Sharing real feedback from top VCs that I've received over the past 2 years of bootstrapping Saasify.
Don't worry, this is NOT a sales pitch for my startup. Actually, it's kind of the opposite.
Intro
For many aspiring founders, the prospect of pitching VCs is both exciting and also completely foreign.
How do they think?
At what point should I be reaching out?
How many investors should I be speaking with?
What should I be on the lookout for?
...
And while bootstrapping my startup over the past two years, I've had the unique privilege of meeting with dozens of top-tier VCs.
And my company ended up getting rejected from all of them.
This is a really important distinction to keep in mind. YOU are not getting rejected — it's some combination of your company / market / business plan and the VC's own interests / timing / strategy.
So as a true believer in open source and building in public, I decided to shed some light on this archaic process by sharing some real feedback that I received from real VCs on my very real startup.
Saasify
This is the startup we'll be talking about. If you want, you can check it out here.
Problem: It's really difficult for developers to monetize their side projects
Market: Micro SaaS products
Customers: Developers & indie hackers
Solution: Shopify for SaaS platform for quickly launching SaaS MVPs
Feedback
This section focuses solely on negative feedback, even though there's been a lot of positive as well.
VCs
Notation Capital
"I can see the potential here for a big business and market, but just having trouble connecting the dots. Today it's well-suited to people with a side project, that's fine, it doesn't need to address a large market on day one.
The leap of faith we need to make is that there will be an Etsy or Shopify movement and that you can dramatically grow the market for people wanting to build a full-time business out of their side hustle and that some of these businesses will grow large (but that some percentage won't outgrow and leave the platform).
I don't think you're on the path to building full-on enterprise software, nor do I think you should be, but it means that there need to be significantly more small pure software products that want to transform into a small business. This is totally possible but I don't have conviction around that market today."
Index Ventures
"You're in a great area code but you need to be headed towards a specific address."
Earnest Capital
"Your target customers may be bootstrappers, but what Saasify's trying to do as a platform is much larger and therefore a better fit for traditional VC."
SaaS Group
"Saasify is not worth much if it doesn’t have paying customers. And this also makes it difficult for us to properly evaluate the potential."
Haystack VC
"I loved your talent / passion / progress, but we had less comfort around the model and the market."
Homebrew
"We struggle with the difficulty of balancing building the platform with also building your own SaaS products. We also worry that with today’s business model, many customers will graduate off the platform once they start generating significant revenue."
Brooklyn Bridge VC
"The execution and product look great, but these aren't the risky areas. The market and business model are much more important, and these just don't jump out at me."
S28 Capital
"The stumbling block for me is understanding if there's a big enough market for "Micro SaaS" apps."
Steve Peak
- Saasify does not work for enterprise ⇒ therefore marketplaces are stronger.
- If Saasify is for developers, then marketplace is better ⇒ less stress / support / marketing.
- If Saasify is for developers how will you solve the “I’m not a business-minded person”?
- If Saasify is for developers, then your customers will always have “code”, right? So then this disqualifies many use cases. Service as a Service != Software as a Service. Many of the companies in the passion economy offer services that have limited to no software.
- If Saasify is for developers: they are more likely to build versus buy.
(Steve is not a VC, but rather the Founder & CEO of Storyscript and one of my closest advisors)
Summary of Concerns
- The size of the market isn't clear.
- Number of makers, number and quality of SaaS products, and what % we could capture.
- Successful products are more likely to churn once they start gaining traction.
- How does Saasify grow with these products while keeping incentives aligned?
- Target makers are developers who are more likely to opt for build vs buy.
- Much of our target audience doesn't understand or care about marketing & sales which is going to make it very difficult for their products to succeed.
- Saasify's ability to power generic SaaS products makes it more difficult to focus on specific use cases.
Reflections
In retrospect, all of this feedback is pretty obvious — especially around Saasify's potential market size.
I had gone into things assuming that our target market was all of SaaS just like Shopify targets much of e-commerce. But what early stage VCs really care about is the size of your initial target market, since trying to build a solution that would apply to all of SaaS is pretty vague and difficult to imagine how you'd get there.
Stripe is a great example of an index company which fundamentally enables a significant chunk of online payments and SaaS. Saasify, on the other hand, provides a go-to-market solution for developer-oriented SaaS APIs.
It's pretty difficult for me to imagine Saasify's path to $100M revenue, which is the VC litmus test for whether or not an idea is worth their time. There are definitely some new-age VCs like Earnest Capital and Indie VC that are looking to change this mindset by focusing on profitability over growth, but ultimately my goal with Saasify was more aligned with the traditional VC model of building a high-growth, high-impact company to solve a problem at scale.
The core problem I had set out to solve with Saasify was helping developers go independent.
And after several pivots, I ended up with a solution that didn't really solve the original problem that I cared about. It definitely had some early signs of traction, but no real signs of revenue traction or growth potential due to the quality of Micro SaaS products that we attracted.
I'm currently working to transition Saasify to a more open, community-led platform.
If you're interested in contributing to Saasify as an open source platform, please get in touch on our open slack.
Conclusion
I haven't seen too many examples of this type of concrete feedback from real VCs, so I wanted to share it with the world as a case study. I think it's particularly useful to share this type of feedback for less successful startups in order to avoid survivorship bias.
The follow-up to this post up is a retrospective that focuses on the key lessons that I've taken away from building Saasify over the past two years.
Follow along with my journey on twitter @transitive_bs.