Opinions Needed: Can a SaaS startup survive without Investment?

[tafy]

Do you know haw hard it is to sell a SaaS solution to businesses even when you have a great product?

3-6month sales cycle

Now try pre selling SaaS software and getting them to give you money for a promise....

 

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[Eos]

Do you know haw hard it is to sell a SaaS solution to businesses even when you have a great product?

3-6month sales cycle

Now try pre selling SaaS software and getting them to give you money for a promise....

@tafy
Is there a resource to find the sales cycles of different types of 'product'?

 

[tafy]

I took this info from Quora:

This completely depends on a number of factors, I have listed the factors in my opinion of how influential they are (how much the lengthen the sales cycle).

• selling to bigger companies = longer sales cycle
• broader product (not a point solution) = longer cycle
• new market (not an existing market with known and defined functionality and competitors) = longer sales cycle
• higher price = longer sales cycle
• longer payment terms / annual contract = longer sales cycle

And

1. Deals < $2,000 in ACV should close on average within 14 days.
2. Deals < $5,000 in ACV should close on average within 30 days.
3. Deals < $25,000 in ACV should close on average within 90 days.
4. Deals < $100,000 in ACV should close on average within 90-180 days depending on # of stakeholders and gates.
5. Deals > $100,000 in ACV will take on average 3-6 months to close. Of course, some faster, some shorter. But on average.

My experience. It will vary. If the business process change is HUGE (e.g., ERP) it will be far, far longer. If no business process change is involved (rate), it can be shorter.

 

[Eos]

I took this info from Quora:

This completely depends on a number of factors, I have listed the factors in my opinion of how influential they are (how much the lengthen the sales cycle).

• selling to bigger companies = longer sales cycle
• broader product (not a point solution) = longer cycle
• new market (not an existing market with known and defined functionality and competitors) = longer sales cycle
• higher price = longer sales cycle
• longer payment terms / annual contract = longer sales cycle

And

1. Deals < $2,000 in ACV should close on average within 14 days.
2. Deals < $5,000 in ACV should close on average within 30 days.
3. Deals < $25,000 in ACV should close on average within 90 days.
4. Deals < $100,000 in ACV should close on average within 90-180 days depending on # of stakeholders and gates.
5. Deals > $100,000 in ACV will take on average 3-6 months to close. Of course, some faster, some shorter. But on average.

My experience. It will vary. If the business process change is HUGE (e.g., ERP) it will be far, far longer. If no business process change is involved (rate), it can be shorter.

Solid response. Thanks. +REP

 

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[Delmania]

Do you know haw hard it is to sell a SaaS solution to businesses even when you have a great product?

3-6month sales cycle

Now try pre selling SaaS software and getting them to give you money for a promise...

Thanks for the response, my comments were aimed a B2C SaaS company. I missed the point where he mentioned he was targeting gyms. Chalk it up to being tired. Anyways, my point was that @Matthew E. is focused on building a product for a perceived need without having first validated the idea behind that product.

 

[GrayCode]

Investment isn't only about money, it is also exposure to the power and networks of successful people. If you will be 10 times richer in 3 years by seeking venture capital compared with doing it alone then do you think it will have been worthwhile?

It isn't a simple yes no, but consider your resulting wealth over time in your decision making process as a result of both options rather than flatly looking at the percentage of the your business that you will be 'sacrificing'.

Sent from my Nexus 6 using Tapatalk

It hasn't anything to do with percentages

Why would a VC give me any money if I haven't sold anything yet. Yes there is a need for the product but why would a business owner pay me for a product he won't be able to access for 6 months..

It seems like a triangle of back and forth to me.

However, if I build it. Then sell it. Business owner is happier, I am happier and with sales going VCs will be more inclined to invest

 

[GrayCode]

Thanks for the response, my comments were aimed a B2C SaaS company. I missed the point where he mentioned he was targeting gyms. Chalk it up to being tired. Anyways, my point was that @Matthew E. is focused on building a product for a perceived need without having first validated the idea behind that product.

I have heard 95% of my clients over 2 complain about a similar problem(the one I am setting out to solve)

As well as the people whom run my gym complain because it isn't being done.(this gym owner has 3 gyms)

Does this not count as validation?

If I remember correctly @MJ DeMarco heard heard one person mention a limo in another city before the lightbulb went off, and even then 12 companies were doing it. In my case and research no gym software is tackling this issue and I have heard complaining from all parties. Sounds like validation to me!

 

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[Andrew Ward]

It hasn't anything to do with percentages

Why would a VC give me any money if I haven't sold anything yet. Yes there is a need for the product but why would a business owner pay me for a product he won't be able to access for 6 months..

It seems like a triangle of back and forth to me.

However, if I build it. Then sell it. Business owner is happier, I am happier and with sales going VCs will be more inclined to invest

I get what you are saying, but your original question was whether you can grow a business organically or seek venture capital.

What you are talking about here is selling. Is the value behind your proposition strong enough for someone to buy into it?

If you just have an idea then you had better have an amazing track record and bullet proof idea with a plan of execution.

That said if you have built it and already started to prove the concept in the market place then you may also be in a really strong position.

Personally if I were seeking VC I would like to have something solid to prove my projections are accurate. I'd want to walk into that meeting and leave with them having dollar signs in their eyes. If I were you I'd try and sell to a niche sub segment of your whole potential market and see what happens. If you get a good percentage of your prospects converting then you can start to play the numbers game in your sales pitch based on real world sales data.

E.g. imagine if you could approach them and say something like this:
I approached 50 SME's, gained the interest of 10 and then actually sold to 4. The potential market for my sector is 50,000 SME's so with the current offering we would hope to convert 4,000 over 3 years. The average annual client value is $1200 ($100 per month) so this would project a crude annual turnover at end of year 3 is about £4.8mil. Based on your reach out to that 50 you estimate required advertising and marketing spend of X until we reach our first 100 customers at the end of month 6 (which ties to my request for £XX investment). After that point the business is making healthy returns to fuel its own growth through organic capital.

Sent from my Nexus 6 using Tapatalk

 

[Delmania]

I have heard 95% of my clients over 2 complain about a similar problem(the one I am setting out to solve)

As well as the people whom run my gym complain because it isn't being done.(this gym owner has 3 gyms)

Does this not count as validation?

If I remember correctly @MJ DeMarco heard heard one person mention a limo in another city before the lightbulb went off, and even then 12 companies were doing it. In my case and research no gym software is tackling this issue and I have heard complaining from all parties. Sounds like validation to me!

That's good, but have you presented your solution to them? The sooner you get your idea out in front of them, the better.


Sent from my iPhone using Tapatalk

 

[SlowlaneJay]

As someone who has solicited investment funds before, it's not a question of if it's possible, but whether the acceleration of time is worth the cost of equity. This leads to questions of: what is the value of time accelerated (how much time, reduced risk of speed to market) versus cost of equity (how much equity, impact on company decision making process). Lastly there is capacity to consider from an infrastructure standpoint. What data, servers, processing power is required to manage x users bringing in y revenue per user with z amount of data points tied to the unique identifier for each profile?

Personally, I'd do anything possible to avoid giving up equity. OP, how much of your own cash are you able to sink into this? Remember, you don't have to spend a lot of money in order to get something up and functional.

Think Lean. If you haven't read the Lean Startup yet, it's definitely worth a read. Get a bare-bones app up and then scale using the revenue (and feedback) generated from your initial MVP. Later on, you'll thank your past self for being so stingy with equity

My 2¢

 

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[GrayCode]

Personally, I'd do anything possible to avoid giving up equity. OP, how much of your own cash are you able to sink into this? Remember, you don't have to spend a lot of money in order to get something up and functional.

Think Lean. If you haven't read the Lean Startup yet, it's definitely worth a read. Get a bare-bones app up and then scale using the revenue (and feedback) generated from your initial MVP. Later on, you'll thank your past self for being so stingy with equity

My 2¢

I agree, That is why i am taking this route. I don't have much, but i was able to get a co-worker (personal trainer) of mine to invest 5k and i am doing all the coding. sweat equity. He thought it was good enough to put into.

Lean is what i am going for, Build it. Sell it to a few gyms, re-invest that into more sales, rinse and repeat until i have a solid business generating $$. I will post more about it as i get closer to launch

 

[Christiano]

Personally, I'd do anything possible to avoid giving up equity. OP, how much of your own cash are you able to sink into this? Remember, you don't have to spend a lot of money in order to get something up and functional.

Think Lean. If you haven't read the Lean Startup yet, it's definitely worth a read. Get a bare-bones app up and then scale using the revenue (and feedback) generated from your initial MVP. Later on, you'll thank your past self for being so stingy with equity

My 2¢

I agree there are definite circumstances where equity is not necessary.

I think it's worth considering that validity of equity exchange is situation dependent. What are the circumstances involved in relation to: requirements for a minimum viable product/service, market trends, ease of functionality absorption by a bigger player, etc? Assessing factors comprehensively first helps to ascertain risk associated with time. Also, keep in mind that as things progress, the standards for a minimum viable product / service will grow. This is especially true in the SaaS space as it relates to trust around data retention, data quality, service reliability and ease of adoption across a corporate entity.

I think the natural evolution of skill-set requirement will drive intuitive development skills. This is where the developer of the solution can strategically setup the back-end infrastructure with the intent of supporting the intuitive functionality necessary to execute on a comprehensive yet simplistic interface. As for Matthew's specific case, time will tell if that balance is prevalent in his creation.

@Matthew E. You are not alone buddy! Keep going!

 

[mikekob]

I'm 18 months into a SaaS model product and I have given away ZERO equity for investment. I also have a fully functional product that I sell to hospitals. I'm not even entertaining the idea of investment money after hearing quite a bit of horror stories from other CEO's. You can totally grow organically, but at this point you shouldn't even think about investment. What are they investing in? You have no idea if this will even sell and be profitable. If there is such a pain point you solve but the barriers are too low you'll have competitors ripping you off in no time. And given your current "skill level" of coding, a bug could put you down for weeks and give someone else the chance to take your business.

I'd do a little more homework before any attempt of investment money happens. If you walk into a room and pitch your idea stage product to a group of angel's, not only will you get laughed out of the room, but they'll also tell all of their investor friends and you shot yourself in the foot. Have a MVP and get some letters of intent, or some sort of tangible idea of buyers.

More on the organic growth part, you can totally do it organically. You can't grow as fast per se, but if you find the correct sales channels and are able to scale fast due to good homework and planning you'll be fine. I would also look at some sort of IP protection as it seems there is low barriers to entry with this type of product.

Feel free to PM me if you'd like to discuss some more. As mentioned before sales is the life line of your business. If you can get those lined up before even having a product then you'll be that much more successful.

Mike

 

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