
State of Independent SaaS [pdf] - DavideP86
https://static1.squarespace.com/static/5d6fd1b92a7aeb00017966dd/t/5e291fc7d2e9fa1df81e2a8c/1579753464656/sois
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inapis
Some surprises for me -

1\. Why is VC funding so down the rank compared to self funding, friends and
family, angels and even debt? Is it probably because VC funding expects a
>100x exit and most SaaS probably can't deliver that? Or are SaaS founders
turning away from VC for ideological reasons (like want to enjoy the process
instead of rushing to justify a valuation?)

2\. 50%+ people pursued ideas which were not their own itch to scratch.

3\. 30%+ didn't validate before building. 20%+ just asked their audience.
Effectively, 50%+ just jumped into it without doing any significant and
rigorous testing. Probably because the cost of entry and failure is too low?

4\. 74% don't require a CC to start a trial. (Either infra costs are very low
or competition is intense?)

5\. 80% don't offer a forever free plan.

6\. Most founders don't know their website visitor to trial conversion rates.

7\. "Asking for a credit card before a free trial has almost no correlation
with revenue growth."

~~~
zabana
how would you go about validating an idea if you don't have at least a
prototype to show potential customers ? This has been suggested to me on many
occasions but I fail to understand how it works in practice. I'm not being
sarcastic I'm genuinely interested because if this is possible it would save
me a whole lot of time and headaches.

~~~
Maro
Depends on the idea, but there's a lot you can do before you write a single
line code.

1\. Of your friends/network, pick 5-10 people who could be potential
customers. Ask them.

2\. Think of a way to scrape emails addr of people who could be potential
customers. Ask them.

3\. Same on Linkedin.

4\. Build a landing page, buy traffic from G and FB, look at time spent on
your landing and CTRs to a signup page which then collects emails of
interested parties ("We'll let you know once the Alpha is out").

5\. Find a blog with potential customers, pay money to run some article on it
that relates to your idea, with links to your landing page. Look at open rates
of the article itself, and CTR to the landing, CTR on the landing, etc.

6\. Create a public group on FB for people that could be potential customers.
(Try to) create content for it, try to get people to join (maybe with ads).

All of these are highly noisy, but it's something. Also you could learn
something unexpected, like: "oh, I get your idea, but we use already use X for
that", and you didn't know about X, or you didn't know it could be used for
that. This happened to me several times. Don't be overconfident in your
Google-fu, it's a long tail world, and you may not be able to guess all the
relevant keywords/marketing/angle that a competitor could be under.

------
notlukesky
The ultimate issue with all these studies is the sample bias. How did they
source the independent SaaS companies (there are over 40 thousand plus, follow
power laws and most are economically duds). All samples are biased but there
are methods of “correcting” the bias. Historical errors are legion:

[https://www.math.upenn.edu/~deturck/m170/wk4/lecture/case2.h...](https://www.math.upenn.edu/~deturck/m170/wk4/lecture/case2.html)

By the way the key takeaway from this post is that you can make more money
driving for Uber than starting an independent SaaS business. You have to be
irrational to start an independent SaaS business (applicable to all startups
as well).

In fact the only folk who benefit from independent SaaS are the supplier food
chain. Levi’s was the main beneficiary of the gold rush. The SaaS conference
organizers seem to be among the beneficiaries of the SaaS “gold rush”.

~~~
balfirevic
I hope I'm reading the report right: median peak monthly revenue seems to be
larger than $10000. Almost 35% of surveyed business don't have any employees.

The only way for this not to sound pretty promising (without getting into
sample bias) is if you live in Bay Area.

~~~
notlukesky
It would be great to see a breakdown of the range of earnings and not just
revenue per employee. Some SaaS companies only end up working for the ad
companies Google, Linkedin and Facebook. In those SaaS businesses the House
always wins. This is maybe asking for too much, but I have come across too
many SaaS founders who would have made more money opening a taco stand.

Maybe the best approach to start it as a side hustle and then quit your job
once you have enough traction.

------
victor9000
Along these lines, can anyone recommend a framework for developing a SaaS
prototype? Ideally, it would include things like payment processing, user
auth, admin dashboards, etc. I've been looking at Laravel Spark, but I'm
wondering if people have other suggestions.

~~~
DanHulton
Huh. I've actually been working on one of these for the past month or so. It's
largely borne out of the fact that I couldn't find any that worked quite the
way I wanted (Node, Vue, Tailwind, HMVC architecture), but also that, yeah,
there definitely seems like an opportunity here for a pretty wide variety of
SaaS template apps.

Any chance you'd be willing to have a short email conversation about what
you're looking for? If so, my email's in my bio here.

------
csomar
> More than 25% of respondents have been running their business for 5-10
> years, which is longer expected given the relative newness of SaaS, and the
> high chance a startup fails in its first one or two years.

Could this be survivor-ship bias. If you failed your SaaS venture in less than
a year, you are less likely to be part of this survey.

~~~
bob33212
At the bottom of the PDF they say that the people who filled out the survey
got "Marketing Extras". To get a good range of respondents you would have to
give out cash to "Verified" SaaS executives during 2019. Which is way more
work and doesn't generate any revenue for Stripe/Basecamp

------
Ace__
Some context would help in framing this report.

MicroConf: "MicroConf is a collection of two-day events laser-focused on self-
funded and indie-funded software startups"

Rob (Walling): started Tiny Seed Fund:
[https://tinyseed.com/](https://tinyseed.com/)

Tiny Seed Fund: Accelerator for BootStrappers, "... we do this all without the
headache of traditional fundraising, loss of control, or the pressure to build
a unicorn."

So, it provides some clarity as to why BaseCamp (formerly 37 Signals) aided in
the production of the report, certainly when you take their own genesis and
growth into account. As far as I know they only had one small outside
investment, from Jeff Bezos:

"In 2006, Jeff Bezos bought a minority, no-control stake of Basecamp from
Jason and me." [https://m.signalvnoise.com/the-deal-jeff-bezos-got-on-
baseca...](https://m.signalvnoise.com/the-deal-jeff-bezos-got-on-basecamp/)

Cheers, Ace.

~~~
sudhirj
This is often characterized as an investment, where the money Bezos paid is
accessible by the company to do company things - but this seems to be private
sale of shares from founders to Bezos. I don't think the company got any money
out of Bezos' check - think the founders got it to their personal accounts.
That would not qualify as an investment in the sense we're talking about, no?

~~~
Ace__
From the same article I quoted: "What Jeff got was the same deal that Jason
and I had: His share of the yearly profits."

~~~
sudhirj
They're also claiming it was a "no-control stake", so not quite the same deal.

That kind of investment opportunity that says "if you trust us buy shares in
our future, but you just get to come along for the ride and get X% of profits"
seems different enough from VC investing to have its own name, don't know if
it already has one.

~~~
Ace__
Yeah it's certainly not comparable to any VC deal I've come across, haha.

There are some alternative forms of investment vehicles, revenue sharing ones,
ever-green funds, equity investment for a piece of the pie, etc.

------
CoachRufus87
Recorded livestream: [https://microconf.com/saas-this-
year](https://microconf.com/saas-this-year)

------
Eikon
> and the high chance a startup fails in its first one or two years.

I never understood why people like to spread this "fact" around. Of course a
company will fail in it's first years, if not, it's a company that is at least
not failing.

Also, it means nothing, not all companies are started equal and these
statistics mix everything and everyone in the same basket, there is too much
noise involved for this metric to mean anything.

~~~
threeseed
Because if you're on the VC funding train then you are almost guaranteed to
fail in the first 2 years.

Why ? Because your Seed Round is only going to get you 18 months runway before
you will need to raise a Series A. But VCs don't tell founders enough that the
chances of that are in the single digits.

And so you get these founders with a company that is unprofitable and growing
well but not growing well enough to get more funding. Which then means the
company dies.

~~~
bob33212
I could never take VC money. VCs and reasonable founders have very different
definitions of success. A reasonable founder may say that 15 employees and
revenue of 5M and profit of 1M is a huge success. A VC may say that 1M profit
is bullshit. They could have made 1M profit investing in index funds.

------
beardedman
> Diversity continues to be an issue in SaaS. Only 11% of founding teams
> include a non-male and 21% include a non-white founder

I find this line absolutely infuriating. And I'm disappointed it's right at
the start. Must there always be an issue when the data doesn't suit a
worldview? Why compromise a survey 's integrity with your own bias?

It costs virtually $0 these days to start a SaaS company, regardless of
gender, ethnicity or religious creed. Look at the emerging African & Indian
markets to see absolutely remarkable people hustling & making things happen
with having very very little.

~~~
Alex3917
> It costs virtually $0 these days to start a SaaS company

The average cost of raising a kid in a middle class family is around 250K.
What percentage of micro SaaS founders do you think had less than double or
triple that (inflation adjusted) spent on them between when they were born and
when they founded their companies?

If founding a SaaS company is free, it's only in the same sense that gas for a
Tesla doesn't cost anything. Being one person who has the liberal arts /
social science background to understand people, and can also code, and can
also design, and can also do marketing, requires many hundreds of thousands of
dollars worth of education -- even if it's just sitting around in the library
for a few years instead of working.

There are definitely people who are wildly successful without that kind of
background, but I don't think they're representative of the typical people
building micro SaaS companies. Keep in mind you're really only able to learn
to code if you're able to read English at a proficient level, which only ~13%
of Americans are able to do.

~~~
csa
> Keep in mind you're really only able to learn to code if you're able to read
> English at a proficient level, which only ~13% of Americans are able to do.

Proficiency is measured on a scale — it is not binary.

What specific level of proficiency are you referring to, and what is your
source for saying that this is the minimum level needed to learn to code. I
will go out on a limb and say that your 13% is folks who can read at a 12th
grade level (or thereabouts). Note that in the literature, this does not refer
to the reading level of an average 12th grader, rather the level that
curriculum developers aim to have 12 graders read at.

Also, what level of coding are your referring to?

I will just say straight up that I can teach and have taught kids who have
little or no knowledge of English how to code (e.g., with Scratch), so I think
you may need to make your assumptions a bit more transparent.

~~~
Alex3917
Source:
[https://nces.ed.gov/NAAL/PDF/2006470.PDF](https://nces.ed.gov/NAAL/PDF/2006470.PDF)

> Also, what level of coding are your referring to?

Just being a working developer. For which the main skill is just being able to
read and understand the documentation for new languages, frameworks,
libraries, etc.

~~~
csa
Thank you for the source.

That said, I don’t think proficiency as defined in that source is an ideal
proxy for “can be a developer”, especially given the that “developer” can
refer to a wide range of tasks.

Some comments:

1\. To pass a FAANG algo interview, yes, the proficient level is needed.

2\. To do the bulk of coding and bug fixing that many (most?) developers do, I
think that there are a lot of high intermediates (my sub-categorization of
intermediate) can do the work and actually are employed as developers. I’ve
seen enough janky code in code bases and submitted as “updates” or “fixes” for
me to believe that this is widely true.

3\. To be a productive creator, I also think the proficient level is
necessary. That said, I have seen a bunch of janky creations with questionable
efficiency/productivity that lead me to believe again that proficiency is an
ideal rather than a necessity.

Literacy is a tricky subject, so I encourage you to exercise caution before
throwing around ideas like only the proficient 13% of the population can be
developers. There are so many qualifications that need to be made before that
statement is plausibly true that it is not worth making, imo.

Let me add that I agree with your overall statement that most successful
founders come from relatively privileged backgrounds. There are many reasons
for this, literacy being one.

------
steve_taylor

      Diversity continues to be an issue in SaaS.
      Only 11% of founding teams include a non-male
      and 21% include a non-white founder.
    

It must be the VC boys' club at work, right?

    
    
      Have you raised funding for this company?
      11.73% Yes
      88.27% No

~~~
buttscicles
Maybe not VCs, but no doubt highly influenced by existing power structures
nonetheless. Not everybody can afford to start a business for whatever reason
(money, time, opportunity)

