Characteristics of Successful SaaS Companies:
More than 64% of venture capital investments in the enterprise SaaS and with the public markets celebrate SaaS companies with large enterprise value-to-revenue (median is 7.6). It’s little surprise that interest in the Software-as-a-Service space is booming. After working with quite a few SaaS companies worldwide (US, Canada, Germany, Singapore, Malaysia), I’ve put together what makes a SaaS company successful.
Characteristic 1: Product leads the way:
The product leads sales, brand, people, and other factors. For example, Chargebee enables subscription billing; Calendly manages calendars; FreshDesk powers customer support systems. Customers can’t work without it, its bare necessity.
Characteristic 2: The Value proposition and ROI is a straight math
The product either costs lesser than the present product users are hooked into. Or the costs are precise when hiring an engineering team to build a refresh version of the product. It could also be the network that’s powering Job search in the case of Blind. Or there is access to robust ML programs like the one Grammarly uses. BTW I’m just using it to type my thoughts.
Characteristic 3: The finance engine powers growth.
Shorter time to market and negative working capital are the blessings in disguise to reach product: market fit.
Customers pay up front: this fuels product improvement and financial efficiency. There is an easy prediction. That’s a serious focus and growth opportunity.
Also, early-stage SaaS companies can target less demanding SMB segment. The expectation is the price variance: top grade compliance, security, and integration features needed by enterprise customers.
Also, the feedback is instant.
Characteristic 4: Incremental sales efficiency model:
The SaaS company can get back its customer acquisition cost, be it online marketing or inside/outreach sales, in a shorter duration, if they achieve product-market fit. Ideally, the company offers longer duration contracts putting it in a leveraged position in terms of churn.
Characteristic 5: Thought Leadership:
If disruptive, the product can be a leader; instead, it’s not about their value proposition; instead, it’s the approach to solving the problem. For example, a hosting company can claim that they are ‘fast’. But when they reveal the technology behind their data center and approach, making it fast, they expose thought leadership.
SaaS companies can be immensely valuable, and for excellent reasons: their product leads the way, the value proposition and ROI is super clear to the customer, a finance engine powers their growth. They have an incremental sales efficiency, and they lead with thought leadership.
Happy building, shipping, and scaling!
