Building a US focused SaaS company
Takeaways from Lightspeed’s SaaS Evening
At Lightspeed, we’re excited by the vibrant SaaS community in New Delhi, particularly the founders focused on the US market. Targeting a market halfway across the globe can be daunting for any early stage founder.
To help such founders, we organised a fireside chat between Sandeep Gupta, COO at Innovaccer and Dev Khare, MD at Lightspeed India. Innovaccer is a big data SaaS company (and a Lightspeed portfolio company) selling into US healthcare. The key takeaways are shared below — we hope this helps you in your journey building an exciting business!
Focus on a vertical
Innovaccer began as a research acceleration company and pivoted to enterprise customers initially targeting finance, healthcare and retail customers. They grew rapidly with lighthouse customers in each of the verticals when they took a difficult decision — they fired 60% of their customers and decided to focus only on healthcare. The team chose healthcare partly because they had the most traction there but also because the sector was undergoing a transformation they could leverage. This counter intuitive decision might’ve halved their ARR but it also allowed them to grow almost 10x over the next year.
One of the mistakes Indian companies make is to target multiple verticals whereas US startups often focus on a single vertical (and often single product) which gives them an edge. According to Sandeep, “As a founder, the toughest thing to do is saying no”. Saying no to customers and focusing allowed them to go much deeper, hire subject matter experts, speak the customers’ language and validate PMF rapidly. Hence, focus on providing a single product to a single problem set! Sandeep adds, “that’s how almost every large company started off”.
Another reason to focus on verticals is that that selling software to the CIO/IT teams is often a commodity space — there are tech vendors that are dime a dozen. To extract real value from your customers, you need to sell to business, marketing or sales which means you need to speak their language and compete with specialized vendors. For example, Innovaccer’s healthcare clients would never call patients customers (which was of course okay in finance and retail).
Go where your customers are
Many founders asked whether they should move to the US. Sandeep was quite unequivocal in this regard — “No one will build the company on your behalf. The first person to recruit in the US should be yourself.” The team realized quickly that hiring a salesperson is not enough. Firstly, there is significant learning that comes from sitting in front of the customer which should inform how the company and product is built out. Secondly, Indian and American markets are vastly different which means you need to validate your hypotheses again — this can only be done by a founder (or someone who can be trusted blindly). Lastly, high ticket sales are consultative but salespersons are often not empowered to adjust to the customer’s requirements. When an initial customer asks for a feature, only a founder can say “we’ll do it” and win the deal. This is essential in your first 5–10 customers. In the beginning, avoid “coin-operated salespeople” as Dev called them, and listen and learn from your customers.
However, this doesn’t mean you shouldn’t take advantage of being an Indian company. Innovaccer has continued to have a significant presence in India and has grown with the philosophy that what can be done in India should be to maintain their cost advantage. This means front end sales, sales engineering and subject matter experts are in the US while inside sales and product / engineering is in India.
Avoid free Proofs of Concepts
Though PoCs are essential for larger contracts, Innovaccer has never sold free PoCs. It’s essential to charge your customers, even if you take a small amount — ideally enough that the customer values you (a rule of thumb — at least cover your costs in a PoC). Unless they put money on the table, clients will neither respect you nor allocate appropriate resources to the project, significantly reducing your chances of having a successful PoC.
Product Market Fit Indicators
A good indicator of PMF for Innovaccer was getting lighthouse customers (customers that are leaders in their particular verticals) and repeating that success across at 2–3 other customers. Revenue expansion per client (e.g. more users or more modules per client) is often a strong sign of PMF. Another important factor is engagement across the client organisation — how many of the potential user base is actually using your product.
A note of caution from Sandeep is that it will likely take 12–18 months to re-attain PMF (e.g. design is super important in the US) and sales motion fit (e.g. no direct sales for small ACVs) after the founders move to the US.
We hope you found these takeaways useful. If you’re a building a SaaS business, and are learning through some these challenges, feel free to drop us a line — we would love to chat. Get in touch at ishaan@lsip.com or vaibhav@lsip.com
