Why SaaS Startups Fail
Why SaaS Startups Fail
Start Up, End Down?
The ever dynamic world of startups is an interesting one, and as with every other thing, it has its fair share of ups and downs. Interestingly, there are always lessons to learn from the successes and failures of startups. No one wants to start a business with the intention to fail. However, oftentimes we have seen different startups start well with promising possibilities, and then suddenly begin a nose dive, a downward spiral through a vortex of doom. When such startups fail, one major question that any reasonable person would ask is "Why? Why did the startup fail?" and that is a very valid question.
The rise and fall of SaaS startups
For those who may just be seeing 'SaaS' for the first time, it stands for 'Software as a Service' and basically, it refers to the delivery of applications that solve a plethora of problems, over the internet, but as a subscription-based service, as opposed to the traditional way that involved purchase and installation of softwares, as well as maintaining the software.
Over time, so many SaaS companies have recorded huge successes, with profits increasing exponentially, and that has made that sector very attractive to entrepreneurs. This is why at the moment it feels like there's a SaaS product for anything (or perhaps, we are getting to that point.). However, away from the success stories of these successful SaaS companies, there is the need to highlight some of the mistakes that prevent many SaaS startups from either starting up as expected, or failing to scale up, and these mistakes could include any of the following:
Failure to study the market.
The importance of market study cannot be overemphasized. Your SaaS product may be great, but is there a market for it? Does the product really solve an existing problem? Are you certain that there's a market that sees the problem you see and hope to solve with your product?
The want to be the first mover instead of the fast mover.
There's competition out there, and so there is the tendency for SaaS startups to want to get their products out there as soon as possible, because it is believed that the first mover gets the fattest chunk of the market, and that is not always the case. Your product could be the first mover and still spiral downwards after a while, and when that happens, your competitors will pick your strengths, solve your flaws and come up with a better product.
Cost of acquiring a customer is more than lifetime value.
Your customers want value for using your product, and so it is imperative that you define the lifetime value of your customers, otherwise you will start running at a big loss when you're spending more money to acquire the customers than the revenue that the product generates.
Vision management team.
The management team is an integral part of the SaaS startup, and without the right orientation and strategies, the startup may just be dead on arrival. The management team needs to understand the vision of the business and product, and then work towards executing strategies that border on market research, target audience, customer acquisition, growth implementation, and other important aspects.
There are several other mistakes that SaaS startups make. However, the aforementioned ones are the common reasons why they fail, and with the right vision and team, the mistakes can be avoided easily.