You can’t build a SaaS company in 2018 without significant funding
davidmytton.blog
davidmytton.blog
In the blog post itself he wrote, "As of 2018, I believe it is now impossible to start and scale a SaaS business without significant capital. [...] Bootstrapping SaaS to sustainable revenues and profitability is so hard in 2018 because of the time it takes to grow organically. [...] That said, it is still possible to gradually build up a profitable small software business in a niche area that can grow over time."
Yeah, that last example? No reason why a niche software business wouldn't be considered a SaaS company.
Really I'm annoyed by the phrasing / terminology here. He should have specified that he's talking about a large SaaS company... but at that point it's banal to say that you can't do it without raising capital.
I have to disagree with that. Essentially all of recent economic history says there are at least three ways to compete at any given time for all services and products: superior price, superior product, superior marketing/sales/brand, and various combinations of those.
For my own reference, I aggressively shop on price + quality. I'll take 85% equal product quality with a required baseline of features at a lower price point. Generally speaking, there will never be a time that you can't compete by lowering price, while maintaining a certain minimum ~85% good enough quality level.
Generic example: 85% quality, lower price point, baseline of features that covers 65% of the market's needs. Each additional feature beyond a certain core, broadly speaking, will tend to have a diminishing return in regards to how much of the market needs/wants it.
It's a mistake to build a SaaS product and try to include so many features that you cover more than ~3/4 of all customer feature demands in the early years. You're likely to either go broke or never finish, trying it; and if by a small miracle you build that wildly bloated product, you'll likely be unable to support & maintain it properly.
Generic example: the total market for a SaaS product has 30 distinct features across 20 competing companies. 8 of those features get you to 65% of the market's needs (few customers will need all 30, some small % will need ~15 features, the majority will need a modest base set of features, eg ~8). The whole market does not need all 30 of those features. As a highly functional rule, every SaaS product will have a core of minimally required features, beyond that each feature will have a diminishing appeal versus what % of all customers require it. You have to hit a certain threshold of minimum features vs max customers - that formula is a bit different for each product or service, you have to figure that out by experimenting and researching.
Do a select few things, do them well, and at a lower price. It has been a winning formula for the last 200 years of industrial history across an incredible variety of products & services. Or do a few things extraordinarily well, at a higher price; that also works just the same. There are of course exceptions to the rules, you're not going to beat Google in search with a slightly better product most likely, or a slightly faster product (you'd likely need a 10x product to dislodge their overpowering brand, financial position, monopoly).
I also (gasp) buy groceries. That's Right! I'll spend money and still have to put work in myself to get value out of things!
I've also sat down in a room to sell software! As an engineer! I could shake their physical hands!
Probably sounds gross to you, but that's how most Earthlings roll.
Just to start, the way the economics work is going after price sensitive customers is often poison to your company. As patio11 has said and so many others have verified, your cheapest customers are by far your worst: most demanding, most in need of support, most likely to be too stupid to be able to use a computer without handholding, most likely to lose license keys, most likely to need pushing to pay, most likely to churn and leave you in the hole for acquisition costs. The high-value customers that will probably provide the bulk of your profit are remarkably price insensitive.
He’s mostly right. Mostly. Very few SaaS products are designed to be exciting products. They solve problems, maybe even major business problems, but if we’re being honest here they rarely make a meaningful impact in someone’s life. You use them and move on. Most people who have to use these products are paid to endure them until the day is over and they can go home and go back to what they really care about.
So yeah, the company with the resources necessary to drop it’s prices and aggressively sell something that no one really cares about will win. It’s a race to the bottom. If that’s upsetting, too bad.
Unless...
Unless you build something that individuals, not companies, care about.
I think that’s why Slack is doing so well. Most of the add-ons for it have no real legitimate business need. Your company doesn’t need GIPHY, or party parrot emojis. People sure love that sort of thing though. It makes work a little more fun. I think they’re created value in a way that is very hard for competitors to replicate.
Then don't have one. Find something that people / businesses around you need, build it, and then let others come to it too. Classic way to a slow burning successful small business. An entire sales team? To start with? Nah.