Getting to Initial Traction

If You’re Going to Do a SaaS Start-Up … You Have to Give it 24 Months

echojason@gmail.com'

Jason Lemkin

It seems like everyone wants to be a SaaS founder these days.  I meet with great VPs of Sales and Product in particular who are Ready.  It’s time.  To go out on their own.  Start their own SaaS company.

Awesome.

I get it.  I’d like to recruit you to be a VP at one of my companies, but I get it.  No one ambitious wants to work for The Man.  I mean, not really.

But should you?  There are three things I ask folks who want to start their own SaaS company:

1.  First, are you prepared to give it a full 24 month commitment to hit Initial Traction?  Not 12.  Not 18.  But — 24?  6 months isn’t enough.  12 isn’t.  It’s going to take you 9-12 months just to get the product right.  And another 6-12 to get any material revenues.

Maybe an Instagram or a WhatsApp or a Pinterest or a Meerkat can explode in just 12 months.  That just doesn’t happen in paid SaaS apps.

>> Can you “afford” to commit for 24 months just to get to Something, to real Initial Traction?  If not, you should pass.

Slack went from $0 to $12m ARR in ’14.  Woah.   But it wasn’t founded on 1/1/14.  It took them a year to get to a Minimum Sellable Product.  And it was really founded as a company many years earlier, see the Crunchbase chart to the right:

In any event, giving yourself 12 months to get to Initial Traction just won’t cut it.  You’ll quit.  Because you won’t have enough revenue just 12 months in … if you have any.

And the honest truth is most folks can’t really commit for 24 months.  For financial, or personal, or whatever reasons.  That makes sense.  But you’ll fail in SaaS if you don’t commit to 24 months to Initial Traction.

2. Are you able to commit to 8,760 hours a year?  That’s 24 x 365.  I don’t mean committing to being in the office 14 hours days.  That’s not really necessary.  That’s for the YC kids 🙂  But can you really, honestly, commit to obsessively thinking, worrying, futzing, stressing about how to do The Impossible.  Every.  Single.  Moment of the day.

Nothing else, but work.  Even when you are playing with the kids.  Having dinner with your husband.  Because that’s what it’s going to take.

>> If you don’t have the mental bandwidth — you should pass.  Because everything in SaaS is just insanely competitive.  And also because SaaS is so multi-faceted.  You’re going to have to be the VP of Sales, Customer Success, Marketing and probably Product in the early days.  There’s endless drama with paying customers.  You’ll almost lose your Best Logo Accounts.  You have to be intensely, painfully committed to do all this.

Later, there will be fat, once you get to $5m ARR or so.  The cavalry will come.  More on that here.  But in SaaS, it takes a long time until then.  Because it’s just so hard to get recurring revenue engines going.

3.  You have to have Zero Optionality. This is perhaps most important.  If you maintain optionality, it never works.  “I’ll try for a while and go back to Salesforce if it doesn’t work.”  or  “I’ll do a lot of consulting while I see if it works.”  or “I’ll raise $500k and see how it works.”

This just never works.  Not for high-growth start-ups at least.  Great founders maintain Zero Optionality.  Not because they are crazy risk takers.  But because they just don’t see the huge risk.  They have no back-up plans.  They see The Future.

If you need to maintain optionality — you aren’t ready to do your own SaaS startup.

…..

Ok, now what if you aren’t quite there.   You can’t pass tests 1, 2 and 3 above.  But you are … close.

Then take a pause.  But don’t say no yet.  Instead, go do some more homework.  Do 20 customer interviews (more on that here).  Find a great co-founder that also can commit for 7-10 years overall, and for 24+ months to get to Initial Traction.  Because he or she has to pass tests 1, 2, and 3 above.  You almost certainly can’t do it alone.  And see how it feels after that.

Because again, the great founders can see The Future.  But sometimes they need a little help to get there.  I did, in both my start-ups.  20 interviews and a just amazing co-founder can be the missing pieces, to show you how to really do your own SaaS start-up.

Going back to one of our Dreamforce presentations, look at Guidespark and Talkdesk.  Both are on their way to being Unicorns.  But man, both took far longer than 24 months to get to Initial Traction.  But now, they’re killing it.  Can that be you?

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Published on March 6, 2015
  • http://TubularLabs Rob

    Yes, exactly. Zenefits is heralded as the “fastest growing SaaS company ever” but it still took them 24 months to initial traction. They were in ycominator summer 2012, launched in October 2013 and had 1m revenue run rate after 8 months, so that is June 2014. 24 months to initial traction, even for Zenefits….

    http://www.businessinsider.com/the-incredible-story-of-zenefits-founder-parker-conrad-2015-2

  • http://moxiter.com ashutosh

    Thanks Jason for this reassuring post. Understanding the problem & pain-points of Businesses is the biggest hurdle. 2 reasons I have found in travel industry –
    a) Tour operators are not much forthright when talking about their problems/inefficiencies. They don’t trust you to come-up with a viable solution.
    b) Identifying and getting hold of some ‘insider’ willing to help, consumes time.

  • https://www.agilepayments.com/ Gene Krause

    Thanks for the helpful information Jason. I’m sure not everyone is going to agree with it, but I think it gives a realistic look at what it really takes to be successful in the SaaS industry. I do tend to believe though that it’s a lot more difficult for people to have Zero Optionality once they have established careers and have families. So I’m wondering if that’s why more young people tend to be successful in the SaaS arena. Your second point is right on the money too. You may not be working 24 hours a day, but the business can never be far from your mind if you’re going to rise above the competition.

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  • http://SwiftMarketing.com Roger Vaughn

    “Fail fast” is an over-used cop out IMHO – I burnt my ships at the shore, in full view of the soldiers.

  • http://www.pierrelechelle.com Pierre Lechelle

    Hey Jason, this article is full of truth about Entrepreneurship in the SaaS environment. It’s great to read posts like this. After reading this, you better be confident that your idea is worth the investment. You therefore avoided people to get into projects they don’t feel fully committed to. Great post!

  • http://odrive.com Alex Teu

    I’ve been thinking about this a lot recently. What does it take to become a startup founder? Does it start with the idea? Nope, it’s as you say, something as simple as, I’m tired of working for the man. That is more important. An idea is worth as much as the napkin you wrote it on or the 5 seconds you thought about it. Likely, 10 other people thought of exactly the same thing in that span of 5 seconds. But it is easy to simply want. Has she thought about what it would take and how long it would take to even validate she might be on to something? So you nailed it. Desire alone is not enough. Fortitude is crucial.

  • http://@channelh_api Robert E. Capelli (@CapelliRobert)

    24 months makes the most since.

    `3 months to get off the napkin and into a demo of what your company is solving.
    `Next 6 months to test with your first 5-15 customer.
    `Month 9 you should be able to have a MSP.
    `Next 3 months of figuring out your best repeatable sales pitch.

    So now you have the kinks kind of worked out, and 12 months to focus on growth and product development based on feedback from your customers.

    I agree with Jason on this set of time. If you think it will be faster, you will short cut, and eventually have a product and team that most likely will crumble under the weight of stress, pain, and customers.

  • http://www.hookify.io Rich Kopcho (@kopcho)

    I found this very encouraging. I read it to mean if we stick to our knitting we are on the right track. And as long as our market validations are correct, then only time and execution need endured and tackled. That’s just another 12 months to over night success!

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  • http://www.comuziapp.com Alex

    Great article. This is true. Our bootstrapped Healthcare IT saas startup was founded 2013, we have pivoted, iterated until we have got a mvp, then 2015, we are making five figure revenue in the first three months of the year + more pipeline deals which will lead to more revenue.

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  • https://www.testlauncher.com Jason Hamilton-Mascioli

    I keep coming back to this post… just amazing insights. 24+ month commitment! Makes total sense.

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  • Red Neck

    Stop bitching and start doing. Or, pussy out and come work on the farm for me.

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