In the last 5-10 years, we have seen a tech funding boom and bust, technology waves of web3 and AI, and other big shifts in the software world.
But these deeper changes have changed the startup SaaS game the most:
- It’s getting cheaper and easier every year to build your first sellable version of almost every software product. It’s 10x cheaper to build a serious version 1.0 product than 10 years ago.Popular and mature cloud platforms (AWS, Azure, etc.), API components (Twilio, Sendgrid, etc.), dev frameworks, and open-source libraries mean you don’t have to build it all to ship your app. The cost of building commercial software will continue to go down. Plug-in generative AI components will only make it better and cheaper.You don’t need big outside funding to build your first app and start selling.
- Growing from startup to scale-up can be very efficient and effective if you use a modern approach. There are many GTM approaches for growing your startup that don’t require big funding to hire expensive salespeople or spend big on paid advertising.Build a community before a product, become an influencer in your world, ship a better product with a freemium experience, or partner with companies who can bring you in.
Find your efficient GTM superpower that doesn’t require expensive sales and marketing–or big outside funding. - The average VC fund size has more than doubled in the last 5 years. Their average investment check size AND their exit size requirements have increased substantially too.This means fewer VCs write small checks AND these VCs can’t win unless there is a HUGE exit. It looked like funding was “cheap and easy” a couple of years ago, but it was actually more risky for most SaaS founders.
- SaaS companies with revenues and decent metrics are now worth very interesting MULTIPLES OF REVENUE at very early stages now. Even SaaS businesses with $500K, $1M, $3M, or $5M in ARR are worth 5x-10x revenues to strategic buyers. (Multiples were even higher in 2020-21.)That’s a big prize for founders with opportunities for life-changing wealth at much earlier stages of growth. And this is different from 5 years ago when you needed to get your SaaS business to $5M ARR to be taken seriously by acquirers.
I have watched all of these factors accelerate in the last 5 years from 2016-2017.
- It’s cheaper to build software and go to the market to create a valuable software company.
- In most cases, with just a few exceptions, you don’t need big outside funding to start a software company and get revenues growing fast.
There is a HUGE crowd of practical founders growing valuable software companies without big outside funding.
It’s not easy to create a growing SaaS company, but it’s more possible than ever for practical founders to win this game on their terms.
#practicalfounder
