I'm a young founder building an "enterprise" SaaS start-up and I agree with most of this.
One important fact that is often overlooked in terms of SaaS+capital is the need to have a basic infrastructure in place in order to get customers. It's not, as the author says, as simple as building a product quickly and getting customers.
Your customers will usually be big companies who invest in software very conservatively and your competing with massive billion dollar enterprise software businesses.
To get customers requires sales reps, 1800 numbers, basic technical support, knowledge base, very secure servers, implementation support, etc. When your app is mission critical, theres no time for beta.
If you're the startup, then you have to be beyond beta.
But if you're the billion dollar enterprise company, then that's not quite true. All you have to do is sell a checklist of features on some glossy paper and throw in some "services" which basically gives you cover for trying to get a functional (or maybe even just installable) build out the door.
And here's an article talking about Waste Management suing SAP for playing that game:
For Enterprise software, absolutely. It's a pretty damn big undertaking. That's why we're straying away from "enterprise sales".
For SaaS, I don't think it's true at all. Why does it have to be different than the consumer market? You have a piece of software, it solves a need, you use it. In the consumer market people pay for an upgrade, with SaaS/biz software people pay on a freemium model/ after a trial basis.
I agree with Jason on his points on "Why Angel Investing In the Enterprise/SaaS Space Isn’t 'Hot'".
But I believe that getting a foothold in the market would also require an 800 number with people who understand the product very well on the end of it.
Also I think the most important point he makes is this:
"Focus on User Experience"
I can't tell you how hard it has been for me to use some business apps in the past! I personally believe the application should really be an extension of their routine, not an entirely new routine.
I'd bet this is the key to success in the enterprise space, make people do less work and they will appreciate it.
Taking a picture of a business card and save the info automatically instead of saving, putting it in a rolodex and also manually entering the info into your phone and/or outlook.
Click to call buttons so that they dont have to dial a number.
Having word docs/pdfs templated so they can be filled in automatically using the persons info instead of having to fill it in manually.
Make the format easily exportable for re-use in another system (salesforce to basecamp or salesforce to calyx or basecamp to blinksale or harvest to less accounting).
These are all things that can be done but arent available to the mainstream SaaS user.
Not sure if user experience really matters that much in the enterprise. I say that because, in the enterprise, person making the purchasing decision isn't the person using the software. I would say they are more concerned about security, compliance, and integration with existing systems.
My last enterprise job was with a large shipping company (that drove brown trucks). Their internal software for call centers was far from easy to use. I offered to write apps internally but could never get anything green-lighted.
I'm not discounting user experience-I just don't think an enterprise startup can win on that alone.
absolutely. I think there are tons of opportunities for saas offerings targeted at small biz (the kind that use QuickBooks, not Oracle; that do $6M in revenue, not $6B). For them, user experience will go a long way.
seriously, so many companies are using green screen interfaces that change via using f3,f4,etc.! Quote that i always use and i dont know who to attribute:
Enterprise 1.0 utilized decision making my one person, the CIO/CTO. Enterprise 2.0 is adopted by the users and the personnel inside the organization.
I don't get this; "nobody wants to talk about enterprise intrusion detection"? Enterprise security is one of the most overfunded sectors in technology.
Sure they have money, but it's not like you'll get any. Larger companies are much harder to sell to than small companies or consumers, and they hate dealing with startups. You might make $1 million on a single enterprise sale, but you'll have to spend 90% of that on your sales and support staff, and that one sale could take a year to close.
My employer is a 20+ person startup selling to the enterprise market. We don't feel that they 'hate' dealing with us, although, our only competition is other startups. Even so, we get rave reviews about the level of service we bring to each contract. They are not used to seeing that from their large company vendors.
It's true that selling is hard, but that is why we have an experienced sales staff. And yes, sales can take 6-12 months in the worst case, but I think you underestimate the number you can have in the pipeline at once and overestimate the cost to support each sale.
One more note in defense of enterprise oriented startups: as a hacker, I don't find creating enterprise software to be less palatable than consumer software. The selling is compartmentalized in a sales dept, so it's not as if I'm the one jumping through the enterprise sales hoops. Obviously, if you're hoping to keep your company so small that you don't have a dedicated sales department, it's a much different story.
My feelings on this subject were less jaundiced before I'd been working with large customers for a few years. The first year or so was much easier - you're hitting all the easy sales, the ones that are geographically close, and the technically-sophisticated early adopters. After a while you've plucked the low-hanging fruit and each sale becomes progressively more difficult and expensive. Meanwhile, the support costs for existing customers accumulate and competitors proliferate.
As a startup, it's easy to differentiate yourself from competitors by offering better-quality service. The difficulty lies in scaling up to a large number of customers.
Glad you agree. Seriously, software should be sign up, get on, get use out of it. Red tape and long sales cycles irritate me more than rolling around in poison ivy.
One important fact that is often overlooked in terms of SaaS+capital is the need to have a basic infrastructure in place in order to get customers. It's not, as the author says, as simple as building a product quickly and getting customers.
Your customers will usually be big companies who invest in software very conservatively and your competing with massive billion dollar enterprise software businesses.
To get customers requires sales reps, 1800 numbers, basic technical support, knowledge base, very secure servers, implementation support, etc. When your app is mission critical, theres no time for beta.