Focus in a Broad Way
SaaS is changing. Or is it?
In a recent post by Jason Lemkin he make some interesting observations about the way SaaS companies have changed in the last year. Specifically, he says that single point solutions aren’t enough to get you an invite to the table.
Specifically he says:
the world in SaaS has rapidly gone multi-product and platform the past 18+ months or so
Almost every SaaS leader I’ve invested in by $20m ARR has 2+ core products in market, but it’s more than that. They are building platforms.
Platforms often require 4-5 core products to even be fully featured.
Banging on about focus
If you read this newsletter regularly, you’ll have picked up that I recommend focus. Especially in the scale-up stage when you are resource and cash limited. For me, it was at the point that we were able to fully focus on our product, that things really started to happen. Does that mean that Jason Lemkin’s post kind of blow my point out of the water? Should we all be building multiple products now?
Predictably, my answer is ‘no’. Well, yes and no…
What is actually happening here?
What Jason is saying is that while agreeing that you have to do less things better because nothing will be great otherwise (which has always been my point). He says that this against a background of customers wanting more from you.
Over the last decade we have seen a proliferation of SaaS products: both in terms of the amount of products out there and the amounts of SaaS tools people are using as part of their tech stack. CFOs started to look across their businesses and notice just how much they were spending on SaaS. All these “$100/month” add up when you have multiple teams adding their own bits of software to solve specific problems. On top of that, because it was so easy to sign up to something and expense it through your company credit card, people were able to bypass IT altogether. After all, it’s only $100/month - and it lives on the Cloud - why bother IT at all?
Even for small companies, it can quickly get out of control. And if tools aren’t playing nicely together, it creates as much work as it solves if you end up having multiple tools from multiple vendors.
As a result, we are seeing vendors looking for fewer SaaS tools that do more.
Why Twilert stalled at $40k in MRR
Back in the late 2000s we launched our first SaaS product, Twilert. Twilert was a ‘Twitter Monitoring Tool’. The way it worked was that you entered search terms you were interested in and then our system would email you every hour (or however frequently you wanted) and let you know who had used that search term, what they’d said and where they were based. It also kept a permanent record of those Tweets if someone ever later deleted them.
Originally we gave it away for free (because we didn’t know what we were doing) and we had over 100k people signed up. Then we said we would have to charge and just over 3% of subscribers agreed to pay us $10/month. That equated to a little over $30k/month.
Happy days. Or so we thought. The way I saw it was that we’d done the hard work (built the thing). Now all we had to do was sit back and enjoy the passive fruits of our labor. Long story short, the MRR continued to grow a bit, then stalled at around $40k and then started to go backwards. What did we do wrong?
Focus.
It all came down to focus. And we lacked it in two ways:
As an agency, Twilert was one of many many things we were working on. We had our clients and we also had four of five other products out there. With limited resources it meant that Twilert had virtually no attention from the owners of the business. We dabbled here and there with some content, but that’s not the same as properly going for it.
We had 100k+ people who were interested in monitoring Tweets. And 3k+ of them were prepared to pay us for it. But we just left it there. We never once tried to find out whether there was a broader problem they needed help with. If their jobs included monitoring Tweets, then it was likely that there were other related challenges we could have helped them with, too. For example, Twitter wasn’t the only social media tool in existence. Maybe their job was to monitor all social media on behalf of their clients. Maybe their job was to devise social media campaigns and check their effectiveness. We didn’t know. We didn’t bother to ask. And so our second ‘lack of focus’ was around the customers themselves.
Focus is more important than ever
When we think of focus, we think about doing less things, better. But it’s not just less things, it’s less customers. What I mean by that is that your product could probably be used by loads of different Customer Profiles. I’m working with an agency that has a platform, Telsen, for managing IoT sensors. The possible use cases for the product are many. But they have focused on food safety. And by focusing on that ICP they’ve realised that the IoT element is only one facet of what they need to do for that group. They also need checklists, auditing functionality, workflows and alerts. And that’s just for starters.
If they’d just tried to be all things to all people, they would not have had the bandwidth to realise the unique food industry needs and so their tool would only do a fraction of what their customers actually needed. In the past the customer may have used other tools to plug the gaps, but now they want one tool to do everything.
I’ve mentioned in previous posts, the SaaS platform, Clio. Their platform has multiple products that includes: Practice Management; Client Intake & CRM; Document Automation; and Legal Accounting.
Pretty much everything it does, could be done by other tools. And probably the suite of products it has could also be used by other industries. But its focus is on law firms. All they care about are lawyers. They understand the needs of this industry probably more than anyone else in their sector. Last year they raised $900m in a Series F. My understanding is that they are closing in on $250m ARR if they aren’t there already. I’m not sure they would have achieved that if they hadn’t focused on the law sector.
What to ‘focus’ on and what to avoid if you are looking at spinning out a product from your consultancy
Just to get you thinking, here’s some pointers:
Don’t:
Just come up with a load of product ideas and start working on them simultaneously, hoping that one of them will magically blow up.
Work on the assumption that, because your product could be used by multiple verticals, then you should try and sell to them all at the same time. If your marketing budget is $10k/month and you are positioning yourself to five key verticals, then you may as well as not bother spending any money at all because the impact you are going to have is going to be non-existent.
Decide on your ICP and then feel that the solution is then to build as many products as you can for them. Whilst the single point solution may be under threat (for the reasons above related to SaaS proliferation), that doesn’t mean that the solution is to build loads of products for a vertical just because you can. Clio has multiple products for law firms, but they are based on years of understanding what these companies need and what makes sense, from a positioning point of view, for them to deliver. They haven’t, for example, gone into law firm branding, or law firm interior design, or law firm financing. All these things are what their customers might need and want to buy, but that lack of focus will detract from the bigger prize.
Do:
Be open-minded and experimental about your product ideas and validate them properly before you start writing any code. It’s OK to experiment early on because you need to learn what matters to your customers.
Understand that, while you are experimenting, the ultimate objective is to work out where you need to focus. That will mean saying no to things - and as an entrepreneur, it will be tough to do.
Recognise that the longer you spread yourself and your business thin, the longer it will take (if at all) for you to achieve what you want. It may seem counter-intuitive, but having more irons in the fire will reduce the odds of any of them achieving anything interesting.
Focus your limited resources on getting to the one product that you can fully back. Even if that product ends up including multiple products for your customers.
Focus on that ICP. Get to know that vertical better than the people in it know themselves. Validate your thinking properly and honestly.
Back to the question I posed at the beginning:
Should we all be building multiple products now?
No - if by that we mean just building products because they seem like good ideas and hoping that one or two of them might hit the big time. But yes - if it’s as a result of a deep understanding of a focused ICP and the challenges they need your help with. And by ‘products’, that may just be broader functionality within your original product, or it may be stand alone products that you can charge individually for.
To my mind, nothing has changed: it’s still all about delivering the best and most useful tool for your customers’ needs. It’s just those needs may now include something broader than a point solution.
