Three SaaS Lessons They Won’t Teach You In Business School with Bogdan Maksak of DigitalGenius

Episode Summary:

In this episode of SaaS Origin Stories, Phil Alves is joined by Bogdan Maksak, CEO of DigitalGenius, a successful startup in the SaaS space. He shares his insights on the critical aspects of the startup journey, including achieving a good product-market fit and funding strategies and common pitfalls.

Guest at a Glance:

Name: Bogdan Maksak

What he does: CEO at  DigitalGenius, an AI platform focused on providing customer service solutions to e-Commerce companies. 

Connect with Bogdan: Linkedin

Topics we cover: 

• A two-point playbook for achieving product market fit 
• Funding your business, how, when, and pitfalls to avoid
• Two metrics to measure and track PMF
• Three takeaways for building your SaaS startup

Key Takeaways

You Won’t Get to First Base Without a Good Product Market Fit

A good PMF is the oxygen for SaaS startups that delivers sales, conversions, and retention. Product market fit has two dimensions; product and market. The product benefits need to align with customer pain areas and on the market front, especially in the early stages, target customers who are losing sleep over the problem your product will solve. 

As you scale and work with larger customers with more unique needs, the product will need tweaking to realign with evolving customer needs. During this phase, the product team needs to stay in touch with the customer to understand the root cause of their problems and tweak the product to resolve these issues. 

In retrospect, we had lost focus. We were chasing too many companies with disparate needs instead of focusing on those who were losing sleep over the problem we could solve.

A SaaS Funding Playbook

Angel investors and venture capitalists are two familiar funding sources for SaaS startups. To amplify your success rate, ensure that you get a referral. Start building your network at least six months before actively seeking funding by connecting with entrepreneurs who have gone down the funding route.

Have a market-validated PMF in place before you seek funding; else, it’s easy to blow up millions of funding in scaling your marketing, sales, and revenue teams, only to discover you don’t have sales traction due to a less-than-ideal product market fit. In this business, you don’t get second chances.

It’s very hard to get in front of an investor if you don’t have someone introduce you to them. So if you can, try and build a network for it.

Tracking and Measuring Your PMF Score

The customer conversion journey starts with offering a limited period free trial of your product. Bogdan recommends not gating any features in the trial and offering a reasonable trial period of 6-8 weeks. The free trial should come with no strings attached, and there should be transparency on the purchase price post-trial. 

Once the customer has used the product, the two metrics to measure your PMF are trial conversion and annual retention. A trial conversion north of 80% and an annual retention rate of over 85% are critical milestones of an excellent product market fit. 

We had over 95% trial conversions in our first year and a 130% net dollar retention rate in our second year. And we were like, yeah, it’s working.