Q: What is your opinion on the factors causing SaaS businesses to fail?
My top list of what causes SaaS startups to fail:
- Not committing to 24 months to get to first $1m+ in revenue — whatever it takes. It can easily take that long in SaaS.
- Running out of money. Sounds obvious, but startups do all the time, when they didn’t have to. They just assume VCs will be there, or bail them out. Assume instead no one even writes you another check.
- Not recruiting a strong enough team. In the end, a great team with 24 months of runway almost always can do amazing things. They never seem to fail. They often come close. But great teams pull it out.
- Not leaning into the market and customers you end up having initial traction in. The folks that end up buying your product are often not the same you imagined! Some founders just aren’t willing to build software and sell to the customers that want them. They just don’t want to take it where it goes.
- Not finding a 10x feature. Almost every category already has 5, 10, 100, 1000 vendors in it. What’s your 10x feature? The one customers will pay for? Do you know? More here.
- Cofounder Drama / Conflict. Starting up is hard. Cofounders being at each other’s throats when it’s harder and takes longer than expected kills a lot of startups. A lot of them.
- Too slow to change, evolve and adapt. Markets change. Teams that can’t evolve every few years with the market often eventually end up not quite failing, but having mediocre outcomes at best.
- Quitting. See point #1 above. No one can force you to quit.
Ok, now what >doesn’t< kill SaaS startups? Some things don’t kill you … that you think might would:
- Competition. Competition can slow you or even maim you. But I’ve yet to see it kill a team with happy customers and true dedication to going long.
- Underfunded. This can be stressful, when the other competitors raise tons of capital. And it may again slow you down. But I haven’t seen being less funded kill a SaaS startup. Just slow it down maybe, for a while.
- Too small a market. The best founders always find a way to grow their market over time. If you can get to even 10 happy customers, you can get to 20, and then 100. And then you are off to the races. Even if your TAM at a practical level isn’t huge at the beginning.
Published on August 14, 2021