Getting to Initial Scale

Successful vs. Very Successful SaaS Companies

echojason@gmail.com'

Jason Lemkin

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.

Screen Shot 2016-01-13 at 11.52.07 AMTo 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 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.
  • 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. ‘Cuz it takes 7-10 years, minimum, to really get anywhere in SaaS.
Because once you have $1m, $2m in ARR … if you are growing at a decent clip … you can probably almost always keep growing.
.
But.
.
That alone doesn’t breed a Unicorn.
.
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 is small now but 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 on-line.  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.

Published on January 14, 2016
  • The list as a VC checklist is awesome.
    As a indicator of long term success also is is bang on.
    As someone you would like to join – there are other factors at play (Yes success of the company is the most important one … but then even the predictors would go wrong and they are subjective 🙂 )

    – Your understanding of the space
    – Goals in next 6 months, 1 year , 2 year which you would have
    – Your rapport with the team

    and on a lighter note if one had skills to judge the second bucket skills, one is better off joining a VC.

    Sachin

Share This