The journey to $100M ARR may seem like a typical success story in Silicon Valley, but that doesn’t make it simple or easy. But what guideposts can you follow to survive the years it takes to succeed? UserZoom CEO Alfonso de la Nuez and CMO Sophie Chesters have a few suggestions.
Fall in love with “solving a problem”
As entrepreneurs, you always want to follow your gut. But you can’t base your business model purely on gut instinct: you need to understand the problem by conducting serious research.
This research will tell you whether your “genius idea” is filling a real market gap and whether you’re disrupting or creating a new category. (And if it’s the latter? Good luck!).
Pick the right partners to start
Do everything you can to not only choose your finding partners wisely but to ensure that you clearly divide your tasks and roles. In particular, Nuez recommends drawing lessons from the book Rocket Fuel, by Gino Wickman, on how “visionaries” and “integrators” can forge incredible collaborations.
Also, as Peter Drucker has said: “Culture eats strategy for breakfast.” If you establish the culture early—by choosing the right partners to start with, it will make your work much easier further down the line.
Define and focus on one target persona
In the early days, UserZoom struggled with deciding whether its target market should focus on enterprise or SMB. But Nuez credits an MIT course with Ken Morse and Bill Aulet for inspiring them to focus on their enterprise customers.
This focus can be a risk because it is shrinking your market. But it will all be worth it if you research and understand your client’s pain points.
Be creative with funding
Many start-ups think they need to net venture capital to jumpstart their growth. But UserZoom’s roots in Europe drove them to be more creative – everything from FFFs (friends, family, and fools), to bank loans, to government grants.
UserZoom moved to Silicon Valley not to find funding but to be closer to their market. And as they got going (past $10M), they found VCs pitching to them, not the other way around.
Combine software with services
UserZoom invested in a model where they didn’t just provide software, but services, in a model known as SaaS++. They adhered to the “75% Rule,” in which recurring revenue of their software made up three-quarters of their business while making the rest from their consultancy, research, and other professional services.
This model allowed UserZoom to provide true value to their clients, who were happy to pay. And as long as you pay attention to your gross margins, you’ll be in great shape.
Understand the business value of great UX design
Good user design can make or break a business. After being useful, UX is the leading factor impacting user retention.
“I always look at retention – and one of the best ways to retain a customer is to make things easy and intuitive.” – Alfonso de la Nuez
Sales and marketing are still significant, but consider dedicating more research and design to the user experience. The insights you glean from your users may make all the difference in this process.
Know how to market your product
Product marketing can bring the focus back onto the value your clients get from your product. Nail down your foundational marketing with crisp and clear value propositions; your ROI and your sales team will thank you later.
Marketecture, an informal, one-page diagram that lays out the workings of a system, can also do wonders for getting your marketing, sales, and product teams on the same page. But also, don’t be afraid to “dumb it down” for the average potential user. For copywriting, bundling and simple labels are best.
Think big and think worldwide
“Silicon Valley isn’t a place; it’s a mentality.” – Alfonso de la Nuez
In SaaS, the entire world can be your market. Even if you start in a place where capital is more limited (like UserZoom’s early years in Europe), don’t let those restrictions limit your ambition to be bold and change the world.
Pick the right partners to scale
Both venture capital and private equity firms can make enticing partners as you scale your business, but each provides vastly different benefits. VCs may have a drive for incredible growth, whereas PE can come with slower growth but with deep reserves of operational experience. Choose wisely.
Treat this partnership with the same care as you would a marriage. Get to know your prospective collaborator for years beforehand, on as personal a level as you can, so that you know that it’s a fit that will last the test of time.
Grow from entrepreneur to CEO
You need an ego to be an entrepreneur, but it can only take you so far. Park that ego enough so you can hire the best people you can find and then get out of their way. Let go and let the talent of your team speak for itself.
The strength of your products depends on your ability to do research and know your market better than anybody. Figure out who your customers are and what true value you can offer them, and then give them a great experience.
Build your team with care. This applies to finding cofounders, team members, and partners to scale. Choose people with whom you can build not only a culture but a true partnership. Take what funding you can get in your early days and use it to build a culture that will outlast it.