A Slow Approach to Building Software That Is Profitable From the Word Go and Less Painful

In business lingo, a Unicorn is a startup with a value of over $1 billion. ·

There are 70 unicorns in India, 40 of which emerged in 2021 alone.

At 38k active startups, that means that one of every 1000 Indian startups is a unicorn now.

Compared to this China has 30 million startups and 206 unicorns. So 1 out of every 145,631 startups in a Unicorn.

The US has 4.3 million startups and 489 unicorns, meaning 1 out of 8793 startups is a unicorn.

What does it tell us? 

That India is the place to start a startup because the world’s capital is flowing into Indian startups.

Without even knowing these numbers, the buzz around the high-growth startups inspires many Indians to start their startups.

A large number of these people want to start one making software.

Now, there are many ways to start a software startup, but the most common is thinking of a product that you think you should make, and the one you think the world needs.

Founder herself or with a developer invested months and her own money in building version 1. Once a basic version she starts looking for customers and finds it tough to onboard the first customer.

And after trying to get customers by asking people to buy stuff, by running ads, and reaching out to people on LinkedIn to get demo opportunities, the founder leaves her startup dreams and gets back to doing something else, or what she was originally doing.

This is the fate of a large number of startups that could have turned into real business.

Here is a less risky approach to building a startup that will eventually sell software, and one that is profitable from the word go.

4 Stage Approach to Building a SaaS startup, while reducing risk and time to profitability

Stage 1

Talk to people, at least 100, who are looking for a solution to the problem that your software will solve. Tell them that you are building something interesting that will help them and is it cool if you get back in touch. Some will say yes. If you identify your 100 people well, you’ll get 30 yes-es.

Stage 2

Think of a way that involves less software building and more teaching and doing things manually that software can do eventually. To deliver this, use apps that are already there, and for what is missing, teach people in a group, and code some custom solution for each customer you work with. 

Now go back to those who say yes in stage 1, show/explain it to them, and ask if they will be willing to pay for this solution you just explained. Some will say yes. Your goal should be to get 10 people to pay for your custom solution built on top of existing apps, teaching, writing some custom code, and hand-holding.

Charge in multiples of what you’ll be charging for software. This may sound counterintuitive but it is the right thing to do because most SaaS is self-serve, but at this stage, you are implementing the solution for them and solving their unique problems by investing your time. It’s like offering a service + teaching + custom software hybrid.

This will give you cash flow so you’ll not have to be in a rush to sell the software immediately. Founders of Stripe, which is valued at $115 billion, installed their software on the laptops of their initial set of customers themselves. They did what Paul Graham calls “doing things that don’t scale”.

Now that you have real customers who paid to get your solution, you’ll get real feedback. Understand their problems, take notes, and help them solve their problems. All use their feedback to improve your solution.

Stage 3

Ask your current customers to refer 2-3 customers who they think will be a good fit. Some will not refer to anyone, but there will be a few who will refer to more than 1. Through this, it should not be a big problem to get 10 more customers. Offer them an improved solution, based on the feedback from the first group in stage 2. Charge them a little higher price and help them win as you did with stage 1 customers.

Understand newer problems that you missed last time, validate and standardize solutions so that you get close to building software.

Stage 4

Ask them all (customers from groups 1 and 2) for testimonials and also ask your second set of customers for referrals. Build your MVP (minimal viable product). Reduce human intervention. Build parts that people can use on their own and see results while achieving similar or better results. 

Also, use all your understanding of your customers to create a marketing site and promote it using traditional marketing channels (like email marketing and online ads).

As you promote it you’ll understand what is working and what is not. Keep tweaking and onboarding, new customers, until you start getting I love your product messages from customers.

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