VCs poured a record €12bn into European SaaS startups in 2020, placing high risk bets on which software would prove most useful in the new world of remote work. Some managed to stick out from the crowd, but now it’s up to these startups to prove to investors they can gain and retain customers.
So how are startups selling SaaS products in 2021? And how can new players grow quickly in a crowded market?
We asked these questions and more to a panel of SaaS experts: Dave Rosenberg, head of marketing at business management software Oracle NetSuite; Òscar Carbonell Dolz, director of strategy at online form and survey platform Typeform; and Itxaso del Palacio, partner at Notion Capital, a VC that invests in enterprise tech and B2B SaaS.
Here’s what we learned:
1. Who cares if you exist?
You might have a great product, but if you aren’t sure of who your target market is, you’re screwed. Carbonell Dolz says startups looking to shift their audience from early adopters to mass market need to make sure they’re serving a need. Identify which of your customers would be disappointed if you never existed, create profiles and based on those profiles, try to develop a product that fits. It’s far easier to grow from a real customer than a concept.
In this way, customers can actually help you figure out what you do, says Rosenberg: “Customers who tell you what you are are more valuable than you telling them what you think you are.”
You need a sense of what your market is… If you think you’re this, but the market is saying you’re something else, you gotta go where the market goes.” — Dave Rosenberg, Oracle NetSuite
2. Demos are key
You always want to be transparent about what you’re selling, whether you’re targeting SMBs or enterprise. Nothing is more offensive to a customer than when you’re a new company that won’t let them see the product at all, says Rosenberg.
Showing customers how your product works via demos, screenshots and on-demand webinars drives conversions. Free trial periods are also a good way to show your customers the full value of your software and get them hooked, Del Palacio says, and should be favoured over freemium models.
In SaaS, freemium is not a business model... It’s better to go the route of a trial period to bring the customer to that ‘Aha!’ moment, rather than limiting the features they can access.” — Itxaso del Palacio, Notion Capital
3. Don’t let enterprise Goliaths take advantage
Free trials are great and all, but at some point, big enterprise might be getting one over on you. Small companies face this challenge when building SaaS products for large companies; you’re at the behest of customers that will hopefully pay up after you bend over backwards evolving your product for them.
Del Palacio says when you calculate pricing, include set-up fees and a timeline in which the customers will start shelling out cash. Set deadlines so you’re not continuously ‘consulting’ with these companies for free.
Founders in this situation should look for experienced advisors or salespeople to help close complicated and time-consuming contracts, she adds.
Eventually you have to ask for the money, otherwise you’re a non-profit.” — Dave Rosenberg, Oracle NetSuite
Photo credit: Dr Andrew Garthwaite
4. Sell ‘visions’ — and hire more salespeople
When building teams, European companies should be favouring building out bigger sales teams to sell ‘visions.’
“Hiring salespeople is really important because in the end, we can keep developing the product, but we need somebody to bring it up to the key clients and get those contracts,” Carbonell Dolz says. Once clients are hooked, build out the product to suit client needs.
In Europe for every sales person, we have 10 developers. In the US for every developer, they have 10 salespeople. It’s a different mentality. In Europe, we tend to sell things when we have them. In the US they tend to sell ideas, concepts, a projection, a vision. Europeans need to learn from the US in this mentality.” — Òscar Carbonell Dolz, Typeform
5. Don’t scale to enterprise until you have product market fit
When demonstrating the real value your product provides for enterprise and where it sits in the market, dive into your engagement metrics. Startups with a product-led growth model should also be measuring conversions and customer retention before trying to scale.
If you’re working with an enterprise and they’re paying more than £250 to £300k, there needs to be engagement with the product everyday. If there’s no engagement, there should be a reason why: maybe there’s a backend API they don’t see, but they get value from.” — Itxaso del Palacio, Notion Capital
6. Simplify your message and commit to a path
New SaaS startups can get caught in the trap of trying to be 10 different things at once, which results both in complicated messaging and a lack of cohesion in your product offering.
“It’s very easy, especially in enterprise, to make your product so complicated and so crazy sounding with all sorts of buzzwords when really what your customer really wants to hear is, ‘You help me with financial management or I have a corporate credit card now’,” says Rosenberg.
Carbonell Dolz also stressed that startups should narrow their product offering and not try to do everything.
You need to decide what you do and then go for it. It’s tough because making a decision means you are closing doors, but the best way of opening new doors is to close previous doors.” — Òscar Carbonell Dolz, Typeform
You can watch our full Sifted Talk on how SaaS companies can stick out from the crowd here:
