The all-in-one niche 🍞
Really knowing the problem space, why Photoshop/Powerpoint stuck, and raising from a position of strength.
Welcome to the 94th 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: HubSpot’s co-founder and CTO, Dharmesh Shah, flips the much-freighted, narrow-vs-broad product question and recounts the reasoning behind their own unusual — “miles wide and inches deep” — early stance.
#2: Vimcal’s co-founder and CEO, John Li, notes a naming slip-up that was also an essential — “…we were just making it twice as hard on ourselves” — branding/PMF lesson.
#3: Leapsome’s co-founder and Co-CEO, Kajetan von Armansperg, documents some notable lessons from the process of raising their series A as a bootstrapped, $10m-ARR business.
🗞 Recently on Relay:
➡️ Heuristics and Hunches (March 22nd) — The Power of Intuitive Tech, “Juicing It” as a Usage (and Joy) Driver, and Other Notes on Shaping a Disciplined-Yet-Freeing Product Path with Arcade’s Co-Founder, Caroline Clark
— Origins of Caroline’s inspiring zeal for tech
— Setting goals for all (long, medium, and short) horizons
— “Juicing it”
— Three core elements of gamification
— Arcade’s organic flywheel
— Understanding the real competition
— Taking a product strategy page from the Atlassian playbook
— A spreadsheet of existential risks
#1: The all-in-one niche 🍞
(From: HubSpot’s Dharmesh Shah) (Source: Lenny’s Podcast)
Some of the best startup advice I’ve heard and have also given is that startups should focus on one thing and get really, really, world-class, exceptionally better than everybody else at that one thing. One of our early zigs is that we’re going to exactly the opposite of that.
From year one, HubSpot decided to build an SEO tool, analytics, blogging tool, content management, all of it. And every one of those categories that we were building the product in had great products with great companies behind them.
‘So, why would you do that?’
The reason is that the one thing we wanted to be good at was solving for the actual customer problem that existed. The customer problem that existed was not a dearth of tools. Lots of SEO, blogging, and all the tools existed. But SMB, specifically, did not have the wherewithal to put all those pieces together.
I can throw a website up, I can put Google Analytics on, I can put a Wufoo/Typeform, I can do all these things. I can wire it all. No big deal. ‘Why is this so hard?’ But for most people, most SMBs, that’s a science project.
We said, okay, ‘in order for us to solve the actual customer problem, we have to solve the actual customer problem even if it’s uncomfortable.’ Even though it’s contrarian and every instinct, every advice we’ve heard/given says we should not do this, we should not go that broad.
Once you make that decision, this is the other lesson learned. We said this in the early years. Let’s say you do this. This is kind of this all-in-one approach, a broad-base product. ‘Okay, we’re going to be many miles wide and only so inches deep…’
One of the…this goes back to our very systematic thinking…it’s like, ‘okay, we’re going to measure each of those product categories that we’re now playing in…are we in the top three in the market in that category?’
‘If the answer is yes that means we invested too much in that category, we should not be in the top three, because our value proposition is not that we’re one of the top three blogging tools, the top three web analytics tools, top three whatever…”
Our value proposition is that everything works so well together that being in the top three and having those right features or whatever doesn’t matter. Doesn’t matter as much as the all-in-one. ...that was one of our heuristics for being able to tell that we were over-indexed on one particular aspect of it.
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We changed that over time. Now, I would argue that most of the categories that we play in, surveys will tell you we’re in top three in each of those categories now. At the time, when we were very, very resource constraint, we wanted to be disciplined and focused.
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It comes down to what problem you’re solving. One of the mistakes I think founders make, especially product-oriented founders is that we fall in love with the solution instead of falling in love with the actual problem.
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Putting that constraint on yourself forces you to understand and at least label and define what problem you’re solving because oftentimes we can describe our product but we struggle sometimes as founders to describe the actual problem.
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If you, as a result of talking to customers and understanding the problem deeply, come to the conclusion that you need to more than just one thing. Then you should force yourself to have the discipline that we did.
Which is, here’s why we’re going broad and here’s how we’re going to make sure that that broadness doesn’t kill us. Where you have to have a self-imposed constraint. You can’t have the best of both worlds.
You can’t say, ‘we’re going to be all-in-one and btw, we’re going to be the best…’ No, you can’t be the best. Because you’re saying we’re going to solve the problem the best but we’re not going to have the best product along any of those dimensions.
Related Relay reading:
Productboard’s co-founder, Hubert Palan, on understanding workflows as key to better all-in-one products (“To me what matters is the overall workflow and how tight that workflow needs to be. In the ideal world we would have one digital platform for everything…”)
#2: Naming again 🏷️
(From: Vimcal’s John Li) (Source: LinkedIn)
Michael [Vimcal’s co-founder] and I are notoriously bad at naming our products, so I was really proud when we came up with the name Maestro.
However, I never would have guessed the confusion that name could cause.
Here's a lesson in branding that we learned the hard way 👇
When you have a 2-worded product name and one of the words is much "stronger" than the other, people will call it by just the strong word for short.
‘Adobe Photoshop’ -> ‘Photoshop’
‘iPad Pro’ -> ‘iPad’
‘Vimcal Maestro’ -> ‘Maestro’
What ended up happening was that on onboarding calls, EAs would ask us ‘so... is it Vimcal or is it Maestro?’
And tbh we didn't have a good answer.
In extreme cases, some people would think our company name was ‘Maestro’ and had no idea what Vimcal was.
Long story short, naming our second product ‘Maestro’ accidentally forced us to build two brands instead of one.
Changing to Vimcal EA not only makes it crystal clear who we're building for, but now everyone also calls it "Vimcal" with no ambiguity.
🤔 So when do you want the "dinner party name" for your products to be different?
When they're completely unrelated and silo-ed, like Microsoft Powerpoint ("Powerpoint") and Microsoft Excel ("Excel").
🤔 And when do you want the short-hand to be the same?
When they're different SKUs of the same product, like iPhone SE and iPhone Pro (both "iPhone"),
or different components of a unified product experience, like Outlook Mail and Outlook Calendar (both "Outlook").
When we launched Maestro, our mistake was in seeing it as a separate product rather than a new piece of a unified team scheduling experience.
If an EA uses Vimcal EA and their exec uses flagship Vimcal, then they both get added benefits they wouldn't get using either solo.
Getting product market fit with just one product is already damn near impossible, so we were just making it twice as hard on ourselves.
You live and you learn!
Related Relay reading:
John on the unceasing magic of doing thousands of user onboarding calls (“When we launched Vimcal back in early 2020, I did all the onboarding calls in the beginning. Partially, strategically. Partially because we only had a month and a half of runway left.”)
#3: Raising after the “fundraising bonanza” 💎
(From: Leapsome’s Kajetan von Armansperg) (Source: Medium)
After debating the costs and merits of a fundraise in early January 2022, we spent 2 weeks crafting our deck and preparing the actual discussions, 2 weeks talking to investors, and 4 weeks in the due diligence process to raise our first-ever round of $60M.
Take all of this with a grain (or fistful) of salt. This was in March 2022, and of course the funding environment was still very different at the very end of the ‘fundraising bonanza’ of 2020/2021. But there are probably still a few things that we learnt from our advisors that are still applicable today — and therefore worth sharing.
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Raise when you can (not when you must)
I’ll start with the most obvious point, which is also the hardest to achieve. Everything that follows below is merely tactical advice. Your true strategic advantage will materialize if you raise your round from a position of strength.
In our case, we were growing quickly, were cashflow-positive and had crossed the mythical mark of $10M in recurring revenue. We wanted to explore external financing (the ‘why’ behind this is material for another post) but we didn’t have to. In a negotiation with investors where your best alternative to negotiated agreement is “simply walking away”, this changes everything.
It’s hard to get into such a situation, so the advice — as unhelpful as it may sound — is simply this: If you ever find yourself in this situation, think twice if you really want to wait until you *have* to raise.
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Set a deadline
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Fundraising is a means to an end, not a goal in itself, and we didn’t want to get distracted by the fundraising process. When we decided to explore fundraising, we therefore set ourselves a deadline of 8 weeks for the entire process and did everything we could to keep it as short as possible.
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Get introduced
Once you have a short list, try to get a credible introduction to the right person.
- It depends entirely on your business and stage of growth who the ‘right person’ might be. It might not be the famous partner but someone at the firm who knows your sector well or has invested in similar companies before.
- ‘Credible’ means that your ‘introducer’ should have collaborated in one way or another with the person you want to meet — a random LinkedIn connection is not enough. It also means you will likely have to share some context before the intro — we equipped our introducers with three bullet points on business metrics to spark some initial interest.
We luckily got introductions to all of the people we wanted to speak to, so I can’t speak to the success of cold outbound. It seems obvious that this would be much harder.
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Plan your meetings (carefully)
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A few things we learned:
- We were lucky not to schedule more than four meetings in a day. Even if they only last an hour, these — and the ensuing email ping pong — can be quite exhausting.
- We should have cleared our schedules entirely. Trying to run the business next to a dense fundraising process was a bit of a stretch.
- We should have done better research on which firms tend to move fast and which tend not to. Toward the end of the process, we had to stall a couple of conversations, which was slightly awkward.
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Prepare additional data
We knew that our pitch deck would not be enough once we had sparked an investor’s interest. Next to our pitch deck, we prepared a few other materials to share on demand. These included:
- Sales efficiency metrics (win rates, sales cycle by market)
- Anonymized sales quota achievement data (showcasing a scalable Sales motion)
- MRR growth by cohort (SMB vs. mid-market customers, different geographies)
- Customer concentration chart (showcasing little dependency on single customers)
- Marketing efficiency metrics (ad spend vs. SQL growth)
- Specific user testimonials from G2
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Get ready for due diligence
Notably less fun than pitching! After receiving term sheets and a bit of negotiation, be prepared to now *actually* share everything. Depending on your investors, you will get to cooperate with a broad array of stakeholders — financial auditors, law firms, ESG auditors, etc., and maybe even more than one in each category. If you are based in Germany, all of this is crowned with a ten-hour session with your neighborhood notary.
We agreed on a deadline with our investors to ensure this would not be a long-term distraction. But it is quite a bit of (obviously important and necessary) work: Make sure you have support from your team to collect data, structure documents, and fill out questionnaires.
And yes, things *can* still go wrong; a term sheet alone isn’t binding. Midway through our process, Russia tragically invaded Ukraine, and we found ourselves nail-biting and tracking the rapidly deteriorating investor sentiment. We got lucky in our process — but not everyone did.
Related Relay reading:
Merge’s co-founder, Shensi Ding, on raising during a stark SaaS environment (“We could make this fundraising decision primarily because of another one we had made long back. Hiring a Head of Finance and Ops very early in our journey is something we’ve been incredibly grateful for, especially since the market turned.”)
🤝 Founder social:
Thanks for reading! 🌻
Team Relay (Chargebee for Startups)