Pivoting from an Agency to a Pure SaaS Business
How we launched and then transformed Directual — an agency-like startup first, and later — a scalable SaaS-business which offers cloud low-code platform.
For the last 6 years my co-founder Nikita and I have been developing the startup named Directual. In this post you’ll find the details of one of the most difficult challenges we’ve faced — to get the company pivoted from an agency to a pure SaaS business.
Prerequisites of Launching our Startup
In 2014, when we founded Directual, there was no such terms as low-coding, no-coding or zero-coding. Nevertheless, having obtained a considerable experience in software development, we figured out the following:
Prerequisite 1. Lack of programmers on the market. Companies and startup founders struggled against the scarcity of developers. The demand for new digital products was continuously increasing, and the salaries of professional coders skyrocketed. The new way of building software had to appear — the way, when an app can be developed by a business user, not a programmer (nowadays such an approach is called no-code or low-code development).
Prerequisite 2. Time-to-market became the key competitive advantage. Companies needed to roll out new digital products and services as quickly as possible. At the same time traditional software development process included many time-consuming steps such as coding and testing which couldn’t be skipped. So, again, a different, more flexible, approach was needed.
Prerequisite 3. Proper founders’ engineering experience. Before launching Directual, Nikita and I had been building digital products for years, working for different startups and enterprise companies. We did know all the peculiarities and all the bottlenecks of software development. That allowed us to focus on the right product features and to develop the MVP by ourselves.
So, as you may see, there were the problems to solve and the skills which permitted us to try to solve those problems! We started building our product — a platform for visual back-end development. Later we expanded it to a general-purpose low-code platform for creating sophisticated and high-loaded apps with minimum (or even with zero) of hand-coding.
How We Built an Agency Business and Why Decided to Pivot It
Often startups choose their path according to circumstances. We did the same. When the MVP was completed, we were invited to acceleration programme at MTS — one of the largest telecommunication companies in Europe. That gave us a large client. We got first significant revenue, polished the core platform technology and continued to sell projects to enterprise clients. Working with MTS, and later, with other large companies (Schlumberger, PIK group), we had to grow our internal consulting team to develop end-products on the platform.
There was a demand for solutions in logistics, HR-optimisation and back-office tools. Directual had proved to be a reliable and flexible basic technology for those products. We managed to reach $600k turnover in 2019. But still, we acted as a high-performance agency with our own technology.
Such a situation didn’t satisfy us. We decided to transform Directual into pure SaaS company. The reasons of performing the pivot from providing consulting services towards SaaS-model were the following:
Reason 1. High costs and linear scalability of service business model. Companies needed end-solutions. There were few people on the market who knew Directual and were able to develop on it. So we enlarged the team for each new project. That was a linear-scalable business. In contrast, SaaS could grow exponentially!
Reason 2. The results didn’t match our mission. Since day one we have declared Directual mission as “letting people create”. It means — giving the opportunity to build sophisticated apps on our platform to each and every who is willing to create. To achieve that we needed to go public with Directual cloud platform, to open it for the mass market.
Reason 3. No-code/Low-code market started booming. No-code has become one of the hottest topics in 2020. Despite that new no-code/low-code tools appeared almost each week, we assumed Directual had strong competitive advantages. Such renowned platforms as Bubble, Airtable or Integromat could merely be applied for building high-loaded apps. For example, Airtable has a limit of 50k records, Integromat can’t process more than a few events per second. Having solid enterprise track, Directual seemed to be 10 times more powerful than other low-code platforms. Looking ahead, it did, but there were a lot of pitfalls to deal with!
Seven Months of Pivoting
We supposed it would be enough to roll out such additional features as signing up via social networks and cloud billing, and then, to prepare the documentation and video tutorials to kick off the cloud platform. On March, 31st we introduced refreshed cloud low-code platform. In the first week we obtained about 500 registrations. Those 500 users gave us the priceless feedback, which revealed three main challenges to cope with:
Challenge 1. Developing different product features. Before the public launch, Directual engineering team had been focused on stability, scalability and complex backend-building features. All the projects were created on Directual+React combination. Users turned out not to comprehend how to utilise some features. Moreover, almost nobody was able to apply traditional front-end development for building an app’s interface. We moved our focus towards simplifying UX and adding drag-and-drop web-page builder (recently we’ve announced it and its basic open-source components library Directual Design).
Challenge 2. Adapting our business processes. Serving customers of SaaS-product is not the same as serving enterprise ones. We needed to organise forum and facebook group. Also we introduced new processes of supporting, of gathering feedback, and of adapting product pipeline.
Challenge 3. Looking for our core audience. There are thousands of people, who participated in no-code movement. Directual couldn’t match needs of each and every. We carefully interviewed our users and profiled them. We managed to find the group of customers, whose requests fit Directual features perfectly. That core audience included tech savvy product owners and startup founders with significant development experience. They had already tried using popular low-code tools and often had faced the limits. Thus, those tech-savvy makers became our beach-head market. As soon as we roll out new platform features, we’ll expand our target audience.
A lot of users assume our platform to be too complicated for them. But the customer from the right segment is happy.
I switched to Directual from the combination of Airtable+Integromat when I faced functional limits of those platforms. Bubble didn’t fit my needs either (due to the limitations of its workflows). Directual seems to be one of the most powerful tools on the market.
Leonid Byakov, CTO at 0qode community, ex CPO at Chatfuel
As a result, coping with those challenges took about half a year. New challenges referring to SaaS-growth are to come!
Indeed, working as an agency could be a natural way to develop your basic technology well enough. We wouldn’t have achieved such a high level of stability, performance, security if we hadn’t created multiple apps on our platform by ourselves. But we realised it could be a trap — we would merely have found a product-market-fit if we hadn’t released SaaS. Fortunately, we did it half a year ago.
Thanks for reading.