Episode Summary:
In this episode of SaaS Origin Stories Phil Alves is joined by Dan MacGregor, Co-Founder at Nexxiot, a successful startup in the SaaS platform space. He shares his insights on evolving simple tracking hardware to analytics and value-based SaaS platform. Dan also touches on the vertical vs. horizontal approach and how a product with bundled value is easier to market than a simple unbundled product.
Guest at a Glance:
Name: Dan MacGregor
What he does: Dan is the Co-Founder at Nexxiot, a SaaS platform aimed at enabling easier, safer, and cleaner transportation of goods across the global supply chain. Its hardware, software, and analytic stacks improve in-transit transparency and efficiency.
Connect with Dan: LinkedIn
Topics we cover:
- Vertical vs. horizontal approach for SaaS startups
- The funding journey
- Bundled vs. unbundled products
- Why B2B selling is easier than selling to a B2C audience
Key Takeaways:
Saas Startups Should Focus on Vertical Growth Before Migrating to Horizontal
Time and money are scarce resources for startups; hence it makes sense for startups to focus their GTM strategy on companies that fall in the same business vertical. These companies will have similar needs and problems that your product will solve. By going horizontal you will waste time and money upgrading your product to solve what could be a completely different set of problems.
You can never have enough cash to go horizontal first because there will always be someone else who’s actually building that domain knowledge into their vertical.
Funding Gets Easier as Your Investors Start Believing in Your Product
While Nexxiot has attracted over $170 million in funding to date, its funding journey started like that of most SaaS startups. The initial seed capital was $100,000, followed by rounds of one, five, and ten million dollars. One of the company's Co-Founders is a fund manager for a large investment fund, and as he started to visualize the product's potential, the funding got easier.
As he became more convinced and more interested in the potential of the product, the interest grew, which brought in more funds.
Bundle Your Product With Value for Easier Sales
The minimal viable product at Nexxiot is a hardware device used to track shipment containers. Selling the product as a stand-alone device was challenging because the freight business is price sensitive, and the shipping lines didn’t see the value-add of the product. Hence, to sell the product, the company had to build a software platform around it.
The platform provides real-time data on the location of each container, the time it takes to load and unload it, and if there is any chance of damage to the goods contained in the container. This enabled the shipping lines to extend guarantees on delivery and quality to the final customer, and sales jumped.
The product is not the hardware, the hardware is just an enabler. The product is the digital or data-driven services that you can create from the platform side.
It’s Easier to Acquire and Service One Large Customer Than a Million Small Ones
A startup needs its first customer to drive its cash flow and demonstrate market validation for its investors. It’s easier to acquire and service one large customer in the B2B space to start the cash flow and provide valuable feedback to tweak your product for future sales. In the B2C space, you’ll need to acquire and service 10,000 customers to get the cash flow up and running and demonstrate market validation.
I think everything is a little easier in the B2B space; hence, it's the audience startups should target. You need fewer customers to start; you only need one big one instead of a million small ones.
