Dear SaaStr: What Are The Top Things to Know Before Starting a SaaS Startup?

Dear SaaStr: What Are The Top Things to Know Before Starting a SaaS Startup?

Top of my list:

  1. Picking a mediocre co-founder just doesn’t work.  You can’t settle here. You have to find someone at least as good as you, ideally better. And importantly, at least as committed. A mediocre “coder” CTO because you can’t code … won’t really work out. A mediocre “business guy” that can’t really run marketing and sales won’t really get you those key early customers. It’s always better to wait and a great co-founder than settle.  A bit more here.
  2. Raising venture capital is really, really hard — and only available to a small subset of founders. You can’t get mad or frustrated that you can’t raise VC capital. Rather, expect it. Expect you’ll only be able to raise VC capital once you prove yourself, either with strong early growth or with an incredible team. Venture capital is a niche type of funding, and 99% of startups will never be able to raise venture capital. If you want to, understand what it takes to be in that 1% of fundable startups.
  3. You need to know your 10x feature. That amazing feature customers will pay for, that they aren’t getting today. This is how you break into a market, 95 times out of 100. What’s yours? Be honest if you don’t have one.  More here.
  4. It often takes at least 24 months to get anywhere. The first version of your product rarely is good enough. The second may be just good enough to get a few customers. It often takes 24 months to get to $1m in revenue, or longer. Are you all in?  More here.
  5. There’s always competition. Even if you don’t have direct competition, you have indirect competition. Or, at a minimum, you’re always competing for budget. There’s only so much spend to go around. So why will you win? Be honest.  More here.
  6. Most quit. Most aren’t committed enough. Most can’t take it when there isn’t enough money to make payroll, even after a year. Most can’t take the withering impact of the competition. Can you? If you can go the distance, that’s a huge competitive advantage right there.  A related post here.
  7. You need a big vision, but it’s OK if you don’t know how to completely get there in the early days. You need to believe you can win in a reasonably sized, important market. But it’s OK if you don’t know how to get to $1B in ARR. The best founders grow their markets and their TAMs over time. But you do need a vision to at least get to $100m in revenues in 7–10 years, if all goes well.  More here.

Published on September 3, 2022

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