The inaugural SaaStock 2016 took place in Dublin, Ireland on September 21–22, 2016. It brought together over 60 speakers, and 700 delegates from 30+ countries, who all shared a common passion for B2B/ Software as a Service (SaaS).
The following represent some of the key lessons from the event:
- Be a Product First SaaS Company
The event opened with the ever insightful Des Traynor of Intercom taking us on a journey through the evolution of software from the 1840’s beginning with Ada Lovelace. He described how the evolution of SaaS has led to a ‘product centric’ world.
Old world — sell to CEO and hope the product trickles down
New world — sell to me and I evangelize internally
Old world — buy before you try
New world — try before you buy
The theme of Des’ keynote was on the importance of being a ‘product first’ company which was one a number of other speakers such as Peter Coppinger from Teamwork also focused on.
Des went on to argue that additional features for your SaaS application always needed to be feasible, viable and desirable.
Recurring usage = recurring value = recurring revenue
Occasional usage = occasional value = occasional revenue
He also cautioned against getting sucked into what he describes as low impact, low value work arguing that product first companies focus exclusively on high impact work.
In essence, Des was arguing that putting more resources on product, over and above sales and marketing was much more important in the early day’s of a SaaS startups evolution. Of course, this can be a challenge (particularly for VC backed companies) where pressures on driving growth often shift the focus to investing in sales to the detriment of product.
“Product first companies need to worry about churn more than growth.”
2. Make Sure You Have Achieved Product Market Fit
Peter Reinhardt the CEO, Co-Founder of Segment spoke about finding product/ market fit, which again was a topic that came up numerous times through out the day.
“80% of SaaS companies never make product market fit.”
Many speakers argued that European companies often dialed up their sales and marketing spend before finding product / market fit and they warned delegates against ramping up too quickly.
How do you know when you’ve found product/ market fit?
“Product Market fit feels like a landmine going off.”
Peter argued that far too many SaaS startups did not find product / market fit and interpreted weaker signals as representing it.
“Glimmers of false hope is not the same as customers wanting to rip it out of your hands.”
3. Plan a Successful Entry into The US Market
The topic of the US was also a common theme throughout the day given the attractiveness of the market (not withstanding the challenges associated with entering a market with domestic competitors).
“Europe is a great place to start — the question is how do you address the US market?”
The need to have a solution that was attractive to the US was important, and a range of suggestions included; the importance of European companies operating on an ‘English first’ basis, and recruiting staff from beyond their own countries to ensure cultural diversity from day one.
“If you want to build a category leading SaaS businesses you need to be competitive in the US. There are a lot of European countries who don’t get the success in the US that they hoped for.”
Again timing was important and it was argued that US Market entry needs to be deferred until a clear product market fit has been established, there has been adequate funding and once the market had been seeded first.
“You need to be resource constrained until you get product market fit.”
How you enter the US market was also the topic for much debate and Jos White of Notion Capital shared some valuable insights gained from his experiences with Message Labs.
For many, there was a view that Europeans had an advantage given the fact that the European market is so fragmented compared to the US (languages, currencies, culture etc). For US companies looking to expand in Europe, they often struggled given the more heterogeneous market that we are more used to here.
“Do everything you can to win the US market even it means neglecting your home market. You really want to be the category leader — your sales and marketing efficiency will be way better. US & Canada makes up circa 50% of the world’s global software market.” Nick Franklin and Christoph Janz
Hiring your first head of sales was viewed as being key. However, there was one major challenge with this — in that senior sales people sell themselves very well making it difficult to assess how good they’ll be. Suggestions to overcome this included the need to:
1. Dig really deeply into their resumes.
2. Use your investors who have experience with other companies who have successfully entered the US to support you (perhaps even having them interview candidates).
3. Do extensive reference checks (a step that is often skipped).
4. Go there yourself rather than hire someone (as an alternative).
It was also argued that your solution may need to be pitched a little differently in the US and this was something that need to be tested in terms of value proposition/ web copy / sales collateral.
In the US it is a lot more of an ROI sale than in the EU where the focus is often on ‘whether we have the budget’.
Of course, the capital requirements of a US entry are also a significant factor, and thus the decision is of key strategic importance (and may in most instances necessitate a VC raise).
“It’s a global game, execute on that basis. Don’t be constrained by geographic limits”. Gil Dibner
Finally, some delegates shared stories about how they were able to successfully sell in the US without the need for a domestic sales presence. So very much a case of ‘horses for courses’.
4. Drive Customer Success
A number of speakers spoke about the importance of driving customer success as being a key criteria for growth.
“Customer success is when customers achieve their desired outcome through interaction with your company. Customer success-driven growth is growth that happens because your customers succeed, upgrade, buy more, and tell their friends.” Lincoln Murphy
Murphy went on to argue that successful customers who had achieved their desired outcomes:
Customer success is the new sales — take care of your existing base — Dave Blake, ClientSuccess
Murphy also went onto describe how churn was the symptom of an ‘underlying disease’ and that startups needed to focus on what was causing the churn.
“Companies that embrace customer success as an operating model organise everything from acquisition to first use to company-wide roll-out in a way that makes customers accomplish their goals. These companies are deliberate about the customer journey, know what’s happening at each stop, and can move customers quickly from milestone to milestone. Nothing is left to chance.” Lincoln Murphy
5. Be Comfortable Pivoting
The topic of pivoting also cropped up as speakers shared their respective startup journeys with a number of them talking about how pivoting helped them transform their businesses. Siraj Khaliq, the Co-founder, of The Climate Corporation described how they made two pivots on their path to exit.
Khaliq described how they stayed aware of adjacent opportunities and this helped them pivot successfully despite their being some resistance to the idea.
For me the key point here is that startups make a number of assumptions, on which they base their core business despite the absence of data initially to validate them. Having founders with both the confidence and the ability to pivot when faced with changes to these assumptions, or the emergence of more attractive adjacent opportunities is key.
6. Always Be Testing
The ability of SaaS companies to test is one of the most powerful elements that SaaS startups have at their disposal. As traffic grows, the need to constantly A/B test needs to be a key element for all marketing teams to focus on. Kieran Flanagan of Hubspot, outlined a number of approaches they use ranging from:
i/ Giving the team the confidence to ‘fail fast’
ii/ Prioritizing experiments based on; Priority, Impact, Ease of experiment implementation
iii/ Using a range of different applications from Trello to Google Docs to manage the process.
“Sometimes small things can make a huge difference e.g changing copy on a page. Adding 6 words let to a 20% inc in conversions.” Kieran Flanagan, Hubspot
Regardless of the business size, ensuring processes are in place to constantly engage and talk to customers was viewed as being of crucial importance, alongside the need to make decisions based on data (with a dollop of gut instinct added to the mix). Again having the confidence to make judgements based on intuition and gut feel was viewed as being critical even when faced with data which may indicate a different route should be taken.
7. Increase Your Prices
A number of speakers talked about aligning pricing with value, and that many startups under-priced their offerings.
“Increasing price is a very underrated tactic.”
Sidenote, my article ten key elements to help with your SaaS startup’s pricing strategy elaborates on some of the pricing themes.
8. Ensure you Align Incentives
Drift CEO, David Cancel described his tips for retention recommending that having full clarity on how you are incentivizing your team is a key criteria for success.
“ The most important rule in management — Get the incentives right”. Charlie Munger
Cancel argued that you need to:
- Align your pricing, product and promotions with your customers.
- Align your teams and departments to promote customer retention.
He went on to argue that most metrics were not aligned with customers, and that as a result retention suffers. Sales people incentivized to drive leads will do so without giving any consideration as to whether or not they are the right types of leads. Similarly, marketing can fill the sales funnel with the wrong types of leads if their incentives are aligned with growth rather than retention.
9. Don’t Screw Up Your Fundraising
Janz talked about the importance of committing to a fund raising process wholeheartedly ensuring that you created a sufficiently competitive process to increase your leverage.
“ Don’t screw up your fundraising. Create an awesome deck (not just ok). Talk to the right number of investors. Your goal needs to be that you can run a competitive process.” Nick Franklin and Christoph Janz
Again there was a mix of views through out the day as to when and whether to take VC funding. We heard from bootstrap successes like Teamwork as well as VC backed startups like Intercom, and again the perspectives were wide and varied (although there was a significant VC representation at the event who ensured their voices were heard).
10. Ensure your Initial Sales Team Mirror Your Target Market
Siraj Khaliq shared a number of insightful stories about his journey to exit. He talked about the importance of recruiting people from the key market you are selling into. In his case, he was selling to farmers, and their initial senior enterprise sales guy struggled given how different he was from the personas he was trying to sell to.
In summary, the inaugural SaaStock was a resounding success, with great speakers, and panelists, and with lots of fantastic lessons for SaaS startups. The sun shone and the wifi worked fine. I’m looking forward to SaaStock 2017 already.
P.S. Apologies to Peter Coppinger from Teamwork, who despite a brilliant presentation does not get much of a mention above. The theme of his talk was essentially a list of ‘what not to do’ to build a $12m ARR SaaS business, and thus his tips have been omitted so as not to confuse.
Alan Gleeson is a B2B Marketing Consultant based in London with a passion for helping SaaS businesses to grow.
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