The Things You Have to Get Right When You Start a Start-Up

Everyone today wants to start a SaaS startup.  They have an idea they are passionate about.  They’ve worked under a great CEO and they’re ready — they think — to do it on their own this time.  And maybe they are.

What does it take?  Well …

Let’s talk about what you don’t have to get right:

  • Absolute Rockstar Founders? Nice, but Not Required. Yes, to build the next Slack, the next Amazon, the next Tesla, whatever, you probably need to be the next Elon Musk. But many founders at very successful start-ups are smart and driven, but no Elon Musk. I’m not / wasn’t.
  • Amazing Technology? Nope. See Airbnb and 100s of others.  So many apps start as hacks.  It’s OK.
  • First to Market? Of course not. See GitLab, Okta, and Talkdesk. Definitely can help. But not really necessary.  Timing matters, as do key changes in markets.  But even if you are late to market, that can still work if you ride changes in the market.  Markets don’t stay static.
  • Dominating the market.  Helps, but … There are now a half dozen unicorns just in project management, from Asana to ClickUp to Notion to SmartSheet and more.  Marketo, Eloqua, HubSpot (IPO), ExactTarget, Pardot, Silverpop, and so many others had great exits in marketing automation a generation ago.  You can also verticalize a market, e.g. $9.5B Klaviyo has competed well with $12B Mailchimp. No, you don’t always have to dominate a market.  Dominating a niche in a market does help, however.  More on the wins from just being #2 here and here.
  • 10x Better than Incumbents. Only sort of required. Yes, your new product does have to be better than the existing guys. But sometimes only in just 1 small, but important, way.  Maybe being more enterprise, like $15B Gitlab vs. GitHub.  And sometimes just Cheaper and Best Service also work without any real different features.
  • Domain expertise. Not required. Helps, yes. But you can learn a lot if you are 100% committed.
  • Work 100 Hours a Week? It helps. But it doesn’t make the business. But time in the office is not as important as time spent thinking about the business.
  • Getting to $1m ARR ASAP.  It certainly helps.  But what really matters is how fast you grow after $1m ARR.

What you do have to get right:

  • Total commitment. It will take you most likely 24+ months just to get to real paying customers. And 7–10 years to build something of any scale. Most so-called “founders” are not this committed. It took $26B UiPath a stunning 10 years to get to $1m ARR!  More on that here.  And $10B Notion took years to get to product-market fit.
  • Product-market fit. You do have to eventually get to a minimum sellable product. You have to find a product the market wants to buy.
  • A Minimum Viable Team. You can outsource development. You can do a single co-founder startup. But. Many folks start something without a truly Minimum Viable Team. No chance without it. You have to be able to build, ship, market, and sell your product.  Building a prototype alone is not enough.  One engineer working part-time never works.  You have to make a 100% full-time, 100% available, 100% committed team that can build the business.
  • Commitment to Excellence and Constant Iteration. You can’t build it once, put it on a shelf, and wait. You may need 100 releases before you have a sellable product. And then 200 more to get to $1m in ARR.
  • Obsession. And you need to obsess about your business. Constantly. In the shower. On a run. You may only “work” 40 hours a week. But you need to be thinking about your business 140 hours a week.

Unicorns are usually built one way.  They just don’t start one way.

The general pattern though: insane commitment for 7-10+ years, including the first 1-2 without pay, potentially … the ability to recruit the Minimum Viable Team … and obsessive commitment … are what most matter to get one really off the ground.

(note: an updated SaaStr Classic post)

Published on October 21, 2021

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