Southern SaaS – It’s a wrap

lanyardSaaStr Annual is the biggest event in the B2B SaaS calendar each year.  ​​If you haven’t heard of it, or seen the rich content that flows out each year, you should. ​ With 12,000+ SaaS founders / execs / investors from all around the world attending each year in the hopes of powering up their journey to $100M ARR with less stress and more success, the reliable feedback is that the experience really does exceed the hype.

Kiwi SaaS players have been making the trek up to the Valley for a few years now, and as the interest grew, Callaghan Innovation jumped on board to spread the experience.  Having taken a group up to San Fran for the last two years, they had the idea of replicating some of the vibe for learning and connection right here down under.

Southern SaaS was born.

A whole day immersion in the SaaS business model with expert speakers plucked from their daily growth journey here in NZ or flown down under from the wide blue yonder, ~250 SaaS founders / execs packed into the top of the Auckland Museum yesterday with open minds and a thirst for actionable insights.

Highlights from the day:

  • Rich Mironov, Valley product guru, shared his wisdom with trademark humour and approachability. My moment of the session was Rich calling out that being a 7 year startup is not a claim to fame.  Something I hear repeated from international angels and VCs.  Our startup ecosystem here in NZ is not quick enough at killing off the unsuccessful and weak.  “Quick in, quick out.” Was his wise advice.
  • Marvin Liao, Partner at 500 Startups, delivered his 16 tips on pricing with that brutal honesty that Kiwi’s love.  “Discounting is STUPID and COWARDLY.  Don’t do it.”  He also pointed out that people put more effort into designing their interior office spaces than they do into pricing, a fact that rings a little too true!  “The moment you make a mistake in pricing, you’re eating into profit or reputation.”
  • Josh Robb: VP Engineering at current industry darling Pushpay was a shining example that everyone in the business needs to care about the performance of the business, not just their functional area.  If the business isn’t successful as a whole, there won’t be a product to build, or a customer to support or sell to.  The comment that stuck with me; when you’re growing fast and everything is on fire, “run to the fire that will kill you, and not the fire that won’t.”  You need awesome data and metrics to know the difference and to prevent those fires from happening again.
  • MC, David Downs was a delight, expertly guiding the energy and flow.
  • Topping it all off was the networking, sharing, and connections made.  As with all these types of things, knowing that others face the same challenges, or feeling like you have been able to share some of your own wisdom gained along the way with those just starting out, is the real value.

So with a notebook full of advice and expertise, the challenge is now to share the best bits with the team back at work and continue to drive forward as we grow towards that $100M ARR.

Landing whales and inherent tensions

Landing whales takes time, effort and a leap of faith.  The benefit to the business is clear, but the path to get there can cause significant tension in a product shop.

Product people are passionate about meeting the needs of the market by creating solutions that address the pains of the majority.  Acquisition teams are passionate about meeting the needs and addressing the pains of individual prospects and customers.  Neither is right or wrong, they are just different perspectives that create an inherent tension: Do we prioritise the many or the few?  Do we force an ‘off the shelf’ solution or allow heavy customisation?  Do we build features / integrations specifically for that large and important prospect?

Tension can feel uncomfortable, but as long as we understand where the tension is coming from and the implications of our decisions, it can drive us to a place of comprimise that optimises the benefits for both.

Solutions customised specifically for individuals are better known as ‘Services’.  Generic solutions taken ‘as-is’ for the many are better known as ‘Products’.  

Services can generate high revenues (if charged for) but lower gross margins over time.  They are significantly less scalable and far more consumptive of resource as the solution is customised towards 100% of the customer’s need.  The individual customer always takes priority in this scenario.  This makes it’s hard to find the time and resource to work on the product for the many.  Services are about the opportunity today, the immediate value creation.

SaaS products create compound benefits.  This means they generate high gross margins over time lifting the business value and ability to invest in future products.  In a product business, market needs always take priority and can cause challenges in the acquisition cycle where the solution only meets say 80% of an individual customer’s needs.  Products are about the opportunity of the future, the long term value creation.

You can see where the tension arises – if both teams are fully focused on what they’re passionate about, they are being impeded by the other and working to competing priorities.

In a SaaS business, the answer tends to be somewhere in the middle.  There is no long term value creation without a product approach, but no short term benefit without an acquisition focus.

So how do we balance this?  Each team must understand the context of the other, and respect that everyone is acting in the best interests of the goals of the business.

By taking inputs from the acquisiton teams, the product shop can finance specific builds with customer sponsors – there’s a real and immediate return as the whale lands and the whole business celebrates.  The product team just need to be consious of validating the underlying problem and potential solution with a wider group to ensure it will have benefit across the many to create that lovely high margin recurring revenue of a product shop.

Both teams then need to know when to draw the line.  

When the customer has selected an ‘off the shelf’ product, icnreasing levels of customisation creates ongoing resource drain and erosion of margins, as well as putting in place an ever increasing financial burden for that customer to evolve their unique application in line with the changes to the generic product.

The product people are best placed to identify when the customisation becomes too specfic or prevents the allocation of resource to future value creation.  This is where they say no.  Just as the product people need to respect the inputs that lead to opportunities for broader value creation, the acqusition team need to understand and respect this line where the inputs are not creating value in a sustainable way.

In short, there’s a win-win from landing and feeding whales, for both product people and acquisition teams, but it is not easy and definitely requires high empathy for each other’s context.

It needs understanding and a team approach.