Getting to Initial Scale

So Your App Is Just a “Nice to Have”

echojason@gmail.com'

Jason Lemkin

thatitalllIn the old days, folks would criticize 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.

The reality is, in SaaS, our #1 biggest player, Salesforce 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 Marketo or Hubspot or Zendesk or Apttus or Slack 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”.

And you know what … 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.

salesforce first

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.

But.

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.
  • Salesforce started off as a simple contact manager.  Today, it’s the default system of record for sales, and increasingly, support.
  • Evernote started off as a simple note-taking and clipping app … and sort of stayed there.  And ultimately, stalled out.

It’s not just going enterprise.  Hubspot has stayed SMB focused, but has become over time evolved from a simple tool to the marketing 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 for 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.

Published on May 23, 2016
  • I had been wondering about this issue for a while now. If your just “ok’ to have than is it worth it to spend time, and money on that product and for how long.

  • True!

  • Investors’ favorite question: What if the big start-up X issues the feature Y which is your main feature? Yeah, big guys always copy the small ones 🙂

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