Building software as a service company and guessing each step

[zander1983]

Not sure if this is the best sub-forum for this. Let me know if not and I'll move it...

Anyway, 6 years ago I became interested in a really really niche area of medical software (the area is called flow cytometry) after a doctor friend said they were frustrated with the current software options, which were all heavy desktop applications meaning he had to go back into the lab every time (the software allowed him to analyse patients blood data). So I spent 2 years creating software that was cloud based and worked on any device and released it about 3.5 years ago. Over the years about 4,000 users have registered from about 2,000 Institutes, mainly Universities (users in all 10 of the top 10 Universities in the world) but also some laboratories that do blood tests. The software is free to use but user can upgrade if they want to use it for larger datasets - worryingly only 2 ever have.

Last year I started following John Somnez and recently read Unscripted and it's given me a huge motivation to create a successful business (Im a software engineer but always hated having to trade my time for money - it wasn't until Unscripted articulated it that it hit home).

So I sent out a mass email to my users - I'd ignored the project for 2 years - and interviewed about 20. All said there is a need for the software - its a competitive market but the ease of use and being cloud-based (though there is one other competitor also the same) - means users like it. All said they would pay a certain amount for it. I've come up with a subscription model based on Grammarly (as most of my users are Uni researchers), so €29 a month or €270 per year for an organisation (like Uni or Lab). One of the users I interviewed really impressed me, so he has come onboard and I've given him 10% equity. 2 other users in Germany really liked the app so they have agreed to be advisors.

Next, I emailed the local University. There is an elderly lecturer there who is one of the most well known in Europe in this niche area. He likes my project and we discussed future direction - we want to use big data and AI and write algorithms to automate the analysis of these files so that, for example, it could automatically diagnose a blood related disease. There is one other competitor doing something similar. The lecturer has agreed to be an advisor - though worryingly he is an advisor to a large competitor. He assures me he will be discrete.

Next thing is I hired 2 software engineers - I am working full-time as a software engineer and have share options which mature in 1.5 years so there's no way I can quit. I earn €425 per day as a contractor, so I pay €27 per day to a software engineer in India and €41 per day to a software engineer in Brazil.

I was offered some private funding but turned it down as it came on the condition I quit my current job.

I have applied for some government grants but that process is very slow.

Some obstacles: competitors (e.g. Beckman Coulter and Becton Dickinson) are billion dollar companies, the area - flow cytometry - may be too niche and small, only 2 users ever upgraded (though in interviews all 20 users said they would pay if I made improvements - my software as it is is very slow to use), lecturer advisor also works with a competitor.

Advantages: a lot of data collected for 3.5 years which can be used to build AI algorithms. Really niche area with a unique skillset required. Good team assembled.

My current plan is have the software engineers build a better version - all users complained my softwares performance is dreadful - and this should be ready in 3 months. Release it - probably with a much limited free tier forcing people to go to premium (€29). After this, with some money coming in, hire another engineer and beginning working on AI based automated analysis.

I'm writing this not with a specific problem but with the hope of receiving general advice throughout this process as I've never done this before and I dont really know what Im doing, Im just doing what I think is right each day to advance the project. If any glaring mistakes are jumping out at anyone, let me know. If anyone wants to keep an eye on this project and give me advice throughout the process, I'd love that.

Thanks

 

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[Spino]

I think it's a good project and you are on the right track

How did you come up with the subscription pricing?
Do you have any revenue at the moment or you are paying the maintenance/hosting and other costs of your own pocket?

Considering the feedback received you might be able to expand your user base with some marketing once you have an improved version

 

[zander1983]

I think it's a good project and you are on the right track

How did you come up with the subscription pricing?
Do you have any revenue at the moment or you are paying the maintenance/hosting and other costs of your own pocket?

Considering the feedback received you might be able to expand your user base with some marketing once you have an improved version

Thanks for feedback. I looked at my user base - mainly University researchers - and looked at other pricing models aimed at them e.g. Grammarly and copied them. No I have zero revenue, paying for everything out of my own pocket. Since reading Unscripted , I've quit my pension contributions and am putting them into this.

Im going to keep posting updates to the project here, in the hope someone will flag serious tactical erros should I make them.

 

[Spino]

Thanks for feedback. I looked at my user base - mainly University researchers - and looked at other pricing models aimed at them e.g. Grammarly and copied them. No I have zero revenue, paying for everything out of my own pocket. Since reading Unscripted , I've quit my pension contributions and am putting them into this.

Im going to keep posting updates to the project here, in the hope someone will flag serious tactical erros should I make them.

I understand yours is a medical software that could be also quite advanced, perhaps a comparison with grammarly is not the best on a pricing point of view.

If you can maybe compare with a similar software if there is any or try to quantify how helpful is your software.
Meaning, how big of a problem is resolving? How much time is it saving to the medical/research staff? How many resources can be saved using your software? Are you improving lives? Are you detecting illnesses?

I am no medical expert but I have like the feeling that you are underestimating your product, providing too many features for free, valuating it too cheap.

 

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[Kraelog]

Very impressive what you've done so far!

Are you certain that Uni's & individual researchers are the correct target market?

I know that the pharmaceutical and medical industry spend hundreds of millions if not billions on the development of each new drug where laboratory work is a very large part of the total expense. I assume your software would of use here?

Everyone is (slowly) moving their infrastructure to the cloud (i'm a cloud devops) so if you have a cloud-based solution that offers ease of use and is a significant time-saver, you can very easily justify a B2B price of 50k+/y.

 

[danielrvt]

Thanks for sharing and impressive accomplishments!

Have you explored the possibility to license your SAAS for each organization (university or lab) instead of selling a subscription to end users? That way you could get capital and use it to sell it to more universities and labs.

 

[zander1983]

I understand yours is a medical software that could be also quite advanced, perhaps a comparison with grammarly is not the best on a pricing point of view.

If you can maybe compare with a similar software if there is any or try to quantify how helpful is your software.
Meaning, how big of a problem is resolving? How much time is it saving to the medical/research staff? How many resources can be saved using your software? Are you improving lives? Are you detecting illnesses?

I am no medical expert but I have like the feeling that you are underestimating your product, providing too many features for free, valuating it too cheap.

Good point about trying to quantify about how much time/resources can be saved by using the software rather than just looking at Grammarly and copying their price. I'm gonna do that and post that I find back here.

Yes at the moment the software is free to use - and I've had plenty of "thanks for the free software!!" emails from happy users that didnt have to fork out money. It hasn't been a waste though, I plan to monetise the data collected by building algorithms that learn from the data. The local University is interested in that idea and putting up a PHD student to do it. Thanks for advice

 

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[zander1983]

Very impressive what you've done so far!

Are you certain that Uni's & individual researchers are the correct target market?

I know that the pharmaceutical and medical industry spend hundreds of millions if not billions on the development of each new drug where laboratory work is a very large part of the total expense. I assume your software would of use here?

Everyone is (slowly) moving their infrastructure to the cloud (i'm a cloud devops) so if you have a cloud-based solution that offers ease of use and is a significant time-saver, you can very easily justify a B2B price of 50k+/y.

You've hit the nail on the head - the real revenue stream we see is providing a service to pharma companies running drug trials (drug treatments usually affect the blood picture). We actually only thought of this last week. You're right, there is enormous money in the area.

50k, interesting. We never thought of it like that, it's always been more of a B2C. Food for thought! Thanks for advice, gonna post here results of my investigations into pharma drug trials and opportunities there.

 

[zander1983]

Thanks for sharing and impressive accomplishments!

Have you explored the possibility to license your SAAS for each organization (university or lab) instead of selling a subscription to end users? That way you could get capital and use it to sell it to more universities and labs.

Yes we have a plan for a limited free tier (to collect more data to prime AI algorithms), premium tier for individual users, and enterprise tier for Unis and Labs. This is all still theoretical, no idea if they'll pay. I hope to be live with new version in 3 months so ill post the results here. Thanks for input