526: Is There Too Much SAAS?

Steli Efti: Hey everybody, this is Steli Efti.

Hiten Shah: And this is Hiten Shah.

Steli Efti: And today on The Startup Chat, we’re going to answer the question, isn’t it too much SaaS? So this is another infamous episode that’s based on a tweet that you made, and that tweet was based on a ton of work and exposure that you’ve had in this area, I assume. But you recently tweeted something that stood out to me and it kind of stirred the pot a little bit, a lot of people that, a lot of friends, a lot of people that are respected, the SaaS space responded to it in one way or another. So I felt like that’s the perfect material to unpack for our listeners. So let me ask you, maybe you tell people a little bit about that tweet and what proceeded there. What made you write about that? And then let’s just unpack this question of there’s too much SaaS and what does that mean for founders out there that are currently building their first SaaS product or running a small SaaS product?

Hiten Shah: Yeah, I mean, there is a lot of SaaS, so what I tweeted was this idea that nobody you don’t talk to people and they’re all like, “Hey, I want more software.” You know?

Steli Efti: Yeah.

Hiten Shah: And the reason I tweeted that is because people are building a lot of software right now. There are new sort of products coming into the market all the time in almost every category and there’s people making very good living building the software too. So the comment was more like, I see a lot of software that’s being built and then whether it’s no code or things that people are just building really quickly and then kind of considering it a project, and then they end up moving on. And so that’s one scenario. Another scenario is I think there’s all kinds of bottlenecks in selling today that selling SaaS that just didn’t exist before, because there was less SaaS. So we’re seeing things like if you’re in certain markets, you need a number of features that are parody for the market, which basically means it takes you more effort, more time to build the product you need to build, and you might take it to market and people might have expectations that you were not even expecting until you actually built it and gave it to them. So, yeah, there’s just a lot going on in the world when it comes to software and SaaS and kind of all aspects of it. So that’s kind of where it came from. I’ve interviewed a ton of people about all the different tools they use and all kinds of different sort of configurations in terms of the interviews from understanding why people switch different document apps, all the way to general customer development on things like how many apps do you use? How are they bought? Stuff like that. So, yeah, there’s a lot going on in the world. SaaS is just sort of a delivery mechanism for the kind of value that a customer needs. And I think all that stuff can be easily forgotten when you’re building and especially when you start talking to people, because they’re not going to tell you they don’t want more SaaS, but they’re not going to tell you they want more SaaS either. And we’re kind of in this weird spot where a lot of people are just creating more software, adding more features to their software. And yeah, I guess I just wanted to say something about it, so that’s what I said, but high level, there’s a lot of SaaS.

Steli Efti: There’s a lot. Remember that chart that every year it was published by some site?

Hiten Shah: Yeah. The marketing tech one.

Steli Efti: Yeah. And it was doubling, it was 2000 and 4,000, 8,000, whatever. I think the last one that I saw was like close to 10,000. I don’t know if they published a new one this year, but it was doubling, but the numbers obviously, the numbers became… Every category in every vector was more and more and more and more crowded. And so there was this idea that I remember even us discussing on the podcast of it’s easier than ever to build a SaaS product and it’s easier than it used to be to get the early traction. But maybe after the first couple of thousand in MRR, maybe it’ll start becoming harder than ever to maintain that momentum just because the moment you get slightly up and running, you’re running into so much competition in so many customer expectations that it’s really hard to keep up as a super tiny company. Now, this is not the first time that this trend happens in software, where you have this trend to consolidation, like the one tool, in the B2B world, the one tool to rule them all. We just want to buy one piece of software that just does everything that we need in our business. And then we know it was obviously led to these overly bloated products that couldn’t do a single thing as uniquely well as people wanted. And then there was this counter trend where all of a sudden where this like, kind of decoupling of a B2B software for every little thing you would do in some other products that already exist. Now, there was a tool that allowed you to do it faster, simpler, more elegantly, maybe better. And now we’re too much of that. So there’s kind of a, it seems like we’re swinging back in the trend of customers saying we’re overwhelmed by the amount of tools our team uses, everything doesn’t talk well to each other. We’re overwhelmed. And the last thing we want is to continued to purchase more and more and more software. We just want something that integrates well, and that does most of it. Do you think that’s going to be a trend that we’re going to see kind of gain steam of a lot next couple of years, and then will it swing back again or will something else happen? I know, obviously you don’t know, but I’m just curious, how you would bet the market goes over the next couple of years?

Hiten Shah: Yeah. I don’t see it slowing down. I really don’t. I see us having more software. It’s just so easy to build. And there’s so many different needs out there that are niched up where a little tweak to your software can get you, like you said, those first early customers. And the thing is for some people that thousand, couple thousand bucks in MRR and growing even slowly could be something that they desire. And it’s actually very like… You get to a certain amount of recurring revenue and you’re able to sort of not have to work for money at least. And that means more traditional like a job or something, so I just see more, I see a lot more.

Steli Efti: And so do you think that, so if I’m a founder today, right, and I rent maybe, or let’s say I’m a new somebody that wants to become a founder and for the past maybe two years I’ve been reading online about entrepreneurship. I started reading a bunch of stuff about SaaS and starting something as a single founder in the SaaS space. And now I’m just getting ready to be like, “You know what, I’m going to jump into the cold water and do this.” Should I be worried that maybe the stuff that I read is outdated? And if I start building something small now maybe I’ll never get traction because it’s too crowded? Or is it just coming back to the core principle of you just better be really, really certain you understand that customer, you better be really, really certain you’re differentiated, you better be really, really certain you understand something about how you’re going to go to market and grow this thing? Would you advise somebody coming to you today and saying, I want to be an entrepreneur, what is a good space to go in? Should I do SaaS or e-commerce or something else? Would you still advise people to do SaaS?

Hiten Shah: I think there’s a lot of ways to make money. So it depends if they’re able to build SaaS like a software on their own or not. So if they’re an engineer, yeah, I’d say absolutely build something or teach people something. And if you’re not an engineer, then I would say, go teach people something and build some cash so you can spend it on building SaaS if that’s kind of the direction you go in. So build an audience that you sell something to would be the first thing I would do.

Steli Efti: Yeah. Yeah. What about people that have a SaaS company up and running that maybe the last year, or in the early days they were hyper-focused that were very differentiated and as they’ve grown, they just kept adding features and now they’re at this point where they are wondering, should we expand drastically and try to become this platform of sorts that does most of the things, but then we might be competing with much bigger competition that already does this, or should we try to kind of stay true to this idea that we’re going to stay a smaller “better product” that’s not bloated, not complicated? How would you make that decision today in terms of you’ve been already up and running for a year or two, the early recipe to success was being simple and being specialized. And, but now you kind of have this market poll of adding more and more and more feature of competing naturally with bigger competition and you’re wondering, are we going down a path that we’re not ready to succeed at because we just are still a tiny team and we’re self-funded or customer-funded and the companies that we would compete against that are kind of all encompassing, they have a lot more money, a lot more people. So is it kind of a trap or is it maybe the direction that every SaaS company today that wants to maintain fast growth just has to take?

Hiten Shah: I think it just goes back to the customer. What is the problem you’re solving for the customer in either of those scenarios? And if the customer, if there are customers out there and you can reach them at a profit, then why would you add anything? If the features you have are good and there’s no problem to solve, don’t solve a problem that doesn’t exist. And so I look at it more like that. I don’t think it’s an absolute that all software needs to turn into all-in-one. I also think customers are kind of different across the board, so it depends what you’re building and kind of who’s competing with you and what the alternatives are. A lot of times I think that you’ll see, I think one more commonplace thing happened more and more, which is people competing on price. So that’s kind of what I mean. If you compete on price, let’s say with HubSpot, you’re going to end up building as much as you can to kind of have feature parody with HubSpot. So in a way, it has a lot to do with your point of view, more so than anything else and what you believe customers need. Hopefully they’re pulling product out of you. If they’re not pulling product out of you where they have more needs that they want you to solve, that’s where you kind of run into a problem because you just won’t know what to do and then you might go do all the things that you see in the market out there, regardless of what maybe people would actually buy from you. You see that a lot.

Steli Efti: Yeah. Yeah, yeah, yeah, yeah. Awesome. All right. I think this is it for this episode. So I think we answered the question, is there too much SaaS with yes? Will there be more? Hell yes. What does that mean for you? It depends.

Hiten Shah: There you go, but talk to customers. Don’t forget. Just talk to customers.

Steli Efti: I don’t remember off the top of my head, the person that had made this little graph-

Hiten Shah: The flow chart.

Steli Efti: The flow chart, of after listening to 420 episodes of The Startup Chat, I came up with this flow chart. It’s basically, should I build a product? If you talk to customers and it’s like every possible problem a founder could have, it’s like, “Go talk to your customers to figure it out.”

Hiten Shah: Yep. Pretty much.

Steli Efti: All right. This is it from us for this episode. We’ll hear you very soon.

Hiten Shah: See ya.