Getting to Initial Scale

The SaaS Year of Hell. And Then – Reignition.'

Jason Lemkin

Screen Shot 2013-04-25 at 1.10.43 PMI was recently at an event with a SaaS-ish CEO who was, clearly, miserable.  His business was doing $30m+ and growing nicely.  He was about to introduce a new product that he thought could be game-changing.  And, he had a strong team (according to him) that he truly enjoyed working with.

What was so bad?  I don’t know exactly.  But what I do know is that he was experiencing what almost all SaaS founders experience once on the 7-10 year SaaS journey – The Year of Hell.

This is never the first year.  As tough as that first year is, that’s still an exploration.  You are learning, just trying to get something off the ground.  It will be incredibly stressful, full of drama, and have some near-death moments.  But that struggle is … what it is.  You make it, or you don’t, and you’re still in your hyper-creative period, figuring something new out, which is always stimulating.

No, the Year of Hell comes later.  It comes post-Traction, usually.  Sometimes post-Scale, like with the CEO above, sometimes before.  But it comes when you see the other edge of the expanse, the way back to the Alpha quadrant … you see it … but it’s that one year when it’s just too darn hard on every level to keep slugging it out.  You’re just under assault on too many fronts.

Now, this isn’t a particularly profound insight, other that to say, Trust Me.  Other than to say, I’ve talked with a lot of SaaS CEOs and founders — and almost all of them who’ve done it long enough have had One Year of Hell.  So if you’re in your Year of Hell, you’ll get through it.  We’ve all been there.  Accept it and keep pointing to True North, to the Alpha Quadrant.

My personal Year of Hell was 2008.  The leads were there, the customer base was there … but we started to spend a lot of money, and it just wasn’t clicking.  It was a tough year.  You can basically see it here in our Google Trends:

Screen Shot 2013-04-25 at 1.04.16 PM

The strange thing to me isn’t that almost everyone has a Year of Hell.  The strange thing to me is that when people come through it, if they do come through it — then many and even most times it seems, the business does more than just improve.  It Reignites.

I don’t exactly know why.  I’ve asked myself that question, why it happened to us.  You can see our chart above.  And I’ve asked a lot of other SaaS founders.  You hear a lot of different reasons – a great VP Sales (helped a lot with us), a big advance of the product (with us too), some self-wounds by a competitor.  Or maybe it’s just market pull.  The reality is, I don’t think people always exactly know.

So what I really think happens is that somehow, in the Year of Hell, you pick yourself up and start trying lots of things.  And some combination of them click, not immediately, but they start working at some level.  And during that year, you still grow.  And as we know in SaaS, success builds on itself.  It compounds.

Screen Shot 2013-04-25 at 1.11.14 PMAnd you will, quite likely, if you keep at it in your Year of Hell — see Reignition.  A true  re-acceleration of growth.  It may be a full year after the Year of Hell (what we saw).   I don’t know when.  But Reignition does happen quite often.  It’s a glorious thing.  And just know, I think if you get to Scale, and you have good customers and a decent product, and you keep at it with 100% dedication — I think unless the entire market collapses (rare in true SaaS) — you’ll see Reignition too.

Patience + dedication here will work.

Trust me.

Published on April 30, 2013


  1. >> “I don’t exactly know why. I’ve asked myself that question, why it happened to us. “<<

    I think I can in part explain – this is an optimisation problem and side effect:

    With any startup business model we are talking numerous balls to be juggled any of which can be a limiting factor and so the result is "the multiplicative product of many independent random variables each of which is positive." This is a quote from The factors are all be positive as any being significantly negative for a startup means rapid death (no sales team, no marketing, no referrals, no product, no "fit" etc – any one can be death). This means that a smooth exponential growth is extremely unlikely – because these interdependencies must all click at the same time more or less.

    Galton (the guy who invented the concept of regression to the mean (and linear regression) thought this out – instead of a normal distribution, it is "log normal" or a "Galton-distribution" cumulatively it looks like this –

    Note the true step-point transition in the most extreme growth related cases (ie SaaS) can happen = reigition

    This follows a threshold period where everything feels nearly right (but is very sensitive to any change or failure in even one small factor) followed by explosive improvement as the multiple positive exponentials finally kick in simultaneously – "re-ignition"

    If you wonder why I happen to have thought this through – energy waste is where we do pattern recognition It commonly forms *I believe' an inverted Galton distribution

    Every vulnerability acting at 100% of optimum means no waste but any independent random source of waste being wrong multiplies efficiency by between 0 and 1 – so absolute waste is strictly positive and potentially unlimited = log-normal cumulative waste

    Where strict resource limitations are applied to diverse requirements a "frontier of delivery capabilities" – emerges known as a Pareto frontier and is an aspect of game theory as brought out by Nobel peace prize winner Nash (of a beautiful mid fame). I blogged about the similarities behind resource allocation, startups , and energy efficiency here

  2. There was obviously an element of broader economic conditions was in play here as well. Recall, 2008 saw massive equity market devaluations, job losses at unprecedented scale, and general crisis in the housing market. It’s not shocking that your “year of hell,” was 2008.

    My point: your low return on investment & lackluster traction was not cyclical, nor random. I’d actually argue that it was secular. People were freaked out.

    Moreover, please keep in mind all the Americans who lost their jobs and their homes that year.

    Everything is relative….I’m guessing your “hell” in 2008 was probably pretty mild.

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