9 ms·

State of Independent SaaS [pdf]

255 points by DavideP86 7y ago

csomar 7y ago
> More than 25% of respondents have been running their business for 5-10 years, which is longer expected given the relative newness of SaaS, and the high chance a startup fails in its first one or two years. Could this be survivor-ship bias. If you failed your SaaS venture in less than a year, you are less likely to be part of this survey.
- bob33212 7y ago
  At the bottom of the PDF they say that the people who filled out the survey got "Marketing Extras". To get a good range of respondents you would have to give out cash to "Verified" SaaS executives during 2019. Which is way more work and doesn't generate any revenue for Stripe/Basecamp
Eikon 7y ago
> and the high chance a startup fails in its first one or two years. I never understood why people like to spread this "fact" around. Of course a company will fail in it's first years, if not, it's a company that is at least not failing. Also, it means nothing, not all companies are started equal and these statistics mix everything and everyone in the same basket, there is too much noise involved for this metric to mean anything.
- threeseed 7y ago
  Because if you're on the VC funding train then you are almost guaranteed to fail in the first 2 years. Why ? Because your Seed Round is only going to get you 18 months runway before you will need to raise a Series A. But VCs don't tell founders enough that the chances of that are in the single digits. And so you get these founders with a company that is unprofitable and growing well but not growing well enough to get more funding. Which then means the company dies.
  - Ace__ 7y ago
    Due to the increased difficulty of attaining certain milestones, there has been the gradual increase and acceptance of more than one funding event occurring at Seed; ie Seed 2, Bridge, Post Seed. All before an actual Series A event. Not disputing that VC's (and others) should do more to highlight the difficulty, the slim chances, the demanding road both professionally and personally, that maximised exit valuation need not mean profit-making, nor revenue-generating, need not even mean sustainable if not propped up, nor some other things which would make my response off-topic.
  - bob33212 7y ago
    I could never take VC money. VCs and reasonable founders have very different definitions of success. A reasonable founder may say that 15 employees and revenue of 5M and profit of 1M is a huge success. A VC may say that 1M profit is bullshit. They could have made 1M profit investing in index funds.
inapis 7y ago
Some surprises for me - 1. Why is VC funding so down the rank compared to self funding, friends and family, angels and even debt? Is it probably because VC funding expects a >100x exit and most SaaS probably can't deliver that? Or are SaaS founders turning away from VC for ideological reasons (like want to enjoy the process instead of rushing to justify a valuation?) 2. 50%+ people pursued ideas which were not their own itch to scratch. 3. 30%+ didn't validate before building. 20%+ just asked their audience. Effectively, 50%+ just jumped into it without doing any significant and rigorous testing. Probably because the cost of entry and failure is too low? 4. 74% don't require a CC to start a trial. (Either infra costs are very low or competition is intense?) 5. 80% don't offer a forever free plan. 6. Most founders don't know their website visitor to trial conversion rates. 7. "Asking for a credit card before a free trial has almost no correlation with revenue growth."
- zabana 7y ago
  how would you go about validating an idea if you don't have at least a prototype to show potential customers ? This has been suggested to me on many occasions but I fail to understand how it works in practice. I'm not being sarcastic I'm genuinely interested because if this is possible it would save me a whole lot of time and headaches.
  - Maro 7y ago
    Depends on the idea, but there's a lot you can do before you write a single line code. 1. Of your friends/network, pick 5-10 people who could be potential customers. Ask them. 2. Think of a way to scrape emails addr of people who could be potential customers. Ask them. 3. Same on Linkedin. 4. Build a landing page, buy traffic from G and FB, look at time spent on your landing and CTRs to a signup page which then collects emails of interested parties ("We'll let you know once the Alpha is out"). 5. Find a blog with potential customers, pay money to run some article on it that relates to your idea, with links to your landing page. Look at open rates of the article itself, and CTR to the landing, CTR on the landing, etc. 6. Create a public group on FB for people that could be potential customers. (Try to) create content for it, try to get people to join (maybe with ads). All of these are highly noisy, but it's something. Also you could learn something unexpected, like: "oh, I get your idea, but we use already use X for that", and you didn't know about X, or you didn't know it could be used for that. This happened to me several times. Don't be overconfident in your Google-fu, it's a long tail world, and you may not be able to guess all the relevant keywords/marketing/angle that a competitor could be under.
steve_taylor 7y ago
Diversity continues to be an issue in SaaS. Only 11% of founding teams include a non-male and 21% include a non-white founder. It must be the VC boys' club at work, right? Have you raised funding for this company? 11.73% Yes 88.27% No
- buttscicles 7y ago
  Maybe not VCs, but no doubt highly influenced by existing power structures nonetheless. Not everybody can afford to start a business for whatever reason (money, time, opportunity)
  - deleted 7y ago
    [deleted]
- deleted 7y ago
  [deleted]
- deleted 7y ago
  [deleted]
- Cenk 7y ago
  > It must be the VC boys' club at work, right? Almost as if systemic problems affect more than one aspect of the system?
Ace__ 7y ago
Some context would help in framing this report. MicroConf: "MicroConf is a collection of two-day events laser-focused on self-funded and indie-funded software startups" Rob (Walling): started Tiny Seed Fund: https://tinyseed.com/ https://tinyseed.com/ Tiny Seed Fund: Accelerator for BootStrappers, "... we do this all without the headache of traditional fundraising, loss of control, or the pressure to build a unicorn." So, it provides some clarity as to why BaseCamp (formerly 37 Signals) aided in the production of the report, certainly when you take their own genesis and growth into account. As far as I know they only had one small outside investment, from Jeff Bezos: "In 2006, Jeff Bezos bought a minority, no-control stake of Basecamp from Jason and me." https://m.signalvnoise.com/the-deal-jeff-bezos-got-on-basecamp/ https://m.signalvnoise.com/the-deal-jeff-bezos-got-on-baseca... Cheers, Ace.
- sudhirj 7y ago
  This is often characterized as an investment, where the money Bezos paid is accessible by the company to do company things - but this seems to be private sale of shares from founders to Bezos. I don't think the company got any money out of Bezos' check - think the founders got it to their personal accounts. That would not qualify as an investment in the sense we're talking about, no?
  - Ace__ 7y ago
    From the same article I quoted: "What Jeff got was the same deal that Jason and I had: His share of the yearly profits."
    - sudhirj 7y ago
      They're also claiming it was a "no-control stake", so not quite the same deal. That kind of investment opportunity that says "if you trust us buy shares in our future, but you just get to come along for the ride and get X% of profits" seems different enough from VC investing to have its own name, don't know if it already has one.
      - 7y ago
notlukesky 7y ago
The ultimate issue with all these studies is the sample bias. How did they source the independent SaaS companies (there are over 40 thousand plus, follow power laws and most are economically duds). All samples are biased but there are methods of “correcting” the bias. Historical errors are legion: https://www.math.upenn.edu/~deturck/m170/wk4/lecture/case2.html https://www.math.upenn.edu/~deturck/m170/wk4/lecture/case2.h... By the way the key takeaway from this post is that you can make more money driving for Uber than starting an independent SaaS business. You have to be irrational to start an independent SaaS business (applicable to all startups as well). In fact the only folk who benefit from independent SaaS are the supplier food chain. Levi’s was the main beneficiary of the gold rush. The SaaS conference organizers seem to be among the beneficiaries of the SaaS “gold rush”.
- srhyne 7y ago
  You take issue with the sample bias, but then start your sentence with.. > In fact the only folk who benefit Yes, there are many products that aim to serve other SaaS companies but that just demonstrates the maturity of the industry. There are so many small SaaS companies serving thousands of business niches.
- balfirevic 7y ago
  I hope I'm reading the report right: median peak monthly revenue seems to be larger than $10000. Almost 35% of surveyed business don't have any employees. The only way for this not to sound pretty promising (without getting into sample bias) is if you live in Bay Area.
  - notlukesky 7y ago
    It would be great to see a breakdown of the range of earnings and not just revenue per employee. Some SaaS companies only end up working for the ad companies Google, Linkedin and Facebook. In those SaaS businesses the House always wins. This is maybe asking for too much, but I have come across too many SaaS founders who would have made more money opening a taco stand. Maybe the best approach to start it as a side hustle and then quit your job once you have enough traction.
beardedman 7y ago
> Diversity continues to be an issue in SaaS. Only 11% of founding teams include a non-male and 21% include a non-white founder I find this line absolutely infuriating. And I'm disappointed it's right at the start. Must there always be an issue when the data doesn't suit a worldview? Why compromise a survey 's integrity with your own bias? It costs virtually $0 these days to start a SaaS company, regardless of gender, ethnicity or religious creed. Look at the emerging African & Indian markets to see absolutely remarkable people hustling & making things happen with having very very little.
- tarsinge 7y ago
  Racial statistics also only make sense in the US where skin color is associated with usually only one culture/origin, and while it's understandable in this specific context be aware than in other countries this is plain racism (and also illegal in some like France) because of the complexity and multi culturally and background that exist between a similar skin color. Now sure there are socio-economics realities correlated but in that case instead of using skin color as a proxy (which again only works in the US) the correct thing to do is to use directly the variables of that socio-economics background, like education, income level, parent's wealth, ...
  - cambalache 7y ago
    Why are you downvoted? Americans are right when they say people from outside do not understand certain things about Americans (like the second amendment or why car culture is so prevalent) but many don't apply that standard to themselves. In many countries race is not a big deal.
  - beardedman 7y ago
    You have many countries with racial stats. I also referred to the gender "issue" - not only race.
    - tarsinge 7y ago
      I don't think gender has the same statistics relevance issue, because the distribution is more uniform across the socioeconomic spectrum. Edit: to clarify, I am not debating wether or not the gender and racial "issue" should be highlighted in the survey, just that the racial stats as they are are not statistically relevant to draw conclusions (at least in non US countries).
CoachRufus87 7y ago
Recorded livestream: https://microconf.com/saas-this-year https://microconf.com/saas-this-year
victor9000 7y ago
Along these lines, can anyone recommend a framework for developing a SaaS prototype? Ideally, it would include things like payment processing, user auth, admin dashboards, etc. I've been looking at Laravel Spark, but I'm wondering if people have other suggestions.
- AlchemistCamp 7y ago
  It's hard to go wrong with Spark. Jumpstart Rails is another option from a source I'd trust.
- DanHulton 7y ago
  Huh. I've actually been working on one of these for the past month or so. It's largely borne out of the fact that I couldn't find any that worked quite the way I wanted (Node, Vue, Tailwind, HMVC architecture), but also that, yeah, there definitely seems like an opportunity here for a pretty wide variety of SaaS template apps. Any chance you'd be willing to have a short email conversation about what you're looking for? If so, my email's in my bio here.
- yoshyosh 7y ago
  https://bullettrain.co/ https://bullettrain.co/ is the main one I know
- ianhawes 7y ago
  I would recommend Laravel Spark only if the options that it provides are exactly as you need them. In my use-case, I started with Spark, then effectively removed it as my revenue model changed. This was about 3 years ago and I know that there have been meaningful updates since then. Alternatively, on the admin side, Laravel Nova is an extremely useful admin framework. Some of the out-of-the-box API options for Laravel are also superior to the Spark offerings. YMMV!
- mariushn 7y ago
  https://nodex.wensia.com/ https://nodex.wensia.com/ nodejs based, $99

255 points by DavideP86 7y ago

> More than 25% of respondents have been running their business for 5-10 years, which is longer expected given the relative newness of SaaS, and the high chance a startup fails in its first one or two years. Could this be survivor-ship bias. If you failed your SaaS venture in less than a year, you are less likely to be part of this survey.

bob33212 7y ago
At the bottom of the PDF they say that the people who filled out the survey got "Marketing Extras". To get a good range of respondents you would have to give out cash to "Verified" SaaS executives during 2019. Which is way more work and doesn't generate any revenue for Stripe/Basecamp

Eikon 7y ago

> and the high chance a startup fails in its first one or two years. I never understood why people like to spread this "fact" around. Of course a company will fail in it's first years, if not, it's a company that is at least not failing. Also, it means nothing, not all companies are started equal and these statistics mix everything and everyone in the same basket, there is too much noise involved for this metric to mean anything.

threeseed 7y ago
Because if you're on the VC funding train then you are almost guaranteed to fail in the first 2 years. Why ? Because your Seed Round is only going to get you 18 months runway before you will need to raise a Series A. But VCs don't tell founders enough that the chances of that are in the single digits. And so you get these founders with a company that is unprofitable and growing well but not growing well enough to get more funding. Which then means the company dies.
- Ace__ 7y ago
  Due to the increased difficulty of attaining certain milestones, there has been the gradual increase and acceptance of more than one funding event occurring at Seed; ie Seed 2, Bridge, Post Seed. All before an actual Series A event. Not disputing that VC's (and others) should do more to highlight the difficulty, the slim chances, the demanding road both professionally and personally, that maximised exit valuation need not mean profit-making, nor revenue-generating, need not even mean sustainable if not propped up, nor some other things which would make my response off-topic.
- bob33212 7y ago
  I could never take VC money. VCs and reasonable founders have very different definitions of success. A reasonable founder may say that 15 employees and revenue of 5M and profit of 1M is a huge success. A VC may say that 1M profit is bullshit. They could have made 1M profit investing in index funds.

inapis 7y ago

Some surprises for me - 1. Why is VC funding so down the rank compared to self funding, friends and family, angels and even debt? Is it probably because VC funding expects a >100x exit and most SaaS probably can't deliver that? Or are SaaS founders turning away from VC for ideological reasons (like want to enjoy the process instead of rushing to justify a valuation?) 2. 50%+ people pursued ideas which were not their own itch to scratch. 3. 30%+ didn't validate before building. 20%+ just asked their audience. Effectively, 50%+ just jumped into it without doing any significant and rigorous testing. Probably because the cost of entry and failure is too low? 4. 74% don't require a CC to start a trial. (Either infra costs are very low or competition is intense?) 5. 80% don't offer a forever free plan. 6. Most founders don't know their website visitor to trial conversion rates. 7. "Asking for a credit card before a free trial has almost no correlation with revenue growth."

zabana 7y ago
how would you go about validating an idea if you don't have at least a prototype to show potential customers ? This has been suggested to me on many occasions but I fail to understand how it works in practice. I'm not being sarcastic I'm genuinely interested because if this is possible it would save me a whole lot of time and headaches.
- Maro 7y ago
  Depends on the idea, but there's a lot you can do before you write a single line code. 1. Of your friends/network, pick 5-10 people who could be potential customers. Ask them. 2. Think of a way to scrape emails addr of people who could be potential customers. Ask them. 3. Same on Linkedin. 4. Build a landing page, buy traffic from G and FB, look at time spent on your landing and CTRs to a signup page which then collects emails of interested parties ("We'll let you know once the Alpha is out"). 5. Find a blog with potential customers, pay money to run some article on it that relates to your idea, with links to your landing page. Look at open rates of the article itself, and CTR to the landing, CTR on the landing, etc. 6. Create a public group on FB for people that could be potential customers. (Try to) create content for it, try to get people to join (maybe with ads). All of these are highly noisy, but it's something. Also you could learn something unexpected, like: "oh, I get your idea, but we use already use X for that", and you didn't know about X, or you didn't know it could be used for that. This happened to me several times. Don't be overconfident in your Google-fu, it's a long tail world, and you may not be able to guess all the relevant keywords/marketing/angle that a competitor could be under.

steve_taylor 7y ago

Diversity continues to be an issue in SaaS. Only 11% of founding teams include a non-male and 21% include a non-white founder. It must be the VC boys' club at work, right? Have you raised funding for this company? 11.73% Yes 88.27% No

buttscicles 7y ago
Maybe not VCs, but no doubt highly influenced by existing power structures nonetheless. Not everybody can afford to start a business for whatever reason (money, time, opportunity)
- deleted 7y ago
  [deleted]
deleted 7y ago
[deleted]
deleted 7y ago
[deleted]
Cenk 7y ago
> It must be the VC boys' club at work, right? Almost as if systemic problems affect more than one aspect of the system?

Ace__ 7y ago

Some context would help in framing this report. MicroConf: "MicroConf is a collection of two-day events laser-focused on self-funded and indie-funded software startups" Rob (Walling): started Tiny Seed Fund: https://tinyseed.com/ https://tinyseed.com/ Tiny Seed Fund: Accelerator for BootStrappers, "... we do this all without the headache of traditional fundraising, loss of control, or the pressure to build a unicorn." So, it provides some clarity as to why BaseCamp (formerly 37 Signals) aided in the production of the report, certainly when you take their own genesis and growth into account. As far as I know they only had one small outside investment, from Jeff Bezos: "In 2006, Jeff Bezos bought a minority, no-control stake of Basecamp from Jason and me." https://m.signalvnoise.com/the-deal-jeff-bezos-got-on-basecamp/ https://m.signalvnoise.com/the-deal-jeff-bezos-got-on-baseca... Cheers, Ace.

sudhirj 7y ago
This is often characterized as an investment, where the money Bezos paid is accessible by the company to do company things - but this seems to be private sale of shares from founders to Bezos. I don't think the company got any money out of Bezos' check - think the founders got it to their personal accounts. That would not qualify as an investment in the sense we're talking about, no?
- Ace__ 7y ago
  From the same article I quoted: "What Jeff got was the same deal that Jason and I had: His share of the yearly profits."
  - sudhirj 7y ago
    They're also claiming it was a "no-control stake", so not quite the same deal. That kind of investment opportunity that says "if you trust us buy shares in our future, but you just get to come along for the ride and get X% of profits" seems different enough from VC investing to have its own name, don't know if it already has one.
    - 7y ago

notlukesky 7y ago

The ultimate issue with all these studies is the sample bias. How did they source the independent SaaS companies (there are over 40 thousand plus, follow power laws and most are economically duds). All samples are biased but there are methods of “correcting” the bias. Historical errors are legion: https://www.math.upenn.edu/~deturck/m170/wk4/lecture/case2.html https://www.math.upenn.edu/~deturck/m170/wk4/lecture/case2.h... By the way the key takeaway from this post is that you can make more money driving for Uber than starting an independent SaaS business. You have to be irrational to start an independent SaaS business (applicable to all startups as well). In fact the only folk who benefit from independent SaaS are the supplier food chain. Levi’s was the main beneficiary of the gold rush. The SaaS conference organizers seem to be among the beneficiaries of the SaaS “gold rush”.

srhyne 7y ago
You take issue with the sample bias, but then start your sentence with.. > In fact the only folk who benefit Yes, there are many products that aim to serve other SaaS companies but that just demonstrates the maturity of the industry. There are so many small SaaS companies serving thousands of business niches.
balfirevic 7y ago
I hope I'm reading the report right: median peak monthly revenue seems to be larger than $10000. Almost 35% of surveyed business don't have any employees. The only way for this not to sound pretty promising (without getting into sample bias) is if you live in Bay Area.
- notlukesky 7y ago
  It would be great to see a breakdown of the range of earnings and not just revenue per employee. Some SaaS companies only end up working for the ad companies Google, Linkedin and Facebook. In those SaaS businesses the House always wins. This is maybe asking for too much, but I have come across too many SaaS founders who would have made more money opening a taco stand. Maybe the best approach to start it as a side hustle and then quit your job once you have enough traction.

beardedman 7y ago

> Diversity continues to be an issue in SaaS. Only 11% of founding teams include a non-male and 21% include a non-white founder I find this line absolutely infuriating. And I'm disappointed it's right at the start. Must there always be an issue when the data doesn't suit a worldview? Why compromise a survey 's integrity with your own bias? It costs virtually $0 these days to start a SaaS company, regardless of gender, ethnicity or religious creed. Look at the emerging African & Indian markets to see absolutely remarkable people hustling & making things happen with having very very little.

tarsinge 7y ago
Racial statistics also only make sense in the US where skin color is associated with usually only one culture/origin, and while it's understandable in this specific context be aware than in other countries this is plain racism (and also illegal in some like France) because of the complexity and multi culturally and background that exist between a similar skin color. Now sure there are socio-economics realities correlated but in that case instead of using skin color as a proxy (which again only works in the US) the correct thing to do is to use directly the variables of that socio-economics background, like education, income level, parent's wealth, ...
- cambalache 7y ago
  Why are you downvoted? Americans are right when they say people from outside do not understand certain things about Americans (like the second amendment or why car culture is so prevalent) but many don't apply that standard to themselves. In many countries race is not a big deal.
- beardedman 7y ago
  You have many countries with racial stats. I also referred to the gender "issue" - not only race.
  - tarsinge 7y ago
    I don't think gender has the same statistics relevance issue, because the distribution is more uniform across the socioeconomic spectrum. Edit: to clarify, I am not debating wether or not the gender and racial "issue" should be highlighted in the survey, just that the racial stats as they are are not statistically relevant to draw conclusions (at least in non US countries).

CoachRufus87 7y ago

Recorded livestream: https://microconf.com/saas-this-year https://microconf.com/saas-this-year

victor9000 7y ago

Along these lines, can anyone recommend a framework for developing a SaaS prototype? Ideally, it would include things like payment processing, user auth, admin dashboards, etc. I've been looking at Laravel Spark, but I'm wondering if people have other suggestions.

AlchemistCamp 7y ago
It's hard to go wrong with Spark. Jumpstart Rails is another option from a source I'd trust.
DanHulton 7y ago
Huh. I've actually been working on one of these for the past month or so. It's largely borne out of the fact that I couldn't find any that worked quite the way I wanted (Node, Vue, Tailwind, HMVC architecture), but also that, yeah, there definitely seems like an opportunity here for a pretty wide variety of SaaS template apps. Any chance you'd be willing to have a short email conversation about what you're looking for? If so, my email's in my bio here.
yoshyosh 7y ago
https://bullettrain.co/ https://bullettrain.co/ is the main one I know
ianhawes 7y ago
I would recommend Laravel Spark only if the options that it provides are exactly as you need them. In my use-case, I started with Spark, then effectively removed it as my revenue model changed. This was about 3 years ago and I know that there have been meaningful updates since then. Alternatively, on the admin side, Laravel Nova is an extremely useful admin framework. Some of the out-of-the-box API options for Laravel are also superior to the Spark offerings. YMMV!
mariushn 7y ago
https://nodex.wensia.com/ https://nodex.wensia.com/ nodejs based, $99