Europe is creating some category leading SaaS companies. Did you know that Algolia hails from Paris? Pipedrive from Estonia? Sellify from La Rochelle? Workable from Athens? NewVoiceMedia from the UK? Typeform from Barcelona? ZenDesk from Copenhagen? Intercom from Dublin? TeamWork from Dublin? We were delighted to hear the stories of some of the above at SaaStock in Dublin last week.
Some of our key takeaways from the event were:
Importance of Vision – the importance of having a clear vision and sharing it with everyone was emphasised, and ensuring that decisions adhere to the vision. It’s an important part of attracting the best talent – for example those that have lots of choices but want to work where they will have the greatest impact. The audience was challenged to be clear about their vision, and to write it down. And then use it – share it a lot, think about it when you are hiring and making decisions.
Belief in product-centric company building – this was a key theme. How important it is to really focus on product – changing, challenging, improving. A wide range of people talked about not underestimating the importance of UI – a comment was that expectations are ridiculous, trained by the mobile phone, you have to delight people. A good product should sell itself – companies like Altassian have no sales force. Teams should come across your product, start to use and create your pipeline for you. A great product solves a lot of problems for the company – sales and marketing, retention, hiring, distribution.
Proof-points for product market fit. PMF is nonetheless still the key – and why 80% plus of startups fail before getting to Series B. Many said PMF was more important than revenue and that you need to keep iterating and pushing until you get it. Don’t confuse a few positive customer comments with PMF, don’t over-extrapolate your own beliefs. When you get PMF right every metric in your business should start to explode. One insightful comment I heard form a US VC was that he thinks European companies in particular underinvest in PMF significantly, and over invest in hiring sales and roll-out. A number of people commented you must get PMF before you start sales – passionate founders can push anything, but it’s not about you, it’s about scaling – and you need to nail this before getting a good Series A. European investors of course make this harder by almost insisting on traction before investing at Series A, compared to US investors who fund the development phase more heavily. We have taken note, but we will still expect to see early evidence of customer interest, given you need to know your customer as well as your wife in order to build the right product…..
Customer acquisition over-emphasized – if the three pillars of a SaaS business are customer acquisition, monetisation and retention, most people felt most companies hugely over-emphaise the first. Studies have shown that a dollar invested in the second two can return 2-4 times what a dollar invested in acquisition yields. In particular, very interesting data from Patrick Campbell, CEO of a company called Price Intelligently was very good. Now of course you need to acquire the customer and solve that problem – the point is people don’t spend time on figuring out how to optimise financial return from the customers you do have, nor on understanding or preventing people leaving. Although customer acquisition may be over-emphasised, it’s still a pillar! 2 speakers emphasised the importance of customer personas in successful acquisition. The speakers explained that only by creating (the right!) customer personas will your salesforce be successful.
Don’t forget about the business model – another comment that came up a few times is that in all the rush to get the metrics and proof points for the next round, teams tended to forget the fundamentals. Part of the process is getting the customer sign-ups you need and adjusting pricing to fit the market. But if your acquisition costs plus your costs to serve and retain are more than your LTV you don’t have a business. At some level the business of being a startup is about building a sustainable business, not just getting to the next round graduating class. Patrick Campbell talked about the importance of properly measuring your key ratios and pitched their free servcice http://home.profitwell.com/ whcih helps you manage your key financial metrics in an attractive dashboard. They are a strong firm so it’s likely to be a good product
Customer success is the new sales – a lot of talk about customer success and how critical it is. It seemed for many companies a very significant % of staff were in customer success functions. Apart from ensuring people use and get the most out of the product, and managing retention, customer success teams are up-selling, filling up the pipeline and working closely with sales, identifying under used or needed features, selling support or premium service offerings – and becoming a revenue not a cost centre. A number of speakers emphasised the value of the NPS score to get under the skin of how your customers feel. If you don’t use NPS, start. Even we use it! And make sure you measure you use of it. How do you know you’re doing it well, or even doing it. If you don’t measure it you can’t improve it.
Hiring, hiring, hiring – everyone said this is the most important – and hardest thing. Many people said bring in an in-house recruiter very early – 10 people or more. Others that this was early – probably depends on your growth trajectory. Hiring should be CEO’s number one job, nothing is more important. The CEO should personally hire first 20 employees. Don’t cock it up was a big theme – better to not hire than make a mistake. Get to know everyone you hire – they need to be a cultural fit probably even more than a skills fit. The first 10 or more people you hire are your management team – you need 100% trust in them. They will create the culture of the firm with you. When you have multiple geographies to serve, one of the founders/first hires need to be in each. Can’t build two different cultures, it won’t work and you will have to start over.
And some great hiring tips – have the receptionist/recruiter tell a senior hire there is a 15 minute delay when they turn up. See how they respond. Take senior hires away for the weekend and see who they are socially. And once hired, a brilliant speaker, Fergus Gloster, who launched SalesForce followed by Marketo in Europe, talked about how important it was to spend 5 weeks training sales people. Without that training, including full role plays of the most difficult customers, you simply won’t get the most out of the hire.
Scaling: as you might imagine, the way to scale is to go to the US. That typically means a Founder, once product/market fit is absolutely clear and the first US sales have already taken place out of the home market in Europe. After many false starts of hiring the wrong people and trying to make the East Coast work – typically means one of the founders moving to SF despite the time zone challenges with making that work. In addition, our experience is also that to raise a solid round in the US you need to have a founder or at very least very senior C-level exec based in the US, not just a sales team.
By Adrian Lloyd & Paul McNabb