Lesson Learned scalinig up a SaaS Startup in the Funding Winter

DOUSING, CONSULTING, PIVOTING

I’m relatively new in the role of CEO of a SaaS Fintech Startup. I grew up in years where startups were something different and I have spent the greater part of my career in global corporates.

Due to this I have been always very concerned about some of the rules that the market forced startups to apply and I’m now even more concerned about how things are changing without clearly and simply say that there was something wrong.

It is now quite undoubtful that the current global economic situation is leading to a paradigm shift.

Rising inflation, higher interest rates and a decoupling of ecosystems due to unstable geopolitics caused global investment in start-ups to plummet in the past year

Fifty-four companies with private equity or VC backing have already filed for bankruptcy protection this year, according to new S&P Global Market Intelligence data.

As the ripple effects of the economic downturn continue, the start-up sector is in line for hard times ahead.

Software as a Service (SaaS) companies have enjoyed a heyday for the past fifteen years. But this golden period is over and with its passing comes a huge challenge for SaaS executives.

Revenues are normally distributed on a medium long-term curve while costs are up-front or on a short-term curve.

Scale up is key because costs decrease with volumes while ARR continues to growth. This requires a quite high burn rate, at least in the early stage, that could only be supported through investments or debts.

Looking at what happening around, it seems crazy, to me, how some rules still resist. It is crazy to see how some of those meaningless taboos created in the past by a drugged market, still affect the life of startups while they are trying to survive.

Once again, my corporate background and my “old-style” financial education rise a hand. If there is one lesson that I have learned in my life is that no matter what you have to do to survive, you do it.

So, let’s talk about three of the most common taboo I have seen around that really need to be debunked.

DOUSING

Spend money is always nice - more Staff, better Marketing, better Instruments, new Offices, etc. – spend money you do not have is a suicide.

For years Investors wanted to see high burn-rates - the more you burn the more you are showing an aggressive attitude to grow your startup.

Now, you do not need to be a finance expert to know that this cannot work. As a family man, I’m taking care to ensure that what we are spending is sustainable for our family, because I care of my children’s future. We spend only what we can afford.

A startup, every company, is not different. The burn-rate has to be affordable and managed within a long-term strategy that could allow the company to survive whatever will happen. The soon you are at breakeven the better it is, no matter if this means you will grow slower.

Dousing is not a taboo. When a ship is on fire, don’t worry to douse it down.

CONSULTING

This is word that any Investor didn’t want to hear. Startups sell products and services, they are assets-based companies, consulting is not for startups.

I have worked with and for some of the global top tech companies in the world. Have you never noted that pretty all of them have always a consulting practice? Did yiu never asked yourself why?

Consulting has several benefits for companies, even more for startups and SaaS startups. Consulting is a Pre-Sale and Post-Sale instrument. Consulting is a way to understand the market needs and design your product to fit them.

Consulting is a perfect stream for bringing revenues with short-term cashflow.

Consulting is not a taboo. When you need money sell your expertise always works.

PIVOTING

"Errare humanvm est, perseverare autem diabolicvm,". Even the perfect idea and the most well-designed product could fail. Customers evolve, Competitors evolve, Needs change even the entire World could change – COVID19 docet.

Understand the moment to review your strategy and restart with a new one is always complex. For a Startup’s team this is even more hard. Your company, your vision, your products … it is your creature.

Investors didn’t like startups with more than one product or service, they do not like startups that change their offer over the time. One startup needs to be focused on one thing only.

Today many of the startups that had not been able to pivoting and to hold or even to abandon something are not on the market anymore.

Did you never noted that all the top companies in the world have a wide range of products and services and that quite all of them already had more than one from the beginning?

Did you noted that many of the top companies had pivoted their business several times across their journey to keep success ?

Have more than one product, diversify your efforts and be enough smart to change and evolve your company is key to survive, even more in a complex conjunction like the one we are living.

Pivoting is not a taboo. When is time to change, simply do it and all what needed to survive.

I'm still learning ... experimenting, failing, retrying ... and probably it will take me some time to change my "old-style" and corporate oriented mindset to the one of the new world I'm now living in, but I trust that we all need to stop looking at startups as an asset class, as a speculative exercise where if you do not become an unicorn is a waste of time.

I prefer to think that startups are simply companies, they need to make money, to grow reasonably and to be part of the economic and social environment they operate in, no matter if they will become unicorns or not.

Do everything you need to survive, no matter if you need to debunk taboos. Dousing, Consulting, Pivoting !