Nice to Haves vs Must Haves in SaaS pic.twitter.com/LtBYo8obuV
— SaaStr (@saastr) April 21, 2024
When SaaS started getting going, folks would criticize SaaS start-ups as “just a feature”. Â Oh, Google/Salesforce/Microsoft will just build that. Â Back in the day when the world was a desktop OS, there was a lot of truth to that. Â When the web became our OS, that started to fade. Â The explosion of mobile changed it up once again.
Fast forward to today, in SaaS, our #1 biggest player, Salesforce is now doing $30 Billion in ARR … and it has built almost nothing that has displaced a lot of start-ups. Â And some of its most successful product expansion has come from acquisitions. Â And even with that, as hugely successful as Salesforce is … it hasn’t killed HubSpot or Zendesk or ServiceNow or Slack (actually, it had to buy Slack for $27 Billion) or any of 1,000 other start-ups that it has added features and products to compete with.
Ok, so probably you aren’t going to be killed by a Big SaaS Co copying your post-traction start-up. Â
So the next somewhat related criticism is that You are Just a “Nice to Have”. Especially these days, when things are still great in SaaS … but folks are nervous. They are scrutinizing spend in a way they haven’t in SaaS for a while.
So a Nice To Have, is your App? On many levels … that may be true.
Ask yourselves these questions today:
- Would your customers’ business grind to a halt without your app?
- Is your app basically irreplaceable in core functionality by another vendor?
- Does an entire functional group/area rely on your application to do business? Â (variant of point 1)
- Does an entire functional group/area use and live in your app >= 1 hour per day?
- Are you an application a core group of customers adds to their “app stack” almost by default?
- Is your product “important enough” to charge at least $20,000 a year today, at least for your largest customers?
If you are seeing a lot of Nos on that list … and nothing changes over time … then … you’re a Nice to Have.  Maybe Pretty.  With a Cool UI/UX.  Even with one or two features that are 10x better than the competition.  But that may be about it.
And if you are seeing a lot of Nos, and nothing changes over time … I think you are at high risk. Â Your customers will eventually churn. Â You’ll struggle to ever approach $25-30m in ARR, let alone $100m. Â Your M&A prospects may be much narrower. Â And an IPO is out of the question. Â And VC capital will tougher. Â Oy.
But.
The thing is .. buck up. Â It’s totally OK, actually. Â Because 8 times out of 10, great founders exploit this niche, this “nice to have” … and turn it into a mission-critical must-have:
- Box started off as a crude freemium tool. Â Today, it’s the default cloud choice for content management at $1 Billion in ARR.
- Salesforce started off as a simple contact manager. Take a look at that early screenshot above. Today, it’s the default system of record for sales, support, and much more. It’s at $30 Billion in ARR!
- Evernote started off as a simple note-taking and clipping app … and sort of stayed there.  And ultimately, stalled out. We moved on to Notion and more.
It’s not just going enterprise. Â HubSpot has stayed mostly SMB-focused, but has, over time, evolved from a simple tool to the marketing and sales hub for many of its customers marketing efforts. Â From a tool to a solution.
So my uber-point here is just this. Â Take this criticism, these points seriously. Â And relentlessly drive to add more value. Â To become more mission-critical. Â To be a “hub” for your existing customers. Â To drive, if not upmarket, then at least, to a broader footprint into your existing core customer segments.
Today at least, if a small but passionate group of buyers in the world loves you for something and pays you a decent amount for it. Â Even if that’s just a Nice to Have. Â Then … don’t pull out your hair worrying if your app is important enough. Â Instead — just Build on That. Â Add more value for them, relentlessly. Â This doesn’t mean chasing a shiny penny, or trying to enter verticals where you have zero traction, or going into segments where you have zero customer pull today. Â Don’t do that.
But if you are never complacent with your core. Â If you constantly expand the value and solution you provide to them in every release … a few years will go by … and you will become mission-critical. Â You won’t be a Nice to Have anymore.
That will carry you to $100m ARR and beyond.
A related post here:
Note: an updated SaaStr Classic post