Your passion for software may have been realized when you came up with that brilliant solution for small businesses, however, the challenges of setting up a SaaS business are not limited. The Tech Panda spoke to Florian Bersier, the CEO of the Swiss SaaS company, Gmelius about the challenges a SaaS startup usually faces and how to deal with them. An Oxford grad with a PhD in Complex Systems and over 10 years’ experience in the design of algorithms and complex network architectures, Bersier is seen as a thought leader within the industry.
This article sums up four major challenges a SaaS startup faces along with expert suggestions to overcome them.
Challenge: Global competition
Solution: A large TAM
While it is always challenging to start any type of business, since founders look for ways to grow quickly with access to very limited resources, both in terms of human and financial capital, according to Bersier, a challenge specific to a SaaS business is the scale of the competitive landscape.
“You’ll face, from the start, a global competition that may come from everywhere in the world,” he says.
Once you figure out the size of your competition, ensure you have a big TAM or Total Addressable Market. This refers to the revenue opportunity available for the product or service you are offering. Bersier says the TAM should be large enough to make the adoption of your solution easier in the market.
“A large TAM means there is certainly some well-established competition. This competition will help you enter the market while being seen as an alternative. That, in turn, will lead you to get qualified leads without spending a lot in sales.”
The second reason for ensuring a large TAM is that SaaS are generally cheap, coasting on an average USD 25 per month, or about INR 1,625. That is why SaaS require a large pool of potential customers to be sustainable.
Finally, Bersier says, the size of your TAM is linked to the amount of word-of-mouth your product and company receive. Word-of-mouth leads to a high conversion rate and is certainly one of the best organic growth levers you can get.
Bersier explains with an example from his product, Gmelius, which is a lightweight Customer Relationship Management (CRM) system offering real-time collaboration features for an email inbox, “Bigger the TAM, larger the number of people, and then, easier the word-of-mouth. Let’s take the example of Gmelius, which integrates with Gmail. More than 1 billion people use Gmail and 60% of all Fortune 500 companies use G Suite. Besides, the CRM market is booming due to the adoption of CRM tools by companies of smaller sizes. Those two factors put together create a large TAM for Gmelius.”
Challenge: How to become viable in a short period
Solution: Consistent organic or unpaid growth
You must have discovered that unlike other businesses, in the world of SaaS businesses, things move at a rapid pace. Hence, most SaaS startups aim to become viable in the short/mid-term. But they struggle.
Bersier says it is essential to quickly ensure that your SaaS product gets consistent organic growth. The obvious reason for that is that paid traffic costs a helluva lot and is not a sustainable growth path for an early-stage company.
“It’s near impossible to build an efficient marketing strategy without understanding the factors behind your organic growth. That’s why I chose to integrate our solution with existing email clients, e.g., Gmail, instead of developing our own ecosystem. Having our product integrated within a service widely used allowed us to attract customers who were not ready to change their work environments or train their teams to use a brand new system, thus removing some barriers to entry and facilitating the adoption of Gmelius across the market,” he says.
Challenge: When to release the MVP
Solution: Start simple
Another common challenge faced by SaaS startups is to decide at which stage of their development should they release their first Minimum Viable Product (MVP). Many product-centric founders often feel their product is not stable or complete enough to be publicly available, and Bersier says this is perfectly normal. However, it is advisable for every SaaS founder to release a simple MVP and then listen to the feedback from their first paid customers for future product iterations.
“Doing so will increase the chances to ensure product market fit by prioritizing the items on the product roadmap and building a community of loyal users who will play the role of brand ambassadors later on,” he says.
Challenge: Getting press
Solution: Find your journalist
Another major challenge faced by SaaS startups is to get press coverage. Every startup dreams of being featured in mainstream media because that will bring visibility to both the product and the company in a tremendous way. It will help build the reputation of the company within a specific industry as well.
However, amid fierce competition, it can be quite difficult to pitch a SaaS product to journalists. According to Bersier, while there is no miracle recipe to guarantee a press article, founders should refrain from pitching their startups to journalists the way they do to investors.
“Journalists often have specific agendas and cover specific topics or stories. I would recommend to follow them and reach a journalist once you see a clear match between a trending topic and your product. This will increase the chances of your email to be read, which is an important first step. For instance, we recently approached journalists who were actively writing about blockchain and were looking for actual applications of the latter technology. This approach proved to be successful and our hybrid blockchain-powered architecture got covered by a few well-respected media,” he says.
This article contains a client of an ESPACIO portfolio company.