It’s safe to say that Christoph Janz – partner at Berlin-based VC Point Nine Capital – knows what he’s talking about when it comes to SaaS startups. Along with being a former entrepreneur himself, he was the first investor in runaway success story Zendesk and his VC’s portfolio is full to the brim with SaaS companies. Read on and discover what he thinks SaaS founders need to keep in mind in 2014…
#1 Have the right mix of paranoia and patience
In the spirit of Andy Grove you need to be paranoid about becoming and staying the #1 player in your market. For a variety of reasons, most SaaS markets have “winner takes most” characteristics, so you have to do everything you can to dominate your market. But since we’re still in the early days of Cloud adoption and since it usually takes five-to-10 years to build a large SaaS company, you also need lots of patience. Gail Goodman of Constant Contact reminded me of that in this excellent talk.
#2 Work on your weaknesses until they become your strengths
At the outset, almost every SaaS founder team that we talk to is either very strong on the product/tech side or on the sales/marketing side, but rarely on both sides. It’s like a team DNA, and it’s hard for a product-driven team to become excellent at sales and vice-versa. At the same time, you have to be great at both product/tech and sales/marketing in order to succeed, so you should do everything you can to work on your weak side.
This usually means a combination of a) learning really fast and going out of your comfort zone and b) hiring senior people with complimentary skills and experiences. I’m not saying that you shouldn’t leverage your strengths, but I know you’re going to do that anyway. Doing what you love to do and what you’re good at is comparably easy. Fixing your weaknesses is the tougher part.
#3 Have a plan for 2014
Become clear on what you want to achieve in 2014 and what this means for your product roadmap, your marketing plan and your financial plan. Define company-wide OKRs (objectives and key results) as well as quarterly OKRs for each employee. It sounds like a no-brainer, but my guess is that most startups will benefit from going through a more structured OKR exercise. More about this in my recent post about OKRs.
#4 Prioritise “mobile”
Mobile is eating the world. ‘Nuff said.
If you don’t offer your customers a fantastic experience on smartphones and tablets (which usually means native apps that leverage the unique capabilities of the device or the mobile usage scenario) you’re at risk of getting disrupted by a mobile-first startup, faster than you can disrupt the incumbents of your industry.
#5 Don’t optimise for the edge cases
One thing I’ve noticed is that many startup founders are trying too hard to make everyone happy, which leads them to optimise pricing, sales tactics and maybe even product design for a small vocal minority of users. When I discuss e.g. lifecycle email marketing and pricing with SaaS founders I like to say:
“If no one is complaining about your prices, you’re most likely too cheap”
“If no one is calling your emails ‘spam’, maybe you’re not sending enough emails”
Similarly, if one user requests a new feature or a change in the product that’s no reason to do it, unless you think it makes sense for a large part of your target group.
The temptation to please every user is understandable but it doesn’t mean it’s the right thing to do. The pricing expectation of your users, for example, will probably follow some kind of bell curve. If you optimise for users on the far edges you’re leaving a lot of money on the table in the much bigger middle area of the curve.
#6 Raise money when you can, not when you need it
It’s a pretty good time for SaaS startups to raise money. If you have the possibility to raise a meaningful amount of money at a good valuation, you should seriously consider it even if you don’t necessarily need the money right away. First of all, it’s usually unclear what “need” really means. Enough to get to break even? Enough to get to the next round of funding? Enough to win the market? More cash almost always means de-risking and an opportunity to accelerate. I venture to say that if you don’t know what to do with an additional couple of million dollars that shows a lack of imagination.
Secondly, I don’t want to send a “R.I.P. Good Times” message, but currently the times are pretty good and no one knows what will happen in the next one or two years. Thirdly, just because you raise money doesn’t mean you have to spend it imprudently, and most SaaS founders who I know are not at risk of failing due to premature scaling because frugality is part of their DNA.
Image credit: Flickr user kevin dooley