In the old days, folks would criticize start-ups as “just a feature”. Oh Google/Salesforce/Microsoft will just build that. Back in the day when the world was a desktop OS, there was a lot of truth to that. When the web became our OS, that started to fade. The reality is, in SaaS, Salesforce has built almost nothing that has displaced a lot of start-ups. And some of its most successful product expansion has come from acquisitions. And even with that, as hugely successful as Salesforce is … it hasn’t killed Marketo or Hubspot or Zendesk or Apttus or Slack or any of 1,000 other start-ups that it competes with.
Ok so probably you aren’t going to be killed by a BigCo copying your start-up.
So the next somewhat related criticism is you are just a “Nice to Have”.
And you know what … on many levels … that may be true.
Ask yourselves these questions today:
- Would your customers’ business grind to a halt without your app?
- Is your app basically irreplaceable in core functionality with another vendor?
- Does an entire functional group/area rely on your application to do business? (variant of point 1)
- Does an entire functional group/area live in your app >= 1 hour per day?
- Are you seen as an application a core group of customers adds to their “app stack” almost by default?
- Is your product “important enough” to charge at least $20,000 a year today, at least for your largest customers?
If you are seeing a lot of No’s on that list … and nothing changes over time … then … you’re a Nice to Have. Pretty. Cool UI/UX. Probably one or two features that are 10x better than the competition. But that may be about it.
And if you are seeing a lot of No’s, and nothing changes over time … I think you are at high risk. Your customers will eventually churn. You’ll struggle to ever approach $50m in ARR, let alone $100m. Your M&A prospects may be much narrower. And an IPO is out of the question. And VC capital will tougher. Oy.
The thing is .. buck up. It’s totally OK actually. Because 8 times out of 10, great founders exploit this niche, this “nice to have” … and turn it into a mission-critical must-have:
- Box started off as a crude freemium tool. Today, it’s the default cloud choice for content management.
- Salesforce started off as a simple contact manager. Today, it’s the default system of record for sales, and increasingly, support.
- Evernote started off as a simple note-taking and clipping app … and sort of stayed there. And ultimately, stalled out.
It’s not just going enterprise. Hubspot has stayed SMB focused, but has become over time the core hub for many of its customers marketing efforts. From a tool to a solution.
So my uber-point here is just this. Take this criticism, these points seriously. And relentlessly drive to add more value. To become more mission-critical. To be a “hub” for your existing customers. To drive if not upmarket, then at least, to a broader footprint into your existing core customer segments.
Today at least, if you have any customers at all, a small group of buyers in the world loves you for something. Even if that’s just a Nice to Have. Build on that. Add more value for them, relentlessly. This doesn’t mean chasing a shiny penny, or trying to enter verticals where you have zero traction, or going into segments where you have zero customer pull today. Don’t do that.
But if you are never complacent with your core. If you constantly expand the value and solution you provide to them … a few years will go by … and you will become mission critical. You won’t be a Nice to Have anymore.
That will carry you to $100m ARR and beyond.
(Cross-posted @ SaaStr)