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Why SaaS Startups Fail: And How Can This Be Avoided?

Respect the odds? Let's find out.

By Justine CrowleyPublished 2 years ago 4 min read
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Why SaaS Startups Fail: And How Can This Be Avoided?
Photo by Rodion Kutsaev on Unsplash

Respecting the odds in business is a respectable thing, yet it is fairly common (according to statistics bureaus around the world) that 90% of SaaS (software as a service) startups are set to fail. If you plan on setting up a SaaS business in providing a valuable service, whether through an app or a paid subscription desktop style model; you need to understand that with any business or startup, it takes around ten years to build a solid base. Just because one SaaS startup moved to scale up stage and beyond; it does not mean that any sister ventures will, or completely new ventures for that matter. In saying this, you can lean the odds in your favour, and this is where your software based product (app or otherwise) needs to solve a pressing need in the marketplace. In other words, a "problem" for its users. Otherwise, what is the point?

According to NanoGlobals, startups that use venture capitalists can reduce their failure rate down to 75%. It is not as simple as learning how to code, and it is like hey "Bob's Your Uncle" and away you go in developing a new website and/or app.

By Amélie Mourichon on Unsplash

It is wise to undertake some research, yet before you do, you need to be crystal clear on the problem you are attempting to solve through smart technology. Write down that problem statement. According to CBInsights, this is where 42% of SaaS startups fail. It seems like they ignore the User Experience Design (UX) thinking process where you seriously undertake your research, and then synthesise that research in coming up with the right solution statement, and therefore developing prototypes (both lo and hi fidelity), and in testing a MVP in ensuring that they are delivering a product that the market needs, wants, and uses.

By Roman Synkevych on Unsplash

Developing and designing a tech based product requires some capital, in addition to some good old sweat equity. CBInsights states that another 29% run out of cash.

By Magnet.me on Unsplash

When recruiting and developing your team, for any company (SaaS companies are not immune to this); it is critical to hire the right people to do the right jobs. An introvert may be better at administration, rather than in a customer facing role for example. A total of 23% of new SaaS business startups (irrespective of innovation) have the wrong hands on deck, and such sucks the cash and the lifeblood out of a business. Even if HR is not your strong suit; there are ways to obtain the right interviewing and background checking techniques without needing a Harvard Degree in such anymore. One of the founders of Atlassian mentioned at a Vogue Codes event that hiring was not his strong suit, yet to make Atlassian work, they had to find a way to make it work. In that case, the rest is history.

When any business undertakes a SWOT analysis, their competition (same with startups, let alone any business) is always an external threat. There are tools that you can learn in maintaining a strong competitive edge, in addition to having empathy and putting yourself in the users shoes, to work on being swallowed up by the competition. Competitors in business are a blessing in disguise, as they are like your silent mentor in helping you stay on top of your A-game. CBInsights report that 19% of startups fail for this reason, where competitors end up obtaining the competitive edge. This is a bit obscure, and can mean anything by being clearer on their mission, and/or relevant SaaS startup competitors may be better at marketing and SEO techniques. UX Researchers and marketing teams generally read competitors reviews, and further synthesise the pain and gain points from that. This data is real internal user intelligence.

By Victória Kubiaki on Unsplash

You often hear of businesses not engaging in a clear and coherent marketing strategy. The numbers do not lie. When you are in business for yourself, you have to be relatively good at marketing in order to survive. This goes way beyond just putting up a Google ad and hoping for the best. You may have to attend business networks and gain trust, and come up with creative ways of bringing more clients into the door, even when the times are busy. You rarely if ever hear about the four P's in marketing/the marketing mix (Product, Price, Promotion and Place - even People), yet this old school of thought is still important today. Part of the research process is all about digging deep and finding out what prices your clients are willing to pay, and to just meet the market. Amazing customer/client service (hence the people aspect) is critical. They are the lifeblood of any business. They pay the bills. If you have a vacant rental property, because the asking rent is a bit above the market, and you are not willing to budge; then you will have a vacant investment property on your hands. Why? Because you are ignoring your customers. SaaS startups (if not any business venture) operates on the same principles of supply and demand.

By Fab Lentz on Unsplash

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About the Creator

Justine Crowley

Freelance Internet Moderator/UX Writer/UX Consulting Designer/Graphic Designer

http://smashwords.com/profile/view/JustineCrowley

linkedin.com/in/justinecrowley

Lives in Sydney, Australia. Loves life.

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