How to Scale a SaaS Startup from $1M to $100M ARR Without Investor Funding? | Hacker News Reader

How to Scale a SaaS Startup from $1M to $100M ARR Without Investor Funding?

4 pointspajuhaan18 comments

I have a SaaS startup in the ecommerce space; it's like Shopify but with a no-plugin approach. The storefront is open source (Vue Project + JS SDK) and available on GitHub, allowing everyone to build their storefronts and deploy them on our servers. This gives it the flexibility of Woocommerce and Wordpress. We are two founders + one employee + zero investors. I personally wrote all the code for the backend, frontend, iOS, Android app, and more so we can figure out the product side at any level. Also most of our users are agencies, primarily from North America and Europe. Our revenue comes from selling deals to agencies, freelancers, and business owners. So, the next step is making ARR.

I don't want to raise money from investors because they thought my nationality was not ok to secure funding. Therefore, I'm looking to scale without their support, and I'm curious about what startups do after their Series A or B rounds to scale their business. I'd like to understand their scaling strategies and replicate them with my available resources.

Every piece of advice or reference is worth a lot.

You need to watch your CAC Payback Period very very very closely. This is the thing that kills otherwise successful SaaS companies... they are profitable long-term but bankrupt short-term, and end up needing to scrape up funding with terrible terms to bridge that gap.

All customers will cost you something on the front end, even if it's just time. That time is money. How long does it take to earn enough profit to pay that back? Higher margin and lower operation cost --> faster payback period --> ability to onboard customers faster.

Stated differently: if 10M new customers walked through your door tomorrow, could you onboard and retain them immediately? Probably not. Determine your new customer flow rate and gear your sales + advertising activities to hit that rate. Then you can add more business capacity and continue to scale.

One more thought: as you scale, how can you lower your employee cost? People talk about remote hiring, and that's an option, but there's also another shortcut: mission. People will take less money for the same work if they're excited about the mission. Mission IS compensation. What makes a good mission? Maybe you're focused on minority-owned small businesses. Maybe you're offering a chance for developers from non-traditional backgrounds to grow. Maybe you employ ex-cons. Maybe you're trying to launch a rocket to Mars. Whatever it is, find the GENUINE thing that makes your story super unique and use that to attract good employees for less cash.

> Whatever it is, find the GENUINE thing that makes your story super unique and use that to attract good employees for less cash.

That's called emotional manipulation. Pay people what they are worth.

Not manipulation but a recognition of reality. Mission is worth something to people. Different amounts for different people, but not zero .

Why do game developers get paid less, on average, than someone doing boring business software? Because people want to make games. You have to pay someone more to do boring work. "I build games" is part of the compensation package just as much as a paycheck or healthcare benefits.

As a startup you can't always choose your cash flow. But you can choose your mission. All else being equal, you should choose an exciting mission that attracts better talent.

Choosing to share some of the upside in business growth with those employees would mean they're likely fully 'bought into' the mission then.

> "I build games" is part of the compensation package just as much as a paycheck or healthcare benefits.

No, just no. An employee can switch companies for better compensation and still remain in the gaming industry making games.

Also, no one gives a damn about your mission statement.

Thanks. There are some really interesting points in your message. I'll be talking and writing about our values and mission in the coming weeks and observing the feedback - actually, we already have some but not sure how to stand out among the noise.

this is an amazingly long way of saying , have good freecashflow

I am not a founder but worked at various places that did this and I don’t think there is a simple answer except be very resourceful!

High gross margins feed into costs going into future sales and future development. Zero profit because you are reinvesting. Very tax efficient too!

Also see if there are research tax breaks in your country.

It means being lean and scrappy the whole time (no fluff or big rewrite it in Rust type activity). OTOH the successful companies were not cheap with salaries but not extravagant either. But they aim to get the top 10% cream working for them.

Hate to say it but you need to be strategic and good. Maybe see if you can pay for advice too from someone who has done it in your space.

I haven’t given you an answer! But the main thing I see is a sales system that gets tuned. Sales is done like cattle not pets. And you arrange that or hire someone who can (and as always scrutinise them, learn their job so you can question them).

Good luck!

Thanks for your response. So far, we've been trying to reinvest our revenue into dev, Ips, etc... Here in Denmark, the tax system isn't very startup-friendly. So we're currently working on relocating to the US.

I’ll be researching the term "cattle versus pets" in sales, which is interesting and I'd never heard it before.

Regarding the sales team, I heard from Jason, the founder of Saastr, that offering a base salary with a commission structure up to a certain cap could be a good approach. This way, there's a strong incentive for the salespeople, while also ensuring they generate at least as much revenue for the company as they take home. I’m still unsure about the next steps because we're running on the blade with unexpected expenses like a massive one-night 10B request DDoS attack and a dispute over our logo with Apple.

Thanks

For cattle vs pets, it originally referred to devops: https://www.engineyard.com/blog/pets-vs-cattle/

However I have extended it here to any situation where you have systems in place that you can tweak over say hiring 3 staff and treating them very individually and not having much of an overarching plan.

I worked places where you had one star sales person with 20 years of experience in the industry and that person could sell like mad but if they left you lose all that there is no system around it. But in the short term paying that person overtime and getting out their way makes for a good quarter. But long term the org doesn’t learn anything.

Not in sales myself but just what I have observed from the engineering silo!

Without external funding you will need to find a customer that will back you. What I mean is, an account that is large enough to pay for the three of you to continue to build out the platform + will expand + is a known logo you can use and will work with you for marketing purposes (case study, referrals/references, webinars, conferences, etc.).

The tricky part is finding the right "design partners" that can back you financially and help with marketing, while not totally derailing your roadmap. You need to make sure you continue to build for your total addressable market, not just your top paying customers.

How would you scale it if you had a $10 million check from a VC in hand?

Here's what I would do:

1.Get first Techcrunch news :)) also I'd ask them to connect me with people in their network who could help with more PR. I'd also pay influencers to talk about my product and highlight its unique position, like being a no-plugin platform or something that stands out from Shopify and WooCommerce.

2.I'd hire a sales VP with over five years of experience in the ecommerce industry and let them build a team for outbound sales.

3.I'd create a landing page and marketing content focused on just one vertical (like restaurants or fashion), then run ads on 3-4 paid channels. I'd double the budget on each channel if the LTV (based on the first 3 months ) > CAC; and repeat it.

If there are only 3 of you, why do you want to scale to $100m AAR?

I started this company to fund my passion for building robots (modular machines in real-world size), which make it possible to buy parts from a supermarket and build something like a tiger-like robot, mechanical + processing blocks. And this requires a lot more funds.

I think more details would help. Like if ATM you apply any effort to get customers, or do you have churn and burn money to get new customers. If there is a churn — fix it.

Why don't you grow by word of mouth? Is there a space to grow?

Is it possible to change/update model and allow end users to use it?

What’s the meaning of ATM?

We have sold Deals to agencies and freelancers, which means they can use these deals for their clients (instead of subscribing to our plans), and we just charge 1% of store transactions (1% of GMV). So, we do not have an exact churn rate, but for a premium subscription, the churn is under 2% per month.

Moreover, I think the average GMV for stores is low. Currently, we are working on it by providing tips to merchants or targeting more valuable users (which is difficult because we don’t have media coverage or a warm introduction).

The main channel of acquisition is word of mouth. However, I don’t know how I can boost it! The only thing I have been doing is working on the product.

Yes, end users can use it directly on our website. The business model for end users is a 2% transaction fee for the free subscription and 0.5% for the enterprise subscription.

At the moment, I'd assume.

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