Last week I spoke to a buddy who started a SaaS company without any funding.
He didn’t look good.I think he didn’t sleep for about 3 months.
Invested all his money and worked at least 10 to 12 hours a day.
But he bootstrapped the beginning of his business. ( bootstrapped = build without any funding
What are the options for starting SaaS companies?
How do you start financially?
There are some options in my opinion:
- Agency fee to pay for software
- 6- Incubators
One of the main questions is how much cash do you need to validate your business idea and build the MVP. Product market fit is something magical in the SaaS industry, finding it is a struggle.
Let me discuss the 6 options:
I guess build by a 2 man saas company, one business guy one tech founder. Build a internet for SMB’s. Free trail, low ACV. Tech guy invests his time, business guy pays all the bills the first couple of months. The big goal: Get signups and users to monetize.
Pro: Full control
Con: No Money, Stress, and no budget 😛
Pitch your concept to Seed investors. Show them the huge opportunities your product has and how big the market is. You only need x amount to burn on marketing and product development.Pro: Budget to validate your MVPCon: Lose control. Pressure to succeed and keep your investors happy.
Bit of a creative way to get money, but there are nowadays lots of crowdfund platform. Find the one suiting your business and get a starting loan or pre-sell your product for cash upfront.
Pro: Budget to validate your MVP
Con: Lose control. Pressure to succeed and keep your investors happy.
4- Agency fee to pay for software
Let’s say you are building a business for enterprise clients. Building an enterprise SaaS will cost you lots of development, legal and business hours, and money. So you can find investments or: start an agency providing consultancy services in your business. This lets you validate your product, generate cash for your consultancy which you can reinvest in building your SaaS companies.
Pro: Validate your MVP, build up a network
Con: Time, takes some time to build up everything.
5- LoansLoan money from the 3 F’s
Friends, Family, and Fools
Con: Nobody wants to let their friends or family down.
Tech incubators, startup incubators, etc. There are a lot of incubators who can help you with coaching, advice, and help you push your product in the market. They also provide you with start capital to validate your MVP.
Pro: Coaching, Advice, budget
Con: Lose control. The pressure to succeed and keep your investors happy.The main plan is to get traction and validate your business plans. After validation, you can rethink your financial plans.
What do you think?? Anything to add? Do check out this blogpost about different SaaS Funding options where we continue the discussion.
Let me know your thoughts!