More Startups Have Fallen Out of Product-Market Fit

So there’s one topic you have to be ruthlessly honest about as a founder: are you falling out of product-market fit?

The reason you have to be ruthless is while sometimes falling into product-market fit can happen relatively fast, e.g. with a magic feature … falling out takes time.

It takes time for customers to churn, especially bigger customers, and especially customers that sign annual deals.

It takes time for your brand or even just your mini-brand to stop carrying you into deals.

It can take years to truly fall out of product-market fit. Or at least — to truly see it clearly.

We’re gearing up for 2024 SaaStrEuropa.com in London on June 4-5, which will be awesome. 3,500+ of the best in SaaS and Cloud together in London!  See You There!

But then comes The Biggest Non-Vendor SaaS Event of the Year! SaaStrAnnual.com 2024 on Sep 10-12 in SF Bay!!

• 12,000+ of the best founders, CEOs, CTOs, CROs, CMOs and more!
• 1,000+ Braindates, workshops, and mentorship sessions
• 800+ of the top VCs in SaaS and Cloud
• 250+ speakers and sessions
• Founder-VC matchmaking
• Awesome networking, parties and more!

Don’t just come … bring your whole team! For 20% off HERE until May 1!!

What’s the toughest part of running a startup? A partial list:

• Recruiting. This is always hard, forever.
• Co-founder Conflict. Hopefully, you don’t have this.  If you do, boy it’s hard.
• Almost running out of money. Happens to almost all of us. Not fun.
• Loneliness at the top. Tough indeed.
• Having to rebuild the team every few years. Man.
• Falling behind the competition. Painful.
• Losing momentum. It’s so, so hard to get it back.

That’s a lot of tough stuff.

But one visceral memory I had was of a celebration dinner with friends after Adobe acquired my last startup. I was so tired, I barely made it to the restaurant.

And then I had to choose between 3 open parking spots. But I couldn’t chose. I just sat there.  

It had been 5.5 years of mission-critical decisions. Many of which I got wrong. I just didn’t want to, I couldn’t, make those decisions anymore.

At SaaStr AI Day, Mike Tamir, Head of AI at Shopify, and Rudina Seseri, founder and Managing Partner at Glasswing Ventures, level-set about where we are in the cycle for Enterprises adopting AI and the critical work being done at Shopify to leverage AI and solve real problems.

Mike and Rudina do a great job of explaining the complex AI terminology for everyday non-technical founders and leaders to understand and apply to their businesses. Today, many initiatives in AI are mostly superficial, with limited impact on a dollar basis. At Glasswing Ventures, they tell their AI-native companies not to lead with AI because it’s such a superficial indication of interest.

On an adoption basis, there have been some “green shoots,” particularly with Klaviyo and the impact they’ve had bringing AI from a project siloed or customer interface level and into their core business where they’ve automated 700 humans and over two-thirds of their customer success. Why is Klaviyo noteworthy? Because they’ve contributed $40M to their bottom line by bringing AI to their core product and business, and they’re one of the few companies who have.

I think there are approximately 2 ways to get a new SaaS app off the ground:

Option 1: Hustle into The Enterprise.

In almost every category of software, there are gaps. Painful gaps. Generally, several gaps that any buyer has and would pay, say, $5k a month to solve. For example, an integration that doesn’t work well. Or a specific type of workflow that is missing in the standard app stack for that buyer. Or, in some less served industries, software at all to serve certain functions.

Go out and talk to 30+ Target Buyers and ask what their biggest problem is. Ask them if they would pay $5k a month to solve it. See if 1 will agree in writing.

Then go build that.

Far more enterprise-focused SaaS start-ups have started with a variant of this to get off the ground than you might think.

You’re worried about a bunch of VCs replacing you.  That’s fair. You should be. It happens. Regularly — but not usually.

A few high-level things to think about.

First, if you really screw up, shouldn’t you be replaced?

Second, if you don’t end up being a great CEO in the long-run, shouldn’t you be replaced when someone can do the next stage materially better than you can? This will make you more money as a shareholder, no?

OK you probably agree with both in theory. But you’re really worried about the grey area in the middle. You give it 110%. For years. The company does reasonably well, or at least, doesn’t fail. You don’t think anyone could have done any better, or will do any better. But a bunch of guys want to replace you anyway.

That doesn’t often happen. But it does happen regularly, especially with bigger VC funds and when you’ve sold off a majority of the company.

So … how do you protect yourself? 

This edition of the SaaStr Daily is sponsored in part by Adyen

Welcome to the new era of platform potential –

See how platforms are revolutionizing SMB banking. Insights into the products with strongest SMB demand, quickest path to market, and revenue uplift potential of up to 70%.

We conducted global research with over 50 leading platforms and marketplaces and over 2,000 SMB users to evaluate the potential of embedded finance for platforms.

Want to partner with SaaStr? Click here to Sponsor our events, podcasts, newsletters and more.

© SaaStr 2024

644 Emerson St. Suite 200, Palo Alto, CA, 94301

If you'd like to stop receiving the SaaStr Daily, click here