What are the characteristics of successful SaaS companies?

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JASON LEMKIN

The characteristics of Successful and Very Successful SaaS companies are actually quite different in my learnings, and experience.

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 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.
  • 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 drive.  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.

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Published on January 13, 2016
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