What does SaaS heaven look like to a Solo Capitalist?
Imagine a world where all you have to do is tell the prospect what you can do for them, and nothing else.
- You shout your offer from the rooftops.
- They buy without talking to anyone.
- They won’t churn as long as the product does exactly what you advertised.
- Customer support requests are minimal, and can be scaled away over time
- You get paid on time without invoicing
Sound too good to be true?
Companies like Google, Stripe, AWS and Dropbox achieved some version of this Nirvana at some point in their lifecycle (although non-solo-capitalist incentives drove them out of it at some point).
In this series, we’re going to explore what aspects of these products and markets made it possible to achieve SaaS Nirvana, so we can build a SaaS portfolio of products that look just like this.
Better, Faster, Cheaper (BFC)
The best sales people view selling as a very mechanical process. A prospect comes forward with a challenge and a hypothesis of how to solve it. They see a landscape with potential solutions with differing traits — some have Better performance, some deliver a result Faster, and some deliver it for Less.
The job of the sales rep is to change the equation in the customer’s mind between their requirements — by convincing them some are more/less important — and the potential solutions — by convincing them that the rep’s product offers the best tradeoffs for meeting those requirements.
A product that wins on all three criteria of faster / better / cheaper negates the need to have an evaluation process because there are no more tradeoffs.
Simple example: if Delta offered the identical First Class experience at half half the price of other airlines’ economy class seats, I would need absolutely no convincing that this would be the best product for me. Only if this offer led to overbookings in First Class (which would inherently make the product no longer Faster) would I need to go back to an “evaluation” process.
All of the products we mentioned before met these criteria:
| Better | Faster | Cheaper | |
| AWS | No more dealing with physical hardware, provision with clicks from a UI. | No more hardware to provision/install or reserve through an account manager at a data center provider | Pay only for what you use |
| Twilio | Elegant API you can call over HTTP (what most developers know) instead of SMPP (new stack to deploy, new protocol to learn) | No dealing with telecom vendors to get access to their network (takes months) | Pay only for what you use |
| Stripe | Elegant API you can call over HTTP (no learning about payment processing gateways) | No dealing with payment processors (takes months) | Pay only for what you use |
How To Be Better, Faster, Cheaper
Technical founders often make a crucial mistake in the quest for BFC. They assume that achieving this state requires hardcore product innovation, and they spend all of their time/resources on the product.
Rarely do they ask themselves the question, “Better than what? Faster than WHAT? Cheaper than WHAT?”
To be BFC, you need an alternative to… and this is where market selection comes into play.
If you go into the Task Management market, you’re going to go up against thousands of startups at any given time — what are your prospects of REALLY being BFC than these alternatives? How sustainable are those advantages in relation to the investment you put in? And how big is the spread in value that you can create with your Product/Technical skills in the Task Management market vs. any other adjacent market?
This is where you need to evaluate your reasons for building your startup in the first place. I have friends who have already exited companies and are rich enough to retire forever, yet they decide to go into competitive markets like Task Management because their motivation is one of passion, not money. They are happy to see their idea exist in the world, to experiment and do battle with other apps to experience the thrill of competition. BUT, they know that this isn’t the easiest/fastest path to get rich.
As a solo capitalist, if your goal is to create as much wealth with as little work as possible, then you may have to pass on certain ideas you’re passionate about and keep looking for new ideas that allow you to create BFC value.
This was one of the most expensive lessons that I learned building my last startup Truly.co, where we truly had a Better product than others in the market, but the education required meant it could never be faster or cheaper (the education wasn’t in how to use the product but how to RETHINK the problem itself).
Testing Your Idea For BFC
Here is a list of questions you can ask yourself to test whether your idea is REALLY better, faster or cheaper than comparable solutions in the market.
Better
If your product didn’t exist, is there something your user LITERALLY can’t do (and is that still a workable solution)? For example, when Dropbox was first built, it was the only solution in town. Giving it up meant going back to hard drives. For some users, that was akin to going from electric lamps to oil lamps; they simply weren’t willing to do it. Conversely, Zoom offered better call/video quality over Google Hangouts when it launched and it took off. But once Google Hangouts got “good enough”, Zoom adoption and its stock price plunged; even though it was “better” than Google, people were able to give it up and still get the job done.
How observable is your product’s result? What made infomercials so successful over many decades? They always featured products that provided OBSERVABLE outcomes to the problems they claimed to solve. Spill red wine on a carpet >> product gets smeared into the stain >> stain is gone. Boat gets a leak >> tape gets put on the hole >> leak stops. A customer who buys the product can just as easily do these tests themselves in minutes. Can your product provide a similar experience?
Faster
How long does it take to see value? All products have a “time to aha” metric, which demonstrates how long it takes a user to see what they need to see before converting to a purchase. Some products will inherently take longer – for example, an investing app that suggests Long trades may take months to prove that they make good stock choices, whereas a daytrading app inherently will show results in a day.
Does trying your product require physical effort/cost? Does the user need to be educated more about the problem? Do they need to learn a new skill to use the solution? Do they need to get internal permission to try it (eg: IT approval)? Do they need to talk to your sales team, or do they have to pay to trial? The answer to these will often be determined by many factors outside the product itself. For example, selling to Governments or Banks will inherently take longer because they come with regulatory controls and extra due diligence.
Does trying your product require mental effort/cost? You might think that your Teleportation Device will kill every airline overnight, but not all users may like the idea of having their molecules deconstructed and reconstructed, especially by a brand new technology that hasn’t been studied over a longer time. Even worse, the user’s decision may be dependent on convincing others to opt-in to using the product as well, which adds additional mental friction (the #1 reason enterprise SaaS trials never happen).
Cheaper
Can you sustainably undercut the competition? Is there a price that you can offer that your competitors LITERALLY can’t without losing money? For example, if you invent a new compression algorithm, your storage costs are inherently lower than your competitors and you can offer more generous free tiers and undercut them.
How much is the investment vs. the market opportunity? The more you have to invest to build the product, the more you have to capitalize the cost and the more you have to charge for the product. Similarly, the smaller or more competitive the market, the greater the risk and the more you have to charge for the product. This is one of the reasons the Solo Capitalist thesis requires us to build/launch startups in <4 months, since this solves for half of this equation inherently through lower startup costs and higher diversification.
Conclusion
As can be seen, there are many dimensions to the Better Faster Cheaper equation that are decided far before a single line of code is written. The market (and user) you choose to serve will do more to determine your product market fit than anything else.
In future blog posts, we’ll dive deeper into this concept with practical teardowns of other solutions in the market. Subscribe below to not miss out!
eroltoker
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