Milestones for SaaS Companies

28 points by ivolo 11 years ago | 4 comments

lunaru 11 years ago |

This article must have been written with an implicit ARPU in mind. For lots of low ARPU companies, milestone 1 and milestone 2 are going to be inverted. That is, you'll likely get 10 paying customers before finding true product market fit.

Also, likewise, hundreds of customers will not equal $1M ARR for lots of SaaS companies. Even at 1000 customers, you'd need ~$100/mo or greater subscription price.

For SaaS companies with < $100/mo pricing, the equations and milestones are very different. For example, a $30/mo ARPU means having to get 3x more customers. So suddenly, hundreds of customers are not enough, you need thousands. That can mean the difference between a direct sales or white glove treatment to something slightly higher scale.

xivzgrev 11 years ago |

I enjoy reading how he quantifies pm fit - different people have different approaches. Another guy, can't think of his name, said 40%+ would be "very disappointed" if business shut down. Think they're all useful signals.

molf 11 years ago |

I find it hilarious that "profitable" is the last milestone.

beat 11 years ago | |

Once you're on the investment treadmill, growth is everything. Every dime of profit is a dime not reinvested in growing the company. Early investors are making a tremendous commitment - they're not just investing, they're giving up liquidity on their investment. They can't just turn around and resell it to invest in something else, the way they could with publicly-traded stocks. Illiquidity is a largely alien concept to most people.

A little background. There are really three factors to any investment - risk, return, and liquidity. The more you sacrifice with one, the more you expect from the others. Startup investments are high risk and low liquidity, so they should generate incredible returns when they do succeed.

So no, your angels and VC don't want profitability. They want growth. When you finally achieve a "liquidity event" (selling the company, or IPO), it's getting sold to the people who want profitability, and are willing to sacrifice returns for it. Different investors, different needs.

As a business, if you want control, you eschew investment and instead target profitability and stability. But you're greatly limiting your growth. That's fine, too.

Do you want to be rich, or do you want to be king? If you want to be king, avoid investors and build for stability. If you want to be rich, take the investment and grow as fast as you can.

If you want to stand on the sidelines, that's fine too. But don't laugh and mock business decisions by smart and determined people. Maybe they're trying to solve a problem you don't understand.