A case for boring (AI) products 🛠️
(Still) solving real problems, a belief that likely kills most startups, and sizing up a B2B opportunity the 3rd time around.
Welcome to the 74th edition of The SaaS Baton. A fortnightly newsletter that brings you hand-curated pieces of advice drawn from the thoughtful founder-to-founder exchanges and interviews taking place on Relay (curated with 💛 at Chargebee for Startups) and the interwebz. So, stay tuned!
In this edition, you’ll find the following instructive and inspiring pickings:
#1: Synthesia’s co-founder and CEO, Victor Riparbelli, suggests matching the blinding upsurge of enthusiasm around any tech trend with a singular focus on solving utility-first, unoriginal problems.
#2: Lindy’s founder and CEO, Flo Crivello, examines the central misconceptions around the pervasive, long-assumed necessity of having co-founders.
#3: Pilot’s co-founder and CTO, Jessica McKellar, sketches out how they went about scoping their next enterprise bet as successful, 3rd-time co-founders.
🗞 Recently on Relay:
Heuristics and Hunches (May 26th) — Why It’s OK if Your ICP Can’t Pay Yet, Investor Pitch vs Customer Pitch, and Doing YC after 2 Major Exits with Common Paper’s Co-Founder, Jake Stein:
— Aligning with ICPs without an immediate budget
— What this meant for Common Paper’s fundraising strategy
— Choosing YC as a serial founder
— (Not) confusing an investor pitch for a customer pitch
— Evolving messaging with emerging ICP clarity
— Resolutely saying no to the traditional market
AMAs (upcoming!) — I’m A Smart Bear (Jason Cohen), founder of 2 unicorns, both bootstrapped & funded; bought, sold, and invested in startups. AMA!
#1: A case for boring (AI) products
(From: Synthesia’s Victor Riparbelli) (Source: Seedcamp Firsts)
One thing that I’ve found to be true over the last 5 years is that it’s really important to manage your relationship with trends.
So we started 5 years ago, GANs at that point was the big hyped thing. Then we had the metaverse, web3, now we have generative AI, which is bang on what we’re doing.
It’s very interesting how those trends can definitely amplify your message and give you a lot of attention. Definitely have for us. But also how [they] can kill your company if you jump on to the wrong trend.
And you end up being drawn…it’s kind of like the Moby Dick problem, where you have a big company that wants to do something in metaverse and then you go in with them…
Like, in our case, we could go in, and say, let’s create 3d avatars and put them in the metaverse. We could do a lot of those kind of things, but then you can get drawn in a specific direction.
Then you end up doing something which actually isn’t for utility, it’s for the novel PR value of the product. AI is very intertwined with that.
You have to, as a founder, be extremely, extremely careful about creating real utility for real people. If you get caught up in these things, it might very well be good for half a year, but then you’ll crash and burn after.
Because there wasn’t really that much utility in that particular trend. I’m not saying that you shouldn’t engage with any of this.
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The way I think of this is, I have this mental model, if you’re building like a SaaS company, basically what you have is pretty boring technology. So you need to have a very exciting vision.
That’s how your to-do app becomes the future of work. That’s important because that branding piece makes people feel good about your product. Positions the company. It’s a big, exciting vision, and all those things.
If you’re building a deep tech company, you need to reverse those two.
You have super exciting technology that, in itself, is PR-worthy, and people love it and everyone will talk to you about it. But you need to build very boring products. You need to be super focused on where you’re providing value to people.
If you both build very exciting tech and you try to have an exciting vision, so to speak, then you can easily end up in the wrong direction.
We experienced this ourselves when we released the Beckham thing, for example, which was a very hacked together project behind the scenes but people thought it was just some web app where you could put the video in and it could just come out in French.
I don’t know how many thousands of people we had to deflect…
There’s actually lots of those kinds of things with deep tech, you can blow up too big of a vision in terms of marketing.
Especially if you haven’t found product-market fit, those things become even more enticing. Because big companies will be like, “hey guys, we’ll pay you 300 thousand dollars to create this metaverse experience”
You’d be like, “I need that money to extend the runway,”
Then, all of a sudden you end up spending 3 months of your roadmap building something specific for them and then what you’ll find as a founder is that once you go through investors, they will completely discount everything that’s a service-based project.
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They’re focused on if there’s actual business utility in what you’re doing.
Related Relay reads:
#2: Co-founding considered harmful
(From: Lindy’s Flo Crivello) (Source: Flo Crivello)
I’ve come to view the idea that you absolutely need a co-founder as one of the most harmful memes in Silicon Valley. It’s probably killed more companies than any other misconceptions out there.
Instead, I think one should go solo if they can, and only get a co-founder if they are absolutely sure that they found the perfect one.
This is supported by findings that solo founders are twice as likely(!) to be successful than co-founders.
And this is certainly congruent with my experience: almost all co-founders I know have broken up, often endangering the company.
This includes the relationships I would have deemed most solid — people who’d known each other for 5+ years, finished each other’s sentences, had worked together before, etc… And now aren’t even on talking terms.
“But solo is so lonely!”
One of the main reasons folks recommend you not to go solo is that it’s too hard on you, psychologically.
I had a co-founder for a few weeks when I started Teamflow, but have been solo for the rest of the journey. I do have a team I love, but do agree that it can be lonely — there is merit in having a co-founder who is just as financially, emotionally and reputationally invested, riding with you on the rollercoaster.
But the grass is always greener. Solo founders often fantasize about having ‘another them,’ a sort of soulmate in the trenches with them.
Reality often falls short. Instead of a soulmate, you might find yourself trapped with someone who greatly adds to your stress instead of subtracting from it.
And there are ways to mitigate the loneliness: you can open up to your friends or partner — though you obviously don’t want to overdo that — or you can get a therapist or executive coach.
Another approach is to over-incentivize your first few hires, giving them 2-4% instead of 1-2%. Then these people have the same level of buy-in as a co-founder would.
“But you need a thought partner”
Going solo can also make it harder to think clearly. This aggravates the other big cause of startup failure: lack of product-market fit.
Being solo makes finding PMF harder in two ways: you lack a thought partner, and, most importantly, you run a bigger risk of being in denial.
This is supported by the data. The startup genome project finds that:
1. Successful startups have to pivot at least once.
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2. Solo founders are a lot less likely to pivot than co-founders.
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But there are ways to mitigate this too. I’ve found it critical to set aside at least three hours every Friday to think about my startup, with no interruptions (credit to Mathilde Collin for the idea).
It is indispensable to do this thinking on paper — I completely agree with Einstein that ‘you can’t do much carpentry with your bare hands, and you can’t do much thinking with your bare brains.’ Or as Leslie Lamport said, ‘If you’re thinking without writing, you only think you’re thinking.’
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“But I need a technical co-founder”
One common reason why people don’t want to go solo is because they “need a technical co-founder.”
First, this can be a red flag, as for many people that means “I’ll find someone to build this for me in exchange for just half of the company.” Make sure that you do bring something real to the table, whether it is expertise in design, marketing, product, etc.
But I also find this line of reasoning less and less valid as capital becomes more plentiful. There are more than 10 times more VC dollars invested today than 10 years ago [source].
Too much capital is chasing too few founders, forcing VCs to fund startups at earlier and earlier stages. If you have even just a few years of experience, you can now raise a “pre-seed” on a deck, yourself and an idea — and then use that money to hire a founding engineer.
And it’s easier to hire that engineer once you have funding!
Sure, being solo will lower your valuation — especially if you’re not technical. So do make sure that you already have a few solid first hires lined up, ideally just waiting for the funding to start. It will also be hard to raise if you don’t have at least that.
But if it’s dilution you’re worried about, you’ll find that a pre-seed at a lower valuation is a lot less dilutive than the 50% you’d give to a co-founder.
#3: Finding the last-go-round bet
(From: Pilot’s Jessica McKellar) (Source: In Depth)
We did know that we wanted a last go-round. And why? To accomplish what? I think that’s worth being honest about. And Jeff and Waseem have slightly different answers from me on this.
Speaking for myself. 1) We wanted to have the experience of building a company to a later stage than Ksplice and Zulip had gotten to. We wanted the experience — ideally — the path to a public company.
Then, also for the financial upside. We wanted to build a company that was wildly successful. That is transformative financially. I think it’s worth saying out loud because building a company is a lot of work. There are many much easier professions that one could have than being a startup founder.
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What business problem do we want to solve? And we knew what business problems we had had, but how do we learn about where the pain is most acute for startups, for small businesses?
And, you know, we did this straightforward thing that you would do if you wanna answer that question, which is you go talk to a lot of startup founders and small business owners and ask what are your biggest pain points?
And so we did that.
We surveyed finance and accounting teams, legal teams, HR teams in a bunch of SMBs, like early stage startups, mid-market companies, and assembled themes.
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Why bookkeeping first?
1st) [it was] the loudest theme. 2nd) enormous market. 3rd) the ASPs that we thought we could command if we’re really solving the problem end to end.
So not selling bookkeeping or accounting software, but being your bookkeeping solution. You know, what does the market pay for bookkeeping today? And it’s like hundreds to thousands of dollars per month.
If we can capture that, the higher the ASP, in general, the more choice you have about how you’re gonna build the company. You have more marketing dollars. You have more choices about your go-to-market strategy.
This idea that we could capture the hundreds of thousands of dollars per month for a subscription service solving bookkeeping end-to-end, that’s really attractive.
Versus, let’s say, HR software. How much can you get a company to pay for HR software? It’s probably a much smaller percentage of their total spend.
And then, you know, who are the incumbents? Well, who does bookkeeping? Bookkeeping is done by a long tail of mostly local, small, local providers.
So we don’t have one or two huge incumbents that are going to make our lives really difficult. We’re competing against these small outfits that have widely varying quality.
There’s a lot of latent dissatisfaction in the market with the existing solutions in a world where more and more of your systems (your bank accounts, your credit cards, your payroll system, your expense reporting system, how you’re invoicing) all of that stuff, is all moving online.
We can benefit from this trend towards digitization and it’s also harder for legacy bookkeeping firms to keep up.
…for all of these reasons, it just seemed like this really had teeth.
Related Relay read: Pulley’s founder, Yin Wu, on not building for an obviously large market
🤝 Founder social:
Until next time,
Team Relay (Chargebee for Startups)