The #1 Biggest Issue for SaaS Startups In The End

When I look across my investment portfolio for past 11 years, the #1 issue I think isn’t pricing, or TAM, or making a terrible mishire, or competition.

Those all matter, but the best founders fight through them.

No the #1 issue ends up being waiting too long to truly go multi-product.

No matter what you do, if you are too slow here, growth stalls. ?I’m seeing all across my investments that are 5, 8, 10, 12+ years out. ?That’s the one that ends up slowing growth. ?They’re not truly multi-product. ?They don’t truly have 2 or more products that are each large, and each sell ideally to different buyers or at least sell into very different, distinct budgets. ?Otherwise, you often end up with just add-ons, which are great but not truly second products. ?Add-ons don’t on their own expand the number of customers you serve, not really.

Parker Conrad, founder CEO at Rippling, has done a great job including at SaaStr Europa talking about building compound startups.?

Yes, they are an extreme case, using tons of VC funding to build 50 (!) products today.? But you can learn a lot from extreme cases.? Even if you can only replicate some of what they do:

In an ideal world, many of us would do just that. But he’s also clear and honest how expensive his approach is. We can’t all be Rippling.

But what I think all of us probably have to do is make a Clear and Big Second product Bet earlier than planned.

An experiment or two helps, but it’s not enough. What I mean is going all-in on a Big Second Product that doubles your market or more.

Not in Year 1 :). But almost always earlier than planned.

And for most of us, that Second Big Product has to be even bigger than the First. This makes it even harder. Because if it isn’t, the first one just keeps growing even bigger.

Look at HubSpot. CRM is probably bigger than Marketing now (HubSpot doesn’t break it out anymore). If not, it will be soon. ?And HubSpot is still growing its new customer count > 20% at $2.5B in ARR.

They started making that CRM bet way back in 2013:

If nothing else, the minute you start to feel growth slow due to market penetration — start really getting that Second Act, that Second Big Product going. ?

Even though it’s often the hardest time of all to do it, because the First Product still needs so much attention. ?But that’s the job. ?No one said it was easy.

In the enterprise, it might be $50m-$100m ARR. ?With SMBs, it could be much earlier, even $20m ARR. ?It will vary. ?But you’ll know once things start to scale … and then, once things start to slow just a smidge due to crossing double digits market share in your core TAM.

Again, this is hard. ?But in the end, nothing in SaaS is really more sad than finally getting to $50m, $100m, $200m ARR … which is so rare and hard … and then finding out growth has slowed down not because the product wasn’t great. ?But only because you just have one of them. ?It then takes you years and years to pull out of that. ?If you really can at all.

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