I talk to so many founders who grew their valuable SaaS business out of their services business that I wonder why this isn’t a recommended path for young founders.
There are many obvious benefits:
- Young entrepreneurs learn how to actually run a business with customers, employees, cash flow, and competitors.
- You can learn where problems exist that haven’t been solved yet.
- You can survive long enough to use your team and time to test many theories before finding a big idea to bet on.
- Services businesses require software, too. Build software for internal use, then sell it to others.
But it’s not popular to say, “Go start a tech-oriented services business first and then start a SaaS business after that.”
That sounds like it will be hard and take a long time.
Maybe it will take time, but you’ll probably get to a successful SaaS business faster.
Ian Brodie described how he and a college buddy wanted to start a software company on the Practical Founders Podcast this week. But they didn’t have the idea or any experience.
So they started working in the affiliate marketing space and then created a steady services business called Grovia to help ecommerce sellers recruit affiliates and influencers.
They sold Grovia to Acceleration Partners after two years in 2022. It was a small win by VC-industry standards, but it was big for Ian, who got cash and validation for creating a real business.
Ian and two other co-founders immediately started a real software company, Levanta, with affiliate marketing software just for Amazon sellers.
In their first year after launch, Levanta has experienced rapid growth, with $3 million in ARR serving 700 Amazon sellers and 3,000 affiliates on the platform.
He is glad he started Grovia first before launching Levanta for several reasons:
“I definitely believe in the benefits of starting with a services business first–-before starting a SaaS business. I highly recommend it to anyone who’s starting a business for the first time and wants to learn about a space.
“You can spin up a services business so quickly because you can market it cheaply at first, start delivering value, and then grow to a point where you can bring on additional talent.
“Then, you can start experimenting with an engineer to build a product by adding a tech-enabled aspect to your services business. That allows you to learn a lot about a particular industry and become practitioners.
“You can become experts in a particular space and know what problems are missing. If you do go and start another company, that’s where the SaaS opportunity lies. You’ll know exactly where that is.”
There are many ways to start a successful software business. Starting with a services business first is just one way to do it.
Check out the interview here on the Practical Founders Podcast.
Did you start your SaaS business out of a services business?
#practicalfounders
