Really valuable insights; really shows how different independent SaaS is. For instance, 56% of founders are solo in indie SaaS, whereas a lot of traditional VC accelerators prefer (or require) at least two founders on a team.
It's tough to find two or more compatible and like minded people who can afford to make (effectively) zero money for an extended period of time. Having VC money makes it possible to support a bigger team from the outset with less financial risk to the founders. This may contribute to the bias towards single founders in bootstrapped companies.
I'm a solo SaaS founder and would absolutely love to have a partner but the few people I've discussed it with have not been able to tolerate the financial risk / lost opportunity cost.
I am a solo SAAS founder and I would say that other than the financial risk/lost opportunity cost, the major hurdle is finding someone ambitious and driven enough who is willing to slog it out with you. The drive, the ambition and will to do whatever it takes day in, day out is not that easy to find. Especially when you have to find others who may not feel the same about your brand/product/business.
Additionally, the demographics on slide 7 point to the majority of founders being over 30. This age group often coincides with a greater likelihood of having a partner, mortgage, children, etc. Thus the risk aversion for that group is likely also higher.
Finding 2+ people with the risk tolerance alone limiting, much less having a complementary skill set, interests, goals, etc.
I am such a person. I could afford to work for years without money thanks to my high net worth and investments in the tech sector, and have over a decade of software development experience in building robust web scale applications.
Unfortunately, most potential co-founders write me off when they discover I’m ethically challenged.
> most potential co-founders write me off when they discover I’m ethically challenged.
I would have loved to have come across this comment years ago. I was building a bit of awesome software that turned out to be "illegal" ("PayPal is a bank -- oh, you're a regulator? PayPal isn't a bank!" kind of illegal). It was really interesting, but my cofounder backed out once we ran into regulation designed to keep us out of the market. I wanted to keep going and pretend the regulation didn't exist/apply to us.
Perhaps time in prison? In the sense that people assume having gone to prison is a challenge to the default assumption of whether you are a good person.
> VC money makes it possible to support a bigger team from the outset
Yes. However, in practice, it is very rare to be able to raise money before the founding team has already been working on the business for a few months. Hence, by the time VCs put money into the company, most likely, the founders have already incurred their most significant financial risk.
And they say that growth has correlation with the number of founders (up to 3 founders), so it makes sense as for VCs growth is basically the only thing that matters, not so much for bootstrappers.
Regarding "which best describes how you validated your original business idea?", is anyone aware of more research around the effectiveness or practicality of different validation approaches? That is, rough false-positive (validation indicated that business idea had sufficient market demand when it didn't) and false-negative rates (validation indicated that business idea had insufficient market demand when it did) for different validation approaches.
Naively it'd be great to have data of the form "given our idea for a business was bad specifically because there would be insufficient market demand, when we validated the idea by method A (e.g. getting verbal commitment from n potential customers), validation result indicated there was enough market demand to proceed, we decided to proceed, but the business failed later specifically for a reason that the validation approach was intended to measure (customers willing to buy the service) and not for some other reason". I.e. known ground-truth, measurement, measurement result, decision to proceed or abort based on measurement result, actual outcome.
Probably would be a very tricky thing to isolate the effectiveness of the validation approach and tease it apart from other confounding factors.
Co-founder, 3rd startup, helped a handful of others grow.
I meekly suggest a different framing or mindset.
It is less "this idea is good or bad / market demanded it or not" - which suggests a passive, fixed worldview - I propose a more proactive approach: "am I able to make people adopt our solution or not."
If you launch something innovative (i.e. not 1-1 comparable with existing alternatives) your effective market is 0. This applies even more if you create a new category. So you can be faced with the situation where market demand cannot be satisfied unless you know how to reshape its adoption dynamics.
In this case, validation has multiple pieces that have to come together: is there compensatory behaviour to prove that existing solutions are underdelivering; can we identify an early adopter psychographic looking for a specific feature set we're able to create; do we have a way to get to them;
Rob Walling and that crowd are great. I read Start Small, Stay Small years ago and found it to be full of good advice that I was able to employ to make a "productized service". It never really took off, but paid for some new computers and a few vacations, and I learned a ton from it. Wish he or someone would update it, as I think it was a fantastic resource. It had a lot of specifics and details that more handwavy business books just sort of gloss over.
I remember listening to one of his SFRU podcast episodes and he said he might go back and update it but he didn't sound too enthusiastic about working on a book project or that it would feel impactful enough for him to spend the time on it. So maybe but probably not..
Personally, I procrastinate starting a product/service because I feel that I have to have an amazing idea before I get started. (There's nothing new under the sun.)
As this slide reinforces, though, a given person already knows many problems/issues that could be used as a starting point in a product/service endeavor.
75% of those with free trials do not require a credit card up front. This was always my preference as a purchaser because I didn't have to bother my boss and get approval to try out a product.
The lower barrier to entry does show a pretty significant uptick from unique visitors to trial customers as well. On the other side of that coin, the data shows that converting trial users to paid customers is way more likely when you have already collected payment information at the start of the trial. I think your customer base really defines willingness to put up a card up front.
On another hand, as mentioned in the report, if a SaaS operator does manage to close a sale to a larger business then that larger business is likely to provide the SaaS operator a much higher lifetime value due to lower price sensitivity and lower churn rate. But at some point it crosses over into high-touch enterprise sales process with multiple approvals from multiple stakeholders, long time horizons.
It'd be quite interesting to have survey data on what the sales process is like. But probably only relevant for SaaS businesses that sell to government / large business customers.
I converted the conversion rates from unique-trial-paid for each scenario. It looks like 0.846% for credit card required upfront and 0.264% for no credit card required. So *net conversion is ~3.2x higher when a credit card __is__ required upfront.*
Showing my work:
I eyeballed each bar chart and turned it into a data table. I'm getting median unique-to-trial conversion rates of 3.1% (credit card required) and 6.1% (credit card not required). I'm then adjusting these to account for the % of "don't know" responses. So, adjusted medians of 1.8% (cc required) and 3.3% (cc not required).
Following the same process for trial-to-paid yields medians of 47% (cc required) and 8% (cc not required).
Multiplying each pair yields 0.846% (cc required) and 0.264% (cc not required) unique-to-trial-to-paid.
- How the founders were selected ? And where ? initially they say "hundreds of non-venture track" but then 14% raised money
- What is a MRR Growth in dollars ? Thats not how we compute growth
- Is that data statistically significant ? there 2% of companies which had 4+ more founders and still you try to make a correlation between growth and founders count.
- There is 66% of companies who have employees but only 66% of founders who work more than 30 hours a week ? That doesn't seem right...
I like the initiative, but we need more clarity to really be able to trust the data from this report
There is? Page 31 of the document I'm seeing shows the percentage of businesses in each MRR category.
As polote said above, it's very strange to see MRR growth figures given as a fixed dollar amount throughout the presentation. As a founder, you might be quite worried if your business was only growing by the same dollar amount each month over an extended period.
You'd be surprised. I've met founders who were happy growing by a few hundred bucks a month. With most of these companies doing under 15K/month, the percentage growth is going to be pretty low.
You are looking at page 30. See the next slide. Title is “What best describes your company’s average Month-Over-Month (MOM) growth rate over the past 3 months?”
For anyone else reading this later: I was actually looking at page 29 according to the bottom-right of the slides, which is slide 31. The relevant chart is on page 30 according to the bottom-right, or slide 32.
The problem is still largely the same in any case, because unless we have some way to associate the percentage-based growth figures from that one slide with the current dollar-based growth as shown elsewhere, it still gives little insight into whether the various factors being examined correlate with higher percentage growth, which is almost certainly the interesting information here.
I thought of doing low-revenue-low-maintenance SaaS as a side job just to add to my income. Though I balk at the idea of having to support stuff. B2C is more tolerant of that, but with lower earning potential than B2B.
My experience (16 years selling desktop software as an Indie) is that the guy with the @aol.com email who paid $30 can be a significantly higher support burden than the organization that bought $3k of licenses.
