Today’s guest is a venture capitalist, serial entrepreneur and author of Accelerated Startup: Everything You Need to Know to Make Your Startup Dreams Come True From Idea to Product to Company. You will discover how he went from agency to SaaS, how to raise your first funding and how to transition from startup to enterprise company.
Vitaly Golomb is the Partner & Global Startup Evangelist @ HP Tech Ventures and author of Accelerated Startup.
Shifting From Agency to SaaS
Going from a service company to a product company or a startup is a fundamentally different beast. It entails a completely different approach and everything is uncommon besides having to pay your bills on time. Vitaly’s team had a small business loan for their agency but venture funding for product was completely different, for example. The best template from shifting to services to product would be 37signals, which was an agency that spent 10% of their time and funding internally to build Basecamp. Basecamp eventually started generating enough revenue for them that they started to shift more and more of their time to it and eventually, they did not take any more service clients and just focused on product. Making a shift sounds simple if you put it this way but it takes years to do this as the business models between service and product are different.
If it’s worth doing and you are going after a new market, you will need capital. Figure out the product market fit, how the customers are, how to service them, what you need to build and when you have this, build a minimum viable product which will give you the confidenceto go out there and present to investors. You then get some seed capital with a goal of building a repeatable scale. Go out there and spin your wheels again — improve your product, get more customers and determine if you can do that say, 100 times. Then, out of that 100 times, ask yourself how much itcosted you to find that customer, what was the average time it took for them to convert and, what was the average lifetime value of that customer. Our unit economics is: how much did it cost us to find and generate this customer versus how much we get out of them over time? If it is positive and you are able to prove that and you are seeing that the market is accelerating, then go to venture capitalists who will write you up checks so you can start scaling. This is when you start to hire and upgrade your teams. This is called stanged financing and just like a video game, you have to beat the boss in the first level to get to the next.
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