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State of Independent SaaS [pdf]

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Re: State of Independent SaaS [pdf]

#21

Post by Ace__ »

Some context would help in framing this report.

MicroConf: "MicroConf is a collection of two-day events laser-focused on self-funded and indie-funded software startups"

Rob (Walling): started Tiny Seed Fund: https://tinyseed.com/

Tiny Seed Fund: Accelerator for BootStrappers, "... we do this all without the headache of traditional fundraising, loss of control, or the pressure to build a unicorn."

So, it provides some clarity as to why BaseCamp (formerly 37 Signals) aided in the production of the report, certainly when you take their own genesis and growth into account. As far as I know they only had one small outside investment, from Jeff Bezos:

"In 2006, Jeff Bezos bought a minority, no-control stake of Basecamp from Jason and me." https://m.signalvnoise.com/the-deal-jeff-bezos-got-on-baseca...

Cheers, Ace.

Re: State of Independent SaaS [pdf]

#22

Post by Ace__ »

threeseed wrote: post #15
Eikon wrote: post #3

> and the high chance a startup fails in its first one or two years. I never understood why people like to spread this "fact" around. Of course a company will fail in it's first years, if not, it's a company that is at least not failing. Also, it means nothing, not all companies are started equal and these statistics mix everything and everyone in the same basket, there is too much noise involved for this metric to m…

Because if you're on the VC funding train then you are almost guaranteed to fail in the first 2 years. Why ? Because your Seed Round is only going to get you 18 months runway before you will need to raise a Series A. But VCs don't tell founders enough that the chances of that are in the single digits. And so you get these founders with a company that is unprofitable and growing well but not growing well enough to get…

Due to the increased difficulty of attaining certain milestones, there has been the gradual increase and acceptance of more than one funding event occurring at Seed; ie Seed 2, Bridge, Post Seed. All before an actual Series A event.

Not disputing that VC's (and others) should do more to highlight the difficulty, the slim chances, the demanding road both professionally and personally, that maximised exit valuation need not mean profit-making, nor revenue-generating, need not even mean sustainable if not propped up, nor some other things which would make my response off-topic.

Re: State of Independent SaaS [pdf]

#23

Post by kjksf »

zabana wrote: post #5
inapis wrote: post #4

Some surprises for me - 1. Why is VC funding so down the rank compared to self funding, friends and family, angels and even debt? Is it probably because VC funding expects a >100x exit and most SaaS probably can't deliver that? Or are SaaS founders turning away from VC for ideological reasons (like want to enjoy the process instead of rushing to justify a valuation?) 2. 50%+ people pursued ideas which were not their…

how would you go about validating an idea if you don't have at least a prototype to show potential customers ? This has been suggested to me on many occasions but I fail to understand how it works in practice. I'm not being sarcastic I'm genuinely interested because if this is possible it would save me a whole lot of time and headaches.

I second "Mom Test Book" (you can watch author's YouTube talks that cover the topic https://blog.kowalczyk.info/article/06817da6d15d429db3eec8f2...).

The thing is that most people think that idea validation is "Hey, this is my idea, what do you think?"

"Mom Test Book" describes a way to discover valid ideas by asking question, not asking question to validate ideas you had by yourself.

Still not easy by this point of view changed the way I think about it forever.

And now I can't help and see how everyone is doing it wrong i.e. instead of discovering ideas people would be willing to pay for, they have ideas and then look for validation (if that).

Re: State of Independent SaaS [pdf]

#24

Post by sudhirj »

Ace__ wrote: post #21

Some context would help in framing this report. MicroConf: "MicroConf is a collection of two-day events laser-focused on self-funded and indie-funded software startups" Rob (Walling): started Tiny Seed Fund: https://tinyseed.com/ Tiny Seed Fund: Accelerator for BootStrappers, "... we do this all without the headache of traditional fundraising, loss of control, or the pressure to build a unicorn." So, it provides some…

This is often characterized as an investment, where the money Bezos paid is accessible by the company to do company things - but this seems to be private sale of shares from founders to Bezos. I don't think the company got any money out of Bezos' check - think the founders got it to their personal accounts. That would not qualify as an investment in the sense we're talking about, no?

Re: State of Independent SaaS [pdf]

#25

Post by Ace__ »

sudhirj wrote: post #24
Ace__ wrote: post #21

Some context would help in framing this report. MicroConf: "MicroConf is a collection of two-day events laser-focused on self-funded and indie-funded software startups" Rob (Walling): started Tiny Seed Fund: https://tinyseed.com/ Tiny Seed Fund: Accelerator for BootStrappers, "... we do this all without the headache of traditional fundraising, loss of control, or the pressure to build a unicorn." So, it provides some…

This is often characterized as an investment, where the money Bezos paid is accessible by the company to do company things - but this seems to be private sale of shares from founders to Bezos. I don't think the company got any money out of Bezos' check - think the founders got it to their personal accounts. That would not qualify as an investment in the sense we're talking about, no?

From the same article I quoted: "What Jeff got was the same deal that Jason and I had: His share of the yearly profits."

Re: State of Independent SaaS [pdf]

#26

Post by sudhirj »

Ace__ wrote: post #25
sudhirj wrote: post #24

Earlier quoted context omitted.

This is often characterized as an investment, where the money Bezos paid is accessible by the company to do company things - but this seems to be private sale of shares from founders to Bezos. I don't think the company got any money out of Bezos' check - think the founders got it to their personal accounts. That would not qualify as an investment in the sense we're talking about, no?

From the same article I quoted: "What Jeff got was the same deal that Jason and I had: His share of the yearly profits."

They're also claiming it was a "no-control stake", so not quite the same deal.

That kind of investment opportunity that says "if you trust us buy shares in our future, but you just get to come along for the ride and get X% of profits" seems different enough from VC investing to have its own name, don't know if it already has one.

Re: State of Independent SaaS [pdf]

#27

Post by notlukesky »

The ultimate issue with all these studies is the sample bias. How did they source the independent SaaS companies (there are over 40 thousand plus, follow power laws and most are economically duds). All samples are biased but there are methods of “correcting” the bias. Historical errors are legion:

https://www.math.upenn.edu/~deturck/m170/wk4/lecture/case2.h...

By the way the key takeaway from this post is that you can make more money driving for Uber than starting an independent SaaS business. You have to be irrational to start an independent SaaS business (applicable to all startups as well).

In fact the only folk who benefit from independent SaaS are the supplier food chain. Levi’s was the main beneficiary of the gold rush. The SaaS conference organizers seem to be among the beneficiaries of the SaaS “gold rush”.

Re: State of Independent SaaS [pdf]

#28

Post by Ace__ »

sudhirj wrote: post #26
Ace__ wrote: post #25

Earlier quoted context omitted.

From the same article I quoted: "What Jeff got was the same deal that Jason and I had: His share of the yearly profits."

They're also claiming it was a "no-control stake", so not quite the same deal. That kind of investment opportunity that says "if you trust us buy shares in our future, but you just get to come along for the ride and get X% of profits" seems different enough from VC investing to have its own name, don't know if it already has one.

Yeah it's certainly not comparable to any VC deal I've come across, haha.

There are some alternative forms of investment vehicles, revenue sharing ones, ever-green funds, equity investment for a piece of the pie, etc.

Re: State of Independent SaaS [pdf]

#29

Post by srhyne »

notlukesky wrote: post #27

The ultimate issue with all these studies is the sample bias. How did they source the independent SaaS companies (there are over 40 thousand plus, follow power laws and most are economically duds). All samples are biased but there are methods of “correcting” the bias. Historical errors are legion: https://www.math.upenn.edu/~deturck/m170/wk4/lecture/case2.h... By the way the key takeaway from this post is that you ca…

You take issue with the sample bias, but then start your sentence with..

> In fact the only folk who benefit

Yes, there are many products that aim to serve other SaaS companies but that just demonstrates the maturity of the industry.

There are so many small SaaS companies serving thousands of business niches.

Re: State of Independent SaaS [pdf]

#30

Post by balfirevic »

notlukesky wrote: post #27

The ultimate issue with all these studies is the sample bias. How did they source the independent SaaS companies (there are over 40 thousand plus, follow power laws and most are economically duds). All samples are biased but there are methods of “correcting” the bias. Historical errors are legion: https://www.math.upenn.edu/~deturck/m170/wk4/lecture/case2.h... By the way the key takeaway from this post is that you ca…

I hope I'm reading the report right: median peak monthly revenue seems to be larger than $10000. Almost 35% of surveyed business don't have any employees.

The only way for this not to sound pretty promising (without getting into sample bias) is if you live in Bay Area.

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