The success of platforms like Shopify, Dropbox Canva, HubSpot etc. has many entrepreneurs squirming around the SAAS industry hoping to strike gold. Unfortunately, success is not so straightforward, statistics show that 92% of SAAS startups shut down in less than three years of existing regardless of funding. Why do these startups fail? You are about to find out.
Understanding SAAS
The miniature acronym ‘SAAS’ seems like it was coined specifically to dish out migraines but a simple understanding of what it means should put your mind at ease.
SAAS (Software as A Service)
SAAS is a means by which applications are delivered over the internet, saving you from the burden of installation, management and continuous updates that comes with the traditional purchase and use of a software or application.
Why SAAS Startups Fail
If SAAS startups are made to be affordable, groundbreaking and easy to use, why then do some of them fail miserably?
- Lack of Market
- Poor Management team
- Product Problems
1. Lack of market
Loving a business idea is not enough to make it successful and a lot of SAAS startups have had to experience the heartbreak that comes with this lesson. CBI insights report that about 42% of cloud startups stop operations due to this cause. I call it the passion trap and to avoid falling into it, you must ensure that your idea fills a market need. Successful entrepreneurs do this by;
- Obsessively emphasizing the market
- striving to know the market
- Executing based on their market’s opportunity
2. Poor Management team
Visionary managers understand that for a startup to thrive, it must focus on value creation before profits. Hubspot was founded in 2006 at MIT, yet when CMO Mike Volpe was asked in 2010 whether or not the company was profitable, he gave a remarkable reply:
‘HubSpot could be profitable if we wanted to, our current revenue run rate is in excess of $20 million. We just believe that there are tens or hundreds of thousands of businesses that we can help transform with better marketing (beyond the 3,000+ that use our product today). We want to continue to grow fast and be the leader in this market, so we are investing in even more rapid growth. There are many things that worry me, but our ability to be profitable is not one of them’
HUBSPOT former CMO Mike Volpe
Today’s profit-motivated entrepreneurs find it easy to gather a team of freelance developers on Upwork or Fiverr to make their product but once the product is past its concept stage they realize that a lot more time, money, patience and industry is still needed before it could be profitable. Disappointed, they abandon the project.
Managers should be smart enough to know what to pursue and the right time to pursue it.
3. Product Problems
Shopify remains the leading platform for drop-shipping and e-commerce hosting for entrepreneurs because it does what it says, fast and easy. Competitors who have sprouted over the years have failed because they were unable to replicate this convenience and simplicity in their products, leading to bad user experiences and ultimately business failure.
As a SAAS entrepreneur, you should ensure that your product is without bugs, lags, and security risks are mitigated to the barest minimum. Also, you should ensure that your product has the necessary quality and value needed to compete with rivals and substitutes.
Information Prime 