Here’s a big reason for avoiding SaaS startup failure that doesn’t sound as sexy as finding product-market fit–not running out of cash to keep going long enough to create that product-market fit.
Creating product-market fit is often the key to early SaaS success.
That’s identifying a problem that enough people are willing to pay to solve with your software.
This takes a lot more time and testing than everyone expects.
You’d think that VC-funded startups avoid this problem, but they don’t. They are usually less resilient to failure than bootstrapped startups.
The early startup game is about surviving long enough to run enough experiments to find your scalable product-market fit.
Henry Valentino is the founder and CEO of eConnect Global, a leading provider of facial recognition software for casinos and stadiums, ensuring venue security and compliance.
He founded EConnect in 2009 and pivoted several times before focusing on a security platform utilizing AI for casinos during the COVID-19 pandemic.
The Econnect platform offers facial recognition surveillance software that integrates with special cameras at venue entrances to identify known security risks and ensure compliance.
Security teams get immediate identification of “known bad guys” in large venues, which local regulators often require.
Econnect is approaching $10 million in revenue with hundreds of customers as a profitable business, with no outside equity funding.
EConnect took on $2M in venture debt in 2022 and is a growing and profitable company.
Keeping the company going for over a decade through pivots, COVID, and some practical SaaS debt reinforced a core lesson in cash management for Henry as the CEO:
“Make sure you know your financial numbers yourself as the CEO. It’s great to lean on accounting or finance leaders, but if you don’t know them yourself, that’s a big hindrance to success.
“Cash is what it comes down to. If the bank account doesn’t have enough cash, they’re only calling one person to get that resolved and that’s you. If you get into trouble, you’ll be trying to cut costs, which is not a way to grow a SaaS business.
“To continue growing, you need to increase your spending and capacity to take on new customers. How much does it cost to keep these doors open every month? How much cash are we going to bring in? What do we need to bill to put us in a profit position every month?”
Henry got some help from finance expert Ben Murray to get his SaaS accounting and metrics in place, but he retained direct oversight of his cash and expense payments.
Running out of cash is still why many early-stage software companies fail, whether they are funded or not.
Surviving long enough to find a real, scalable business is the real game when you get started.
Check out this revealing interview with Henry Valentino on the Practical Founders Podcast.
