally do. Much less a CEO. My teammates aren’t that sharp with their written English and I don’t want to burden them with replying to customer support emails — so I do it. 99% of it. And you know what? Most of the light bulbs came from my back and forth emails doing support for the company.”
Who would have thought that most of the great ideas to improve the product were born in correspondence with users’ queries to technical support.
“We thought about one letter in which a user asked about the function of removing the Qeryz logo from the site for a certain amount without purchasing additional functionality. So we thought about it and said ‘Hey, if this guy is asking for this, there must be others who would request for the same thing moving forward.’ Finally, me and my team decided to go ahead and we started building the feature. Paypal made it hard for us because they didn’t have provisions for just topping-up on the subscription amount of a customer.”
As Mr. Si noted, while the team was looking for workarounds with the payment system and was launching a new feature, they were approached twice more, asking to remove the Qeryz logo and link without changing the tariff plan for the full package (the most expensive option costs $79 per month). The team took into account each request and decided to contact the users immediately after launching the new option. Now, this option is a source of additional income ($9 per month – for removing the Qeryz logo and link). And it all started with that very letter to the technical support. As you can see, sometimes cool ideas can be found just by listening to the target audience, and sometimes it can be useful to take various aspects of a project for manual management.
- Focus on productivity-enhancing features
Tomasz Tunguz – Venture Capitalist
Mr. Tunguz identifies 3 key options for how a SaaS platform can benefit a customer: increase revenues, reduce costs, or increase productivity. To maximize your customer experience, he says, you need to understand what type of SaaS product (and ultimately company) you’re building. However, there are pitfalls in 2 of the 3 types.
“Revenue increasers need to continue to increase revenue over time. Customer retention hinges on proving the continuous marginal revenue the software delivers. Cost reducers must reduce costs further and further. Each year, the customer will ask, how to deliver much more efficiency to my business? In both of these cases, the value proposition will asymptote at some point. There are only so many more leads the software can surface or only so much cost software can excise.”
As Tunguz notes, despite all the non-obvious benefits, the SaaS platform for productivity improvement provides many more opportunities to attract new customers and retain existing ones. For example, Salesforce’s CRM allows managers to predict the sales funnel. Its benefits to the customer are eternal. Never will the vice president of sales or department manager say, “I don’t need to predict my sales anymore”.
“At YouScan (social media feedback monitoring systems), it was difficult for us to justify the value of our product from the very beginning in terms of increasing our customers’ revenues or reducing costs. “Improving customer loyalty”, “managing your company’s reputation”, “searching for marketing insides” are difficult to express in quantitative terms and even more so in money. In 2010, when we were actively entering the market, it was quite difficult for us to convince customers of the value of our product without having the cost efficiency calculations of its implementation in hand. Are we suffering from it now? Rather no than yes – with market development, most of our potential customers (mainly large consumer brands) realized that working with customer feedback in social networks is the “perpetual value” for business, although it is difficult to express it in money directly.”
A clear example of the success of this approach. Performance-enhancing features are really good for the SaaS distribution model. However, you should not think that this is your last resort. In the end, as Mr. Tungus himself notes, each of the three value options for SaaS products considered can allow their suppliers to create very successful SaaS businesses. The main thing is to understand which of them will offer your startup, determine your strategy for market entry and customer service respectively.
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At the end, we will add one piece of advice from ourselves. Take care of the technical part and find people that will care about your project just as you do. Whatever tricks you use to build your SaaS startup strategy, the technical part must be done at the highest level. In turn, if everything works like clockwork, you may not have to go to all sorts of tricks. A little bit of marketing, magic, quality technological part, and – puff. Before you know it, you will become the owner of a unicorn startup biting off its market share!
