Successful vs. Very Successful SaaS Companies

Should you join that Successful SaaS start-up?

The one that just raised a nice seed round, that has $20k in MRR, and a cool product?

Maybe.

The key is understanding if it’s merely a pre-success you are meeting with … or one that potentially can be very successful.  And it turns out, at least in my experience, the characteristics of Successful and Very Successful SaaS companies are actually quite different.

But especially in the early days, it can be hard to tell, especially from the outside.

To be a Successful SaaS Company — which is very hard today, because there are 10,000+ SaaS start-ups everywhere in every category — you need:

  • A very, very committed CEO and co-founders.  It’s too hard to make customers happy if you aren’t truly 100% committed.
  • Product-market fit.  Which can be arrived at, or hacked, in many different ways.  But roughly, if you aren’t growing at least 10% a month in MRR on the way to $1m ARR, and at least 6% a month thereafter, you don’t quite have product-market fit yet.
  • Passion and belief in your market, customers and journey.  Total commitment to understanding every nuance of your market and niche, and shipping software to serve it.
  • The patience to keep at it, for always, forever. Because it takes 7-10 years, minimum, to really get anywhere in SaaS.  And sometimes two decades to really build a decacorn.  More on that here.
Because once you have $1m, $2m in ARR … if you are growing at a decent clip … you can probably almost always keep growing.
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But.
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That alone doesn’t breed a Unicorn.
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To be a Very Successful SaaS Company.  An Outlier.  A Pre-nicorn.  To achieve Hyper-growth.  You also need:
  • A great CEO.  Not just very good.  Incredibly, or at least very, smart.  Insanely driven.  Not just very driven.  Really, a little bit insane.  Because there’s no magical network effect in SaaS.  The CEO has to push the rock up the hill.
  • The ability to see the future. In SaaS, anyone with a brain can see the white space that exists today.  Oh, it’s so stupid we still use Excel and clipboards in Industry XYZ.  Of course it’s stupid.  But what’s hard is to truly see where it will evolve in 2, 3, 7 years — and how to get there.  The best SaaS CEOs I know, the ones building Decacorns … can see the future.  And how to get there.
  • The ability to get to that future, no matter what.  Period.  To recruit amazing teams.  To break things and fix them.  To pick themselves off the ground, 5, 10, 50 times.  To never, ever quit.
  • A market or at least, market segment, that if small now will be huge.  Related to seeing the future.  For example, you can’t take Salesforce head-on today, not really.  But CRM is a big market.  Start small, but see something that can be $10b+ in CRM.  And make it so.  Small markets that stay small-ish are common in SaaS companies that don’t expand, that don’t grow.  These ones all stall out at some point.

So maybe, use this as a checklist if you are deciding whether to join a given SaaS start-up or not.  If you have options.  You’ll know if they have success, or at least, pre-success.  You can see the logos, check out the vibe, read up online.  But if the company also has some of the second group of attributes … they probably really have something.

Try to join one in the second category if you can.

(noted: an updated SaaStr Classic post)

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Published on May 28, 2021

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