Today, let’s take a moment to dream big (we’re overdue for an aspirational article). What if you were actually building a SaaS unicorn? It’s possible — so far, over a thousand startups have reached valuations over $1 billion. In 2020, there were 475 active unicorn startups, and in less than two years, the number has more than doubled globally. A number of them are SaaS products — Slack, Miro, Grammarly… If becoming a unicorn was easy, everyone would do it, right? Not everyone can, but if you look at SaaS unicorns, you’ll see some repeating themes.
According to an industry report by Fractal, the median time it takes for a vertical SaaS company to achieve unicorn status is five and a half years. That means there is extremely fast, sustained growth — compounding growth — over a relatively short period of time. Let’s examine the stages.
Garage (Early) Stage
In the early days of a startup, we’re working on product-market fit. We want to build something that people want, but we have to figure it out fast. As Geoffrey Moore wrote years ago, we’re trying to ‘cross the chasm’ from those experimental testers to paying customers.
Once the product or service has a beachhead established, it’s time to find as many viable customers as possible. That requires exploring new sales & marketing channels, extending the product line, and tapping bigger territory (e.g., going international). We’ll lay out more about the growth strategy in a moment.
Once we find grow stability, we add fuel (capital). Although we may have used some early capital growing the product and company, in the maturity stage, we’re working out how to make profit at scale.
Growth Strategy: 10 Secrets to Growing SaaS
Almost every SaaS unicorn started something new. You must introduce a disruptive product, doing something people need to do in a different & better way. We had email and chat, but Slack built a more unified communication platform. Back in the old days, we said if you weren’t #1 on your ladder, make a new ladder. Today people say you need to write the book – that is, you need to do something so different, you need write a book on what you are doing.
The customers matter. You must engage, listen, iterate, and respond to the customer. Focus on what they tell you to improve your messaging, product, and business.
We’ve worked for organizations that didn’t have any business metrics other than living month to month. Adding a north star metric (e.g., more trial users, better monthly recurring revenue) is a proven way to motivate your team and grow your product. You can employ a variety of KPIs and set meaningful OKRs to measure & motivate.
Building for an aspiring SaaS unicorn necessitates a positive work culture. Hire A players and nothing less. Unicorn-level growth won’t happen with B or C employees or partners. Your culture will drive success. When needed, outsource to proven vendors. For example, if you’re not ready to build out an in-house sales team, you could engage a business partner who offers BDRs for hire.
Equip your team of A players to succeed. You need a central CRM that keeps records straight “from cradle to grave” with your customers. Marketing tools are essential. Keeping your Help Desk on task prevents customers from churning. Building out QA tools ensures your product doesn’t fail to deliver on your promise. You have so many tools to choose from — find the right ones for your stage (you don’t need Salesforce to start — pick a light CRM). Just tool up as best as you can on budgets, features, and scale.
Velocity matters. Iterate fast to fix bugs and add features.
The best SaaS unicorns are ecosystem friendly. That is, they’re built to integrate. Being adaptable helps customers adopt faster.
We mentioned the importance of culture in hiring, and the best environments foster experimentation. Whether it’s conversion rate optimization in marketing or feature flags in product development, experimentation drives real growth. “The way we’ve always done it” is a death sentence (unless experimentation is the way). The road to unicorn success is paved with failure — but lessons learned from mistakes.
Once your growth process is working, automate. From employee & customer onboarding to development & DevOps, automated repeatable processes not only save time but ensure higher quality. Where an employee might accidentally skip a step on a checklist, software won’t. We’re human, so we make mistakes, and even little ones can bring down production. We have so many smart ways to build automations, from simple solutions like Zapier and IFTTT to advanced techniques like infrastructure as code.
Investors will always ask how far their investment will take you. They know that if you only build the bridge halfway across the river, you’ll fail to reach your destination. You need fuel. Raise capital before you need it. Bootstrap to start, get product-market fit, then add seed capital to scale. And once you’re scaling, you’ll go through all the series — A/B/C/D — on your way to a big valuation.
Building a SaaS Unicorn
The rarity of creating such a successful business venture is improbable, but not impossible. Building a SaaS unicorn is a lofty goal, and even in you only get halfway there, you’re a giant success. The methods are numerous while the focus on detail is the same. SaaS has grown from a new way of doing things to a highly competitive and lucrative industry. Maybe your SaaS solution is the next big thing, poised for its billion dollar story.