Predicting SaaS waves 🌊

The criticality of market timing, why PMF is gradual and should be measured as such, and The (SaaS) Office.

Jan 17, 2024

Welcome to the 90th 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: Alloy Automation’s co-founder and CEO, Sara Du, lists what PMF-seeking founders should be noticing precisely (off uncertain early-stage cliffs, in the tide and the winds of markets): new technologies, build vs buy mindset shifts, new classes of workers, and distribution channels.

#2: June’s co-founder and CEO, Enzo Avigo, recalls how running the now-ubiquitous PMF survey didn’t explain what was actually happening and how they’ve come to rely on multiple, stage-wise fit indicators instead.

#3: tl;dv’s co-founder and CEO, Raphael Allstadt, briefly sums up lessons from making an unlikely B2B growth foray with satiric TikTok skits, amassing 100K+ followers and business growth.

Finding these discerning founder takes valuable? Please consider sharing this edition with an ever-curious teammate or a much-cherished SaaS friend. 🙂 New readers can sign up here.

🗞 Recently on Relay:

➡️ Heuristics and Hunches (January 12th) — Why the Lean Startup Approach Doesn’t Work (as Often), Why PMF Surveys (Alone) Aren’t That Helpful, and Other Notes on Building Opinionated Software with June’s Co-Founder, Enzo Avigo

— Crossing the product-market fit desert
— Why early-stage research is different
— The discovery process that led them to June
— The third (opinionated!) generation of B2B SaaS
— Why measuring PMF requires multiple signals
— The inspirational-yet-grounded positioning balance
— Why June hasn’t anchored around product-led growth

#1: Predicting SaaS waves 🌊

(From: Alloy Automation’s Sara Du) (Source: Sara Du)

Finding PMF is like surfing — you can have the right board, the right form, etc but surfing a great wave requires picking the right wave and timing it just right, to catch the force behind you. And of course, just like when you know you’ve caught the wave, you’ll know when you’ve got PMF.
As a founder, you only get a few chances to surf. There are plenty of markets you can choose from, and in any given moment it can be hard to tell how certain markets are shaping up. It only becomes apparent on longer time horizons, of 5-10 years:
Luckily, there are a few ways to observe the water and catch market waves at just the right time.
New technologies
New tech enables new types of SaaS products. But, more importantly, new technology creates hype and attention. For example, AI is *very* much top of mind these days, and because companies want to look like they’re “with it,” they’re more likely to make fast purchasing decisions in that area. Shortened sales cycles are the greatest side effect of this wave.
But to ride the wave, you can’t just build an app with new technology and expect buyers to jump on it; you’ll need to get really good at FOMO engineering and learn to sell at the executive-level sell. The biggest opportunities lie in convincing Fortune 500 CIO’s (who temporarily feel like fish out of water around the new tech) that your SaaS will bring them into the future.
Build vs buy mindset shifts
New layers of the tech stack emerge as a result of new tech. Since an organization can only maintain so much headspace for building infrastructure in-house, new technology will often edge out an old ‘layer’ of the stack. Companies will adopt more of a buying mentality for that particular area of work.
A good example of this is cloud computing. Prior to AWS, a lot of companies were adamant about maintaining their own server infrastructure. Then there was an inflection point — there was more pressure to move fast, fewer customers cared whether their vendors self-hosted, and there were also more web technologies to keep up with.
SaaS companies can’t possibly build everything themselves, so eventually the whole market tipped towards buying (vs building), and gave in to 3rd party cloud computing infrastructure.
New classes of workers
When new types of jobs emerge, the power balance inside organizations changes as well. Once there’s a critical mass within a company, this new class of workers gets a pretty hefty budget of their own. This can potentially means a huge new market for persona-specific SaaS products.
Alternatively, even if a new market isn’t created, a new type of worker means a new potential champion for existing SaaS vendors. Sometimes, categories evolve to cater more towards a persona. You can see this with CDP software — ultimately marketers use CDP’s, but because data scientists had to implement them, they ended up becoming the buyers and the people vendors had to court.
Distribution channels
When you think ‘App Store,’ you might think Apple. But Salesforce’s CEO Marc Benioff was the original owner of the ‘App Store’ trademark. Salesforce AppExchange was launched in 2006, after which Apple launched the App Store in 2008. Even in just its first 5 years, it rocketshipped in growth.
…
And there’s a reason for that — for every $1 Salesforce made in 2021, $5 went to its ecosystem vendors. IDC estimates Salesforce generated **$20 billion** in 2020 revenue for its 2,000+ ISV partners.
…
If you caught onto this early, you would have had a great time surfing the Salesforce wave, or Shopify, ServiceNow, Atlassian, etc later on. There are only a handful of these types of opportunities every decade.
The ecosystems worth exploring are usually from companies that are just about to or have freshly IPOed (Salesforce listed in 2004, two years before their AppExchange launch), so I would keep an eye on Stripe, Figma, Webflow, and a few others.
Making the most of where you’re at
If you’re in the early stages of building, now’s a great time to check your hypotheses on the market you’re after. If you’ve already started building, think deeply about if the push you’ve felt is enough. Either way, best of luck, there are some great waves out there for you to catch.

#2: PMF signals 🚥

(From: June’s Enzo Avigo) (Source: Relay)

PMF is gradual.
A big misunderstanding is to get convinced of the opposite.
Because the startup stories that you read are often post-facto summaries. “We tried this, then this, then that, and then one day we pivoted and found PMF.”
Those stories happen. But mostly, there are multiple steps that inform PMF.
The first happens very early. When you start doing discovery, I think people’s willingness to talk about the problems you’ve identified is a good signal.
If you think there are issues with managing payments and you send over 100 emails to qualified folks who you feel might have those issues and you get no responses, there’s something off.
If you cannot book enough discovery calls, you really have to ask whether you’re headed in the right direction.
The next one is when you’ve built a prototype for the first few potential users and they take time to offer you feedback. That matters.
Another healthy early indicator of their interest for sure.
Then, further down the commitment chain. If people are willing to sign a letter of intent or pay for your prototype, you’re probably on to something.
Then, once you’ve put out a version 1, there’s product usage (combined with qualitative feedback). If you have great product retention, something above 40% in B2B and 60% in B2C at six months. With decent-sized (50-100) cohorts of people. That’s significant.
That’s why I love retention.
Sometimes people forget what lies behind good retention. In practice, it means that you’re part of people’s lives and it’s likely that enough of them will pay when you monetize.
There’s a qualitative take to this as well. The Sean Ellis survey which Superhuman helped popularize, I don’t think it’s that relevant. It’s nice to get some color on your PMF.
We tried it at June. Very early on. We were above 40%.
But I don’t think we were at PMF back then. Far from it. So I’ve always had doubts about it. And would prefer usage and then revenue as better indicators any day.
YC’s Paul Graham has this amazing article where he recommends if you can grow revenue 5-10% week over week, you’re clearly at PMF. Then there’s the Marc Andreesen take that you’d just know when you have it.
The reality, to be honest, is a mix of all of these things.
I wouldn’t just look at a single indicator.

#3: TikTok and SaaS 🎭

(From: tl;dv’s Ralph Allstadt) (Source: LinkedIn)

Still quite rare [hitting 100k on TikTok] for a SaaS company in 2023, so I thought I share some learnings and observations, hopefully, helpful to a few here thinking of starting a channel in SaaS:

1. Be The Kardashians, not the ad break. Entertain first. Memes go viral because they demonstrate the deepest level of understanding, summarized to the T. Memes are the next-gen thought leadership. Leave the Medium posts to the few industry influencers with actual track record 😝

2. Stay away from Vanity Metrics. After having gone viral on Unilad or 9Gag reaching 10s of Millions with single posts and virtually no spike in revenue, we refocused our target niche content on Product Orgs, and that's when Follower (&Business Growth) really kicked off.

3. Design the viral path of your content. We often portray several Product personas in conflict or harmony with each other. It takes one person to see it on TikTok, and it's shared in the company Slack to share a laugh with your team. Huge multiplier.

4. Don't obsess with tracking social. You can't. Nowadays, our TikTok is mentioned in more than 50% of our customer interactions. But if we would have started measuring business results early on, we would have stopped early. And probably, that's why TikTok is so underpenetrated as a channel for SaaS.

5. Trust your creators!! Let them run the show. Some of our most viral posts have been the ones that I was most skeptical about. And some posts I thought were hilarious ended up in the algo nirvana. Definitely don't hire me to run your Social. Tomas Budin and Ian Evans, you are doing a hell of a job.

Thanks for reading! 🌻

Team Relay (Chargebee for Startups)