You recently mentioned (SaaStr podcast) that every company desires to be a platform and how all these companies are interconnected in one big eco system — interesting point.
So, given the proliferation of SaaS applications and the potential of seamless interconnections, do you feel there’s been a revision in what gets defined as a SaaS platform? What does it really mean to be one today? And should companies be thinking about becoming one?
You need to make an early, vision-level decision about how partnerships and partner ecosystems will play into your business model. Ask yourself which of these applies to you:
A partnerships-first company where the value proposition of what you’re building is dependent upon connectivity with a large number of tech partners (Stitch was one of these, and Zapier is another good example).
A company where partnerships are a force multiplier, but your core product offering has its own standalone value proposition. Most B2B SaaS companies fall into this category, with rare exceptions like the ones mentioned above.
If you fall into the second bucket, I would be cautious about over-indexing your energy on partnerships before you have truly found product-market fit for your core offering. Partnerships are great, but they are not a replacement for a standalone value proposition. Once the engine is running, however, you can layer them on as a way to amplify your scale and make things more sticky.
(Note: This answer assumes you are talking about tech partnerships, although you could probably use similar logic for channel partners as well.)
This is framed like a question about sales strategy, but to me it’s actually a product question. There are two key inputs when trying to roll out a low-touch model:
Does the buying motion of your user persona allow for it?
Can your product actually support a self-serve or low-touch user experience?
You need both of these to be true in order for a low-touch model to work, and they are both very difficult to change once the snowball has started rolling down the hill.
Many people don’t realize the persona issue until it hits them. Sooner or later, even with companies like Atlassian and Slack that you mentioned, you end up moving upmarket, selling to large enterprises, and hiring high touch sales reps. This is for persona reasons and not product reasons – people need a high touch just to survive their company’s procurement processes.
In your case, with a very early stage business, it is probably still doable to move to a low-touch model, but it has to be part of a comprehensive strategy. Put lines in the sand around who your product is for and what their experience needs to be like in a low-touch UX, and commit to living in that world comprehensively across your business.
This happened to us at RJMetrics. We marketed ourselves as a self-serve product and focused on end users who wanted to self-serve. But the product never caught up to the vision because so much of our functionality was built around the crutch of high-touch services from our early days. That gap was a major source of friction, contributed to churn, ultimately was at the core of a lot of our biggest issues in scaling the company.
The “platform” thing is all semantics really, but I do think it’s an important distinction. Every company can’t be a platform. Having an API doesn’t make you a platform, nor does having tech partners or a bunch of integrations to third-party products. It just means you’re participating in the modern API economy, like basically every other SaaS company out there. And that’s fine and you can still build a massive company if that’s true.
I like the definition Bill Gates uses: " A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it." (more here)
You can put your thumb over the end of a hose and it’ll cause water to come out faster, but it kind of masks how big the original opening actually is. The niche thing is like that – you can iterate more rapidly, get more pointed feedback, and generally create value faster by focusing on a core group. But it masks the data about the size and applicability to your total addressable market. That’s the tradeoff.
That way, later on when you need to zoom out (take your thumb off the hose), you can remove those segment filters but not have to pivot off of your core persona that sat underneath them.
As for other axes of segmentation, it varies a lot by your business model. One that I like a lot (and that people use Crossbeam to discover) is what other tech tools they are already using. It can really tell you a lot about their tech sophistication, ability to pay, and organizational maturity.
I suspect you are selling to a different buyer than your upmarket competitors that charge 10-20x more. They don’t just charge that much because their product is bigger and better – they probably have to charge that much because their cost of acquiring a customer is higher. In order to play ball in their end of the market they have to:
Recruit and compensate enterprise sales reps (which clock in at $250k+ typically)
Build extra functionality to meet enterprise needs (SSO, etc)
Undergo costly audits and security routines to pass infosec and procurement reviews (SOC 2, etc)
This stuff costs money, and so it makes their products cost more. It’s also why you see enterprise-focused SaaS companies raising so much money – they spend more and make more per deal. Everything is bigger.
In your world, I suspect you have a few options:
Figure out how to get yourself off the phone and offer a fully self-serve product. Do you really have to manually sell all your deals? At your price point, this will kill your company if so. Run screaming from this customer profile if they pay that rate and require a founder-level sales rep to close the deal.
Push yourself upmarket and start pitching to more mature companies and/or buyers at those companies who have budget for at least 10-20x your current pricing. You can keep your higher-touch sales model (if a rep can sell ~$1M of ARR/year this can scale with non-founder hires). However, this likely will require some up front product and organizational investment to do right, or you won’t make it past the front door at these buyers.
The path to both of those is painful when you have an entrenched customer base and are dependent on the revenue they generate. My best advice would be to try and structure your offering into a “startup” and “enterprise” tier offering where conversations get elevated to enterprise after a certain level of EITHER usage or procurement baggage exists. Start having those enterprise conversations to understand the requirements.
Also, as a side note, I would not call 10-20x your price point “enterprise” – you are currently an $800/yr product, so 20x that would be $16k a year. That’s not enterprise software – it feels like something you’d see selling into smaller mid-market companies, and even at that price you’ll have a hard time with enterprise reps closing enough deals to make that $1M quota. Given that, and if you think this is a true ceiling on your price point, I am inclined to suggest that you try and remove the sales rep entirely, even on larger sales.
At some point, and this happened around maybe 50 employees for me at my first company, you have to accept the fact that your company is no longer just “yours” – it belongs to your team, your customers, your community, your investors, etc. If you fail to do this, you will struggle to scale. Moreover, if you build a successful company and sell it, you will be intimately involved in the “what happens next” discussion, including who runs it at the acquirer (likely you for a while), how your team is structured, where the product vision is going, etc. It’s just another phase in the life of your company.
My first company RJMetrics was acquired by Magento, which itself was then acquired by Adobe. Our software, and much of our team, is now part of the Adobe Digital Experience Cloud. I’m so proud of that, even though I haven’t been involved there for years. That’s the mentality that makes it easy.
For #2, I think it took me a long time to develop a true sense of intellectual honesty and to be risk-seeking rather than risk-averse while operating an early-stage company. Both are core requirements in a startup entrepreneur, as you have to chase down the high-risk, high-upside chess moves and then be honest with yourself quickly when you screw them up and need to pivot. This was a mental journey more than anything. I’ll talk more about other frameworks in another question.
You develop some combination of muscle memory and scar tissue over time that makes it easier and easier, but it’s really a lifestyle choice. I think it took me at least five years to take a frequent, holistic view of “how things are going” that wasn’t subject to the recency bias of the good thing that happened yesterday or the bad thing that happened five minutes ago.
I have been in and out of therapy at various points in the journey. I have had amazing co-founders that I deeply trusted and could confide in. I also try to prioritize hobbies – especially ones I’m bad at (so I feel like I’m always learning and growing) and that I can do anywhere (so that no matter what city I’m in I can find a way to experience them). Good examples are like running and improv comedy.
I don’t have some magic formula, and I certainly still have bad days. But learning to zoom out is definitely the most important piece.
Thanks for the question and for the RJMetrics nostalgia!
I think your question is actually offering a false choice. There are many dimensions on which a company might be considered a good idea or a bad one, but I don’t think entering into a market with existing players – even a lot of them – should be a wholesale disqualifier. Nor should category creation be viewed as a golden ticket or something to avoid.
When deciding which business to pursue next (in this most recent wave when I chose Crossbeam), my framework was more about:
Founder-market fit: Am I uniquely suited to creating success in this business and laying out a vision that will be differentiated and succeed?
Total upside potential: is the TAM large? what are the break points (“kinks in the growth line” that you can foresee) and are they addressable or preventable?
Is there a good answer to the “why now?” question?
The fun factor: Am I fascinated enough by the problem set to fully live in it for years to come? Can I trigger that passion in other people when I talk with them about the idea?
The fact that Crossbeam was a category-creation play and RJMetrics was a crowded market play were not in the top 5 inputs.
It’s certainly possible (and admirable when it happens), but there are many products out there – especially ones where you are selling into large enterprises or experience long sales cycles – where it’s impractical or can be debilitating to your ability to grow at the highest possible clip.
Imagine a company where your CAC ratio is 1 (that means you make back your “costs to acquire a customer” once you have collected one year’s worth of revenue from them). Now imagine in this same world that you are growing at 100% per year.
In this world, at any given time, 1/2 of your customers have been acquired less than one year ago. That means you are always “in the red” for half of your customers, “in the black” for the other half. So, assuming they all pay the same average monthly rate, you are perfectly breakeven.
Now imagine you want to increase that growth rate to 150%. That makes your business better and more valuable, right? Heck, if you can do that and not increase your CAC ratio, you are a stuperstar! But now the percentage of customers in the red is over 50%. You are, by definition, now burning cash. This is why VC becomes more and more important as growth becomes more and more realizable. It costs short-term cash to build long term equity value, and that’s just the way the cookie crumbles for the vast majority of companies in this space.
I think the most important way to enter a new market is founder-led sales. It isn’t a volume play, but it’s the ultimate “do things that don’t scale” technique. It also ensures you aren’t putting the cart before the horse when it comes to validating that your new market is one you’re ready for (and that’s ready for you).
The nice thing about SaaS is that a relatively small sample size is usually extremely effective way to validate your market and start getting some growth engines going. I am always partial to networking my way into warm intros in the form of “product feedback” sessions (ask for advice, not money). The feedback is legitimately the important part, but if you are onto something a decent number of those will turn into customer conversations too.
One of the most important skills is the ability to listen. Good listening allows you to delegate better, trust team members more, build more empathy, and just generally avoid becoming the stereotype arrogant CEO who is short-term effective but often grows toxic and ineffective over time.
That works its way into my decision-making frameworks in a few ways:
I trust my team. I spend huge amounts of energy on recruiting and hiring excellent people who bring experience that I can trust and I feel will be additive to my skills and the strengths of the team. Then, when they’re here, they are empowered to make an impact in the areas where their superpowers are at work and give them the support system (including myself) on everything else.
I trust myself. This is the mild dose of “reality distortion field” that ends up being helpful in moments of doubt or despair. Major decisions come from a place of vision, which often requires a level of trust – validated by good listening and good data – that we are on a bigger, better journey.
Thank you so much for taking the time out to answer all the questions!
There is a ton of super tactical advice, actionable frameworks, and brilliant analogies in there — that I’m sure would be very useful for everyone.
I especially loved the water-hose example and how you phrased this: “You develop some combination of muscle memory and scar tissue over time that makes it easier and easier, but it’s really a lifestyle choice.”
Thank you, again, for sharing your hard-won lessons and insights. Hope to have you join us for another session very soon!