One thing I took for granted was being CEO of an app that was beloved
If you have that, never ever give it up
— Jason ✨Be Kind✨ Lemkin (@jasonlk) April 26, 2019
When SaaS started getting going, folks would criticize SaaS start-ups as “just a feature”. Oh, Google/Salesforce/Microsoft will just build that. Back in the day when the world was a desktop OS, there was a lot of truth to that. When the web became our OS, that started to fade. The explosion of mobile changed it up once again.
Fast forward to today, in SaaS, our #1 biggest player, Salesforce is now doing $30 Billion in ARR … and it has built almost nothing that has displaced a lot of start-ups. And some of its most successful product expansion has come from acquisitions. And even with that, as hugely successful as Salesforce is … it hasn’t killed HubSpot or Zendesk or ServiceNow or Slack (actually, it had to buy Slack for $27 Billion) or any of 1,000 other start-ups that it has added features and products to compete with.
Ok, so probably you aren’t going to be killed by a Big SaaS Co copying your post-traction start-up.
So the next somewhat related criticism is that You are Just a “Nice to Have”. Especially these days, when things are still great in SaaS … but folks are nervous. They are scrutinizing spend in a way they haven’t in SaaS for a while.
So a Nice To Have, is your App? On many levels … that may be true.
Ask yourselves these questions today:
- Would your customers’ business grind to a halt without your app?
- Is your app basically irreplaceable in core functionality by another vendor?
- Does an entire functional group/area rely on your application to do business? (variant of point 1)
- Does an entire functional group/area use and live in your app >= 1 hour per day?
- Are you an application a core group of customers adds to their “app stack” almost by default?
- Is your product “important enough” to charge at least $20,000 a year today, at least for your largest customers?
If you are seeing a lot of Nos on that list … and nothing changes over time … then … you’re a Nice to Have. Maybe Pretty. With a Cool UI/UX. Even with one or two features that are 10x better than the competition. But that may be about it.
And if you are seeing a lot of Nos, and nothing changes over time … I think you are at high risk. Your customers will eventually churn. You’ll struggle to ever approach $25-30m in ARR, let alone $100m. Your M&A prospects may be much narrower. And an IPO is out of the question. And VC capital will tougher. Oy.
The thing is .. buck up. It’s totally OK, actually. Because 8 times out of 10, great founders exploit this niche, this “nice to have” … and turn it into a mission-critical must-have:
- Box started off as a crude freemium tool. Today, it’s the default cloud choice for content management at $1 Billion in ARR.
- Salesforce started off as a simple contact manager. Take a look at that early screenshot above. Today, it’s the default system of record for sales, support, and much more. It’s at $30 Billion in ARR!
- Evernote started off as a simple note-taking and clipping app … and sort of stayed there. And ultimately, stalled out. We moved on to Notion and more.
It’s not just going enterprise. HubSpot has stayed mostly SMB-focused, but has, over time, evolved from a simple tool to the marketing and sales hub for many of its customers marketing efforts. From a tool to a solution.
So my uber-point here is just this. Take this criticism, these points seriously. And relentlessly drive to add more value. To become more mission-critical. To be a “hub” for your existing customers. To drive, if not upmarket, then at least, to a broader footprint into your existing core customer segments.
Today at least, if a small but passionate group of buyers in the world loves you for something and pays you a decent amount for it. Even if that’s just a Nice to Have. Then … don’t pull out your hair worrying if your app is important enough. Instead — just Build on That. Add more value for them, relentlessly. This doesn’t mean chasing a shiny penny, or trying to enter verticals where you have zero traction, or going into segments where you have zero customer pull today. Don’t do that.
But if you are never complacent with your core. If you constantly expand the value and solution you provide to them in every release … a few years will go by … and you will become mission-critical. You won’t be a Nice to Have anymore.
That will carry you to $100m ARR and beyond.
A related post here:
Note: an updated SaaStr Classic post