For SaaS startups, differentiation is an iterative process
Software as a service has been thriving as a sector for years, but it has gone into overdrive in the past year as businesses responded to the pandemic by speeding up the migration of important functions to the cloud. We've all seen the news of SaaS startups raising large funding rounds, with deal sizes and valuations steadily climbing. But as tech industry watchers know only too well, large funding rounds and valuations are not foolproof indicators of sustainable growth and longevity.
Failing to come across as a unique, differentiated company will likely mean settling for an exit that feels mediocre instead of incredible.
To scale sustainably, grow its customer base and mature to the point of an exit, a SaaS startup needs to stand apart from the herd at every phase of development. Failure to do so means a poor outcome for founders and investors.
As a founder who pivoted from on-premise to SaaS back in 2016, I have focused on scaling my company (most recently crossing 145,000 customers) and in the process, learned quite a bit about making a mark. Here is some advice on differentiation at the various stages in the life of a SaaS startup.
Launch and early yearsDifferentiation is crucial early on, because it's one of the only ways to attract customers. Customers can help lay the groundwork for everything from your product roadmap to pricing.
The more you know about your target customers' pain points with current solutions, the easier it will be to stand out. Take every opportunity to learn about the people you are aiming to serve, and which problems they want to solve the most. Analyst reports about specific sectors may be useful, but there is no better source of information than the people who, hopefully, will pay to use your solution.
The key to success in the SaaS space is solving real problems. Take DocuSign, for example - the company found a way to simply and elegantly solve a niche problem for users with its software. This is something that sounds easy, but in reality, it means spending hours listening to the customer and tailoring your product accordingly.