SaaS founders, be a scientist, not a builder, until you hit $1m ARR.

by Maria McMenamin, Venture Partner @ Anamcara

Founders who start to build too early miss opportunities to learn from their customers and uncover the value of their product.

I work with companies across Europe, building SaaS businesses from $0m to $5m ARR. The top mistakes that I see founders make in Go To Market are selling the product before it is ready, not leveraging their product to increase usage and preventing customers from buying the way that they want to buy.

Mistake Number One: Every Customer must pay.

The other day I met up with a founder who told me that even though they have only one customer, a sales trainer was pushing them to get this customer to pay for the product.

This is madness! Unless this is a bespoke solution built for one customer, this product is not ready to be sold.

The value of a SaaS business’ first customers is to help you understand how they use the product, where they see value and what they are willing to pay for it. This is why, as soon as your product is ready, you should get it into the hands of your first users. These users are your Design Partners. Choose them wisely, as they will help guide your product direction and build long-term customer value.

Be prepared to listen, learn and experiment with your Design Partners. If every product experiment works, you are not iterating enough. This is your opportunity to unlock unique value for your customers by deeply understanding their workflow and creating a solution that delivers real value.

Mistake Number Two: Hiding Your Product

Once you have worked with your Design Partners to polish the first version of your product and you know you have product market fit — do not hide your product behind barriers.

If your product needs an onboarding session, fix your user onboarding to make it self-serve or allow customers to self-serve a cut-down version. Experiment your way to find out how your customers want to communicate with you. You will need to experiment by segment, by customer size and by geography. Set up a hypothesis for the experiment and track what works. Customers’ needs change all the time. Get ahead of your competition and legacy solutions by meeting and exceeding your customers’ communication needs.

Mistake Number Three: Your CheckOut Flow

Most SaaS founders I work with can sell to a global audience. Match your pricing and your checkout flow to your global ambition. Most founders do not experiment with pricing, worried they will upset their customers with pricing changes.

This is one thing I know for sure…..Once your customers have purchased — they have lost all interest in your pricing model.

Customers will not tolerate friction and confusion in the pricing and checkout flow. Make your process, from upgrade to checkout to renewal, seamless, fair and transparent. Aim for your pricing to be boring.

I have found that most revenue teams find creating a pricing model that captures all your product’s value challenging. The pricing challenge compounds as your feature set increases, your product improves and expands globally. Founders who experiment with their pricing model generate more revenue. Pricing experimentation often takes engineering resources, but the payoff is worth it.

I first read about the importance of the experimentation cycle until you reach $1m in ARR, in an article by Jacco van der Kooij. His data shows that startups that hit $1m in ARR too early fail to learn the lessons needed to be successful. Startups that succeed experiment in the early years and take the lessons learned into the scale phase.

It takes the average SaaS company 33 months to hit $1m in ARR, a great outcome would be 18 months. If you are in this phase, embrace your inner scientist, prepare to learn through many experiments, make sure your team understand that failure is part of the journey and unlock the value your business can bring to your customers!’