Many startups launch focusing on the small business (SMB market). Given how large this market is, it can be a compelling target. There are 30M small businesses in the US alone. In addition, SMBs don’t have big purchasing departments and corresponding long sales cycles. If you reach the owner and solve a need that she has, you’re in!
I love the SMB market. Many of my previous startups have addressed on it. Most notably FreshBooks, which has built a very large customer base here. However, I have seen over the years that most startups that launch with an SMB focus eventually go up market serving larger customers. They do this because while the SMB market is huge and sales cycles are short, each customer is small and not worth much. So, you need a lot of them in order to build a big business. Acquiring lots of small customers in a cost effective way is difficult.
Without further ado, here are the only two ways that I know off to truly scale SMB SaaS companies:
1.) Ridiculously low cost of customer acquisition: Continue reading The only 2 ways to scale SMB SaaS
I’ve been thinking a lot about pricing lately as I work with one of my startups on our pricing strategy. As I was trying to works things out, it struck me that venture capital or the lack of it has a huge impact on pricing strategy and what we as end users or consumers get to use in the market.
Many of the services or sites that we use today would not exist without venture capital. Twitter is a clear example. Tens of millions of users later it has consumed lots of VC$ and is just beginning to commercialize. Closer to home (for me anyway), Tungle continues to offer an amazing and entirely free scheduling service to the market. This of course would not be possible without VC funny money.
What I am wondering is whether, as consumers / users we have more or less choice as a result of VC investment in web startups? For sure, those companies that attract VC$ can afford to go free and offer great services without asking for money. That presumably increases choice in the market. But what about those startups that cannot or will not raise VC$? Do they have a level playing field to compete on? As a user will you go with the slightly better service from a self funded company that needs to charge you? Or will you opt for a slightly worse service if the company offering it is funded and does not charge you?
Continue reading Does VC increase or decrease choice on the web?
A member of our YourStartupCFO community posted a great question about SaaS billing options. The question and my answer are below. I know many people are looking at this exact topic, so thought I’d share it here. Do you have anything else to add? Did I miss anything the member should be thinking about?
We’re currently building a SaaS offering and I wanted to get your take on various billing options we’re thinking of. Like many services out there we’re using cloud platform (Amazon AWS). This means we’re paying for compute and storage resources as they are being used by our customers.
Continue reading SaaS billing Options
Yesterday, Josh Kopelman of First Round Capital made the following tweet:
Too many freemium models have too much free and not enough mium
This is a timely comment as this week we have seen some players scale back their free:
Jott– the voice to text service that lets you leave notes for yourself is killing its free service. So too is Sprout. Even Google is getting in on the act, quietly axing several free services.
I’ve also noticed lately that Linkedin the poster child of B2B freemium success is quietly cutting back on the limits of their free offering. I can no longer forward a job posting to all my connections. There are artificial limits.
Continue reading Is there too much free in freemium?