Dear SaaStr: Why Do Most SaaS Startups Fail?
I’d like to suggest that web start-ups founded by quality teams often fail due to time.
I know those hot start-ups seem to be lapping you,
Raising bigger rounds
You should worry
But here’s the thing
UiPath took 10 years to get to $1m ARR. It’s worth $10B.
Procore took 10 years to take off, only once mobile emerged. It’s worth $8B.
— Jason ✨Be Kind✨ Lemkin (@jasonlk) April 6, 2022
Especially if you are selling something (e.g., SaaS), it’s usually going to take you 24 months to get to any truly meaningful revenues, and probably 36 months to get to enough repeating/repeatable revenues to have a really stable business. Not always. But most of the time.
Many seemingly great entrepreneurs just let themselves run out of time:
A lot of this, of course, is related to not quitting and not running out of money, but you can stretch capital, raise a little more, etc.:
- People get discouraged and quit when they don’t have traction in 3-6-9-12 months. It’s no fun when the bell doesn’t ring for days on end.
- People get discouraged and quit when they have some pre-traction, some early signs of potential success … but it’s not enough to build a real business. Most of us don’t get enough revenue, fast enough, for it to be remotely easy. UiPath, now at $1B+ in ARR, took 10 (!) years to get to $1m in ARR.
- People get discouraged when they finally learn what the market needs (after 3-12 months of learning), and they learn it’s just sooo much work, and will take so much time.
FWIW my view, my learning, is you have to give yourself, truly budget, 24 months to get your start-up to true initial traction, from first release to iterative release to first users to first customers to a product people actually want to pay for that can scale.
Faster is better, faster is what your seed investors want, faster is what you want.
Yes, fail fast if your idea is a dog.
But if you don’t give yourself time, you will probably fail.
Above is our 8-year journey (including pre-launch) to the first $50m ARR. It took 5+ long years to get to $10m ARR at Adobe Sign / EchoSign. But then just 3 years after that to get to $50m ARR. Go long.
(note: an updated SaaStr Classic answer)
A related post here: