
How to Bootstrap Your SaaS Company to $1M ARR Before Raising Venture Capital - replicatorblog
https://hackernoon.com/how-to-bootstrap-your-saas-company-to-1m-arr-before-raising-venture-capital-d3be086effa0
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philipodonnell
Here, I'll save you the read. The keys to success are:

\- "Make sure you build something people will pay you for"

\- "Make the Value of Your Product Really Obvious"

\- Hire good people but not too early

\- "Be Relentless in Your Focus"

And in case you are interested (like I am) in hearing how entrepreneurs
honestly evaluate mistakes so that we all may learn from them, this company
only made two mistakes worth noting in their history:

\- Not enough PR made it hard to hire early on (but they wouldn't do anything
differently)

\- Leaving out almond butter is how you get raccoons

This is the kind of "we're amazing at all the generic things and the only
mistakes we made are humblebrags that aren't mistakes and irrelevant
anecdotes" puff tech journalism that gives this industry such a bad name.

~~~
replicatorblog
There were a few other nuggets:

\+ Get Leads Without Spending Money: The most interesting learning for me was
the idea to focus on getting "free" leads. Basically, the founders of this
company figured out how to showcase one of Shopify's advanced APIs to such a
degree that Shopify promoted the startups product. It's a "puff" observation
on one level, but this old school "biz dev" approach to marketing a nice
counterpoint to all the growth hack BS about fine-tuning Adwords spend.

\+ Don't make your first hire until you're at $1M ARR: Another simple
observation, but scale is important. If these two guys can run a business for
two years and get to $1M, why do most funded startups need 5-10 people prior
to product market fit?

It may not be your taste, but these are lessons that are rarely taught.

------
mpeg
"You should expect the same passion and drive in your employees that you have
yourself as a founder."

Nope. Especially not in a bootstrapped company where founders probably retain
most equity.

~~~
charlesdm
Maybe, maybe not. But you can still find pretty kick ass employees by somewhat
spreading the wealth around. Make sure they have a great office and they're
well taken care of. Perhaps have a bonus pool. Offer flexibility. Etc.

It might not matter much in the valley, where every startup does it, but it
will if you're building a business in say, Europe.

I personally don't believe that just because you retain most equity as a
founder in a "lifestyle business" you can't find equally and/or better
employees. You just have to focus on different things. It's just a different
game (organic, slower growth, longer term), and you probably don't want to be
handing out equity to people if you run a profitable bootstrapped business.

~~~
sidlls
I think the context matters. If the employee(s) in question have meaningful
equity and authority in the business then it's a reasonable comment.

If they're just salaried employees, even with some token paper lottery ticket
style equity options, it's absolutely ridiculous to expect them to have the
same passion and commitment as the founders.

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Tostino
The $1M ARR is about the point that I'm at today with my startup. It's three
founders which own 90% equity, and 3 small investors which own the other 10%
split between them. We managed to build it up with relatively small capital
investment from the founders, but in our industry there is no getting away
with not hiring any employees for a long time, as it's not simply SaaS, but
SaaS + "services" (services meaning doing a portion of the work for our
clients within our software rather than them hiring people to do it
themselves).

Our software is B2B, and the sales cycle is frustratingly drawn out and
expensive with demos, in person meetings, etc. That was something I hoped we
could get away from when we started, but seeing the sales cycle first hand, I
can't see a way to make it much cheaper while still growing. The people at
these large companies which make the decisions really like in-person meetings,
and if your competitors are willing to and you aren't...not a good way to try
and save money. The up side to that, is each customer brings in a lot of
revenue. We've noticed that a sale can take anywhere from 6 months to 1 year
to go through.

I wouldn't change anything about the slow growth we went for rather than
trying to ramp up and get as many clients as possible as quickly as possible.
It let us focus on the product a lot more, and make it efficient for our users
(and thus our internal employees providing the "service" portion of our
product). We'll continue slowly adding clients as we build out our product
more, we want to keep customer satisfaction high so we don't want to spread
ourselves too thin.

~~~
Blackstone4
Thanks for this! I've got an idea for a financial data B2B business that I am
going to go full-time on later this year.

The idea of a long drawn out sales cycle worries me as I'm only looking at an
initial product with a $10k p.a. price point. With that I can't necessarily
afford to have sales people out in the field so they would have to be in-
house. I imagine clients would want demos etc. so mostly Webex

~~~
Tostino
Yeah, that's actually the same general space my business is in. We do Trade
Promotion Management for manufacturers, which means managing their "contracts"
and "claims (rebates)", and ensuring that they don't pay out more money than
is actually owed.

Our price point is considerably higher than yours, and requires buy-in from
every level at these companies for them to go for our product. We don't have a
dedicated sales person at this point, but that is a good portion of what one
of the three founders spends his time on.

We were initially trying to position our product at a much cheaper price point
for just the software with us providing none of the "service" side of things,
to market to smaller customers which are currently managing everything with
Excel, but we found after talking to these companies that they are just as
much of a pain to try and sell to as the bigger guys, and required just about
as much effort, even if the revenue it would bring in was just a fraction of
what a bigger client would bring in. That caused us to refocus on targeting
the larger customers for now at least.

We use Webex heavily for demos and everything, but with a sales cycle
stretching into a year, every single client we've got has taken us going out
there for at least one in-person demo with the higher ups, and an in-person
training for their users after the sale. It adds up, but for a very
complicated software that they tightly integrate into their business, it's
necessary for them to feel all warm and fuzzy, have a face to a name, and feel
like they are not going to be left high and dry if they have any issues. The
effort put in during, and after the sale is really necessary to ensure all
those points are hit.

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55555
If you haven't noticed, there's been about 5-10 of these companies pop up
lately and explode in popularity. ConvertKit went from 0 to 5k in MRR over 2
years, then from 5k to 200k over the next 2 years. A rising tide raises all
boats. So I assume the article is about getting in early on a massively
growing industry. As someone who has been fortunate in this very way, trust me
when I say that you really can't overemphasize the importance of this.
Unfortunately it may or may not require being able to predict the future, so
your mileage may vary.

~~~
thisisit
> If you haven't noticed, there's been about 5-10 of these companies pop up
> lately and explode in popularity.

Forgive my ignorance but what you mean by "these types of companies". Is it
simply SaaS companies for a niche product?

~~~
55555
more intelligent email marketing flow/autoresponder providers/SAAS -- Drip,
Klaviyo, ConvertKit, Customer.io etc have ALL grown hugely over the past few
years. If you bootstrapped a half-decent business in this space you probably
became successful.

~~~
dejv
Yeah, right now it is all about email marketing automation. Few years ago, the
hot space was project management software and before that it was bug tracking
software. Get your timing right and you are golden, start too early or too
late and you will be in a tough space.

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infecto
I enjoy articles that talk about success and how people/companies got there
but I have gotten tired of reading the gospel. Instead of prescribing to me
how to be a success just share what you did.

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philfrasty
„...Make a Million Dollars Before You Hire Employee #1...“

?

~~~
freehunter
Yeah I mean if you just define your first few employees as "founders" instead,
you can have 100 founders and make a million and then hire employee #1 right?

~~~
philfrasty
This! Or sell the „startup experience“: 1 „CEO“ + 15 (free)interns.

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somid3
Ed! So happy to read this article from the Beehive days!

