Getting to Initial Scale

SaaS Start-Ups: Buck Up – It Really Does Get Easier.

echojason@gmail.com'

Jason Lemkin

One of one top engineers at EchoSign, who had strong experience both in consumer internet and enterprise internet, told me a while back the #1 reason he disliked SaaS / enterprise — it never gets easier.  His point was, once you solve the problems for Big Customer #1, then you get 10 more Big Customers.  Which is ten more problems.  Then 100 more customers.  That’s 100 more problems.  It gets worse, not better.

A fair point for the dev team.

But one of my top learnings from EchoSign, to all the other SaaS start-ups out there: for the founders — it gets easier.  Once you get past 50 employees, it gets a lot easier.  Once you break through $10m in ARR, it gets a lot easier.  And once you break through about $15-$20m in ARR, it gets really, a dramatically whole lot easier.

It’s not that it gets any easier to grow, or hit your plan, or make your investors happy.  That stays just as hard.  And competition gets harder as you cross this point – your competition sees it, and tries harder.  And more enter the space.

But the operational pain in SaaS companies seems to go away around $10m-$15m in ARR, depending on how each is structured, capital needs, etc.  At that point:

  • Your customer base is highly diverse, and not dependent on any whales
  • You have enough reference accounts.  You want more — but don’t need more logos, as great as they area.
  • Your sales and client success teams are working as a team, as an imperfect but effective engine, and not dependent on a single rockstar or two.
  • You have a brand, maybe a small brand at first, but a real one.  This is a key inflection point in the getting-easier process.  More leads come in, more easily.  Customers still need to be sold, for sure, but at least you don’t have to kill yourself to get into the discussion.
  • You can’t be killed by BigCo entering the space or the competition.  Wounded, yes.  But not killed.
  • Your product may still suck in a lot of ways, but it’s pretty feature rich.  You have what many customers need.
  • You know the market so well, it’s pretty easy to see 2 years out, not just from a product side, but from a scaling revenue and team side.  Makes hiring much easier.

So to my SaaS brothers and sisters out there, working to get to the first $1m in ARR, or $5m in ARR, or $10m in ARR, or $20m in ARR, my #1 learning and piece of advice.  Yes, you’ll have to put another plate (or two) on the bench press every 6 months.

But —  It Gets Easier.

Really.

Published on September 5, 2012
  • If the business isn’t going from 10 features per customer to 1 feature per customer to 1 feature per 10 customers, it will have a big issue in product and engineering and is really a PS offering on top of a Siebel/SAP/Remedy type toolkit.

    I’d think ~ 10:1 down to ~ 1:1 feature/customer should be somewhere around $10m ARR/50 customers and go down from there…

    Agree/disagree, Jason?

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