Free trials for SaaS startups have their benefits, but at some point, you have to spot when big enterprise might be getting one over on you, according to Itxaso del Palacio, a partner at Notion Capital, a venture capital firm that invests in enterprise tech and B2B SaaS.
The VC offered some great sales tips to Software as a Service (SaaS) startups and developers alongside other industry experts including Dave Rosenberg of Oracle NetSuite, in a recent online panel interview with the FT’s Sifted.
Del Palacio said, “Small companies face this challenge when building SaaS products for large companies; you’re at the behest of customers that will hopefully pay up after you bend over backwards evolving your product for them.”
Dave Rosenberg, Oracle NetSuite, came right to the heart of the matter. “Eventually you have to ask for the money, otherwise you’re a non-profit.”
Stop consulting for free
According to Del Palacio when a SaaS startup calculates pricing, they should include set-up fees and a timeline in which the customers will start “shelling out cash”.
Another tip is to set deadlines to avoid ‘consulting’ with these companies for free. Founders in this situation should look for experienced advisors or salespeople to help close complicated and time-consuming contracts, she added.
“Freemium is not a business model”
“In SaaS, freemium is not a business model… It’s better to go the route of a trial period to bring the customer to that ‘Aha!’ moment, rather than limiting the features they can access,” said De Palacio.
However, if the product is too good to resist, freemium users can turn into premium subscribers.
One of the latest freemium launches of this year includes Spotify’s push into 80+ new markets around the world, which will add 36 languages to its platform. The company will make Free and Premium plans available across all the markets. Consumers in select markets will be able to subscribe to individual, family, duo and student plan subscription options.
When to start thinking like a CEO
Advice from one of the greats, Reggie Bradford, who was SVP at Oracle’s Startup Ecosystem and Accelerator when he lost his battle to cancer in late 2018, always came with humility and common sense. He felt startup founders should start to think like a CEO as soon as possible.
In a blog he wrote, “Founders are accustomed to doing most everything themselves; CEOs understand that they must hand off a range of duties in order to focus on the bigger picture—putting their business in rapid growth mode and a position of sustainable market leadership.”
The power of a good story and partnership
He said founders must start to tell their company’s story rather than sell it.
Another tip he offered was to make partnerships a priority at a time when digital innovation is transforming and at times cross-aligning sectors. “…Startups must rely on partnerships to build their credibility, grow their customer bases and revenues, and extend their momentum.”
Quoting an old African proverb: “If you want to go quickly, go alone. If you want to go far, go together.”
Bradford’s social media company, Vitrue, was struggling until it partnered with Facebook. That partnership transformed the business and would lead to Oracle acquiring it in 2012 for $300m.
Focus on the problem
Startups can get distracted. But what consumes you can make or break a business. “Focus on the problem you are solving and get paying customers ASAP,” suggested Nick Woodward, CEO of ETZ Technologies, a SaaS business that specialises in the recruitment and the freelancer economy.
“Don’t be distracted by talking to VC companies and raising money,” he said.
“If you need capital to grow, then borrow it, it’s far cheaper than giving away your company. Close to 90% of VC-backed startups fail and of the 10% that do succeed, 99% of the founders will lose control of their business and be replaced as CEO. Think about that before you sign a term sheet,” said Woodward.
SaaS startup marketing tips
Alex Cohen, head of Marketing at ETZ and a SaaS marketing specialist, suggests that SaaS startups should think about what they want to achieve from marketing early on.
“For some SaaS start-ups it’s just getting initial customers and revenue,” said Cohen. “If that’s the case you need to focus on quick-win tactics that can get awareness and traffic to your site quickly. Think PPC and email marketing.
For others, it’s building more of a brand or telling a story from day one and including tactics like content and SEO in your marketing mix.”
Do you want a ‘launch’?
Most people will probably say ‘yes’, according to Cohen.
He said that a launch gives you a reason to undertake a campaign and get press coverage. “However”, he added, “a launch also says your product is new and that may put questions in a potential customer’s mind – is it buggy?”
He suggested that some customers might think, will it still be around in a year’s time? “So just starting marketing and not saying it’s new may help you in those early days,” he said.
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