Breaking Into B2B SaaS
Building a company is hard! Unless you have conviction in an area through prior experience, figuring out your next big idea is a daunting task. Do you build an app that finds the best parties? Everyone likes to party, right? Wrong. So how do you get started searching for ideas?
At the start of 2020, I had zero clue on what I wanted to solve… I spent 2 months working on a podcast app that ended up with a total of 10 users and I had 8 months left in my runway. I knew that I wanted to solve a big problem but following the advice of “solve your own problems” always led me to consumer fitness or health apps, which is a heavily saturated market. After months of building consumer solutions (without problems) and trying to figure out how to get paid for them, I realized that I needed to focus on solving problems for people who would pay for solutions: businesses.
Focusing on businesses allowed me to expand my scope from “my own problems” to “problems I’ve encountered or known about from work” that could be applied across industries. After making the switch and focusing on business problems, I was able to research 6 industries/markets and end up founding a company in the automotive industry within 4 months. I found that if you want to discover many ideas fast, there is one business model that directly correlates with solving problems for people: B2B SaaS.
B2B SaaS stands for business-to-business software-as-a-service. Think Slack. As a B2B SaaS company you are selling cloud-based software to other companies. It could be super-specific like email-solutions for e-commerce companies like Bluecore or something as broad as managing work tasks like Monday. Businesses need software solutions and it doesn’t show signs of slowing down (spend on SaaS is up 50% from just two years ago).
You may wonder what’s left to automate but it’s important to note that 22% of small businesses haven’t invested in any SaaS at all. It’s not an if but when they will take advantage of SaaS solutions. And while the technology necessary to transform all industries has been available for over a decade; risk-averse, low-innovation, and human-centric industries are just realizing that they can leverage SaaS to reduce costs and optimize workflows.
Finding the industries and markets
Since B2B SaaS focuses on selling to businesses, the industries to focus on are those that make a lot of money and/or are growing. If you’re already interested in an industry, be sure that it is one of these two. Use tools like CBInsights to analyze overarching trends in industries and identify viable options. Also, you can look at industries that VCs (eg. Sequoia) are investing in or are requesting for startups in (e.g. YCombinator RFS). It’s their job to bet on the right industries, so leverage some of their homework for your own benefit.
Once you have your top-level industries of interest, dive into industry specific reports (e.g. google search for ‘Carbon Removal trends 2021’), ping industry experts you find on blogs, and start pinging folks in your network (e.g. LinkedIn, OnDeck) to understand where the opportunities are. Again, you are looking for big industries with some parts that are either due for a change or are already experiencing some growth.
Let’s try this for one industry!
I looked over YCombinator’s Request-For-Startup page and found that YC was focusing investments in AI. One of their listed examples for AI disruption is manufacturing. I quickly validated that not only is the market huge at $7.7T but in 2022 will be 2% larger than pre-pandemic times. I googled and found Deloitte’s “2022 Manufacturing Outlook Report” which reports that over 40% of manufacturing executives are investing in “operational efficiency solutions such as: automating processes, increasing machine insights with IOT devices (think small sensors)…. sensors to track assets (Tile for a million dollar drill), and real-time insights on tracking maintenance of machines.” At the end of the report there are some sources and folks listed; I would send linkedin requests and emails to these people to learn more.
Just from the cursory research, I would guess that there are analytics and data management opportunities for manufacturing businesses with a long-term play at taking the data gathered to automate some of their manual processes (AI!).
Fun! One general opportunity found!
….. btw after reaching out to someone in my network regarding manufacturing, I was pointed to the expected growth of additive manufacturing 15% year-over-year from now through 2030 ;)
Finding an entry point into the industry
So, let’s say you’re hooked now! You are all into providing SaaS for manufacturing… How do you break in?
Talk to people.
Don’t fall into the trap of being a laptop/armchair genius. You can do all the research on the internet you want, but at the end of the day, your business is going to sell to people and they are going to need their problems fixed. So start emailing and calling people to learn about the industry.
If you are already exposed to the industry via past experiences, it’s time to start calling these folks and running discovery interviews.
If you are coming to an industry with zero exposure, don’t worry. Someone you know or someone that knows someone you know will have worked in the industry. Also, look at startups that are solving problems in the industry and ping founders/employees via LinkedIn, see if you have friends that work at those companies. Start reaching out to all of these people and be transparent about your learning process; people will help you if you give them a chance. Your main goal is creating a network of industry insiders for your company.
One cheat-code that exponentially increases your network is to ask the following question from anyone you meet:
“Who are 3 people you think I should talk to that are either working in this industry or are innovating in this industry?”
Boom. 1 goes to 3, 3 goes to 9, 9 goes to 27. You are bound to find some information and problems there.
Understanding the industry
I know, it’s wild! Just 2 weeks ago you thought manufacturing was a cool space to investigate and now you have 18 people on the calendar to talk to. You may be thinking: “I don’t know anything about manufacturing, how am I going to solve their problems?”
No worries. All you have to do is listen. People love talking about their jobs, especially if you are promising a better path forward. Your goal is to learn as much as possible about:
- The industry.
- The specific market the people work in.
- The key decision makers in the market.
- The problems this person faces.
- The problems the market is facing.
- Who are other people they can point you to to learn more about the above.
Your initial conversation won’t be enough. This is the start of a beautiful and new friendship. Don’t forget to take them out for lunch, coffee, or send them a thank you gift (or whatever you do for friends).
I recommend reading The Mom Test to help structure your conversations. At the end of these chats, keep the door open with “This was super helpful, I’d love to keep chatting if you’re up for it!” and always look for ways that you may be able to help them (outside of solving their problems of course!).
You’re on your road to being an expert!
B2B SaaS is a great business model because it’s based on the fact that someone at work could use software to make their job easier and/or more effective. By doing top level research you can figure out what industries and markets are likely to have costly problems but in the end, building a company is about talking to people! Your job is to find the right people to talk to; the sooner you understand who the major players are, who key decision-makers are, and what problems exist for you to solve, the closer you’ll be to building a high-growth company.
If you ever need a sounding board, feel free to reach out! Good luck friends!