What do you look for in SaaS companies? It’s hard to answer this question concisely because there are so many different ways of building a great software business. The best way I’ve found to describe it is a technology innovation leading to a go-to-market advantage. That’s how I answered the question in the 20Minute VC podcast with Harry Stebbings.
Software is a competitive world. Sales and marketing software vendors have flourished, growing from a few hundred to several thousand in the span of a few years. The same is true for vertical software, developer software, and every category in between. In such a contentious ecosystem, how does a new business develop a sustainable competitive advantage?
Initially, technology differentiates offerings. This technology advantage manifests itself in a few different ways. RelateIQ machine learning to offer an innovative customer relationship management software to sales teams. Looker architected a novel language and execution engine to revolutionize business intelligence. Zendesk, Duo Security and Expensify develop customer service, two-factor authentication and expense management software with radically simpler UIs than their competition.
But, technology is not enough. In fact, it is only half of the equation. Innovation = Invention + Go To Market. That initial technology advantage needs engender go to market advantage, a way of educating, convincing, and closing customers more efficiently. Often, these technologies grow the addressable market, alluring new buyers to try software.
Zendesk, Duo and Expensify leverage their product advantage to generate massive customer inbound demand, fueling explosive growth. Looker’s architecture empowers data teams to provide operational teams with the data they need to run the business at scale. This unique value proposition reduces sales cycles and leads to substantial negative net churn within accounts. RelateIQ’s technology which addresses the data entry pain suffered by most CRM users uniquely positioned them in the marketplace, and change the way that salespeople evaluate new customer relationship management tools.
There are other ways of creating this technology advantage including SaaS Enabled Marketplaces, focusing on a particular vertical and distribution of software through open source. No matter how these businesses generate a technology advantage, the most successful software companies leverage that initial booster rocket into orbit by creating more efficient requisition mechanisms, better upsell and cross sell, and changing the evaluation criteria of the target customer base.