5 ways to build $100m SaaS business
Look beyond the animal metaphor and hunting
To build a $100m SaaS business go to market strategy is the key. Back in 2014 when we started, we never knew that there is a framework to look at Go-to-Market (GTM) strategically considering different factors like marketing, sales, product virality, etc.
Christoph Janz from Point Nine Capital in his famous article - Five ways to build a $100million business gave a great framework to think about GTM and the mechanics involved in building a $100m business. This article is a reference for many founders, VCs, and the SaaS community. He recently updated the article with few tweaks - Five years later: Five ways to build a $100m SaaS business. I thank Christoph for putting together such a framework and helping many SaaS founders (including my founding team) think about the right GTM.
I have three contentions with this framework. These have popped up during my discussions with friends outside of tech.
The animal metaphor
Usage of word “hunting”
Removing $10 ARPA from the graph
Long live animals, you will not be hunted anymore
I understand that it is a metaphor and shouldn’t be taken literally. During many conversations, I heard founders, VCs, and myself saying - ‘we are going after (or hunting) the Deers and will soon go after Elephants.’ It is lame and insensitive to use such language.
The reference to animals or usage of ‘hunting’ language doesn’t evoke a positive emotion. Especially given what's going on right now around the world with all the ongoing violence against animals, . It is okay to say one is good at hunting leads but it sounds gross if we say this sales rep is good at hunting elephants. Going forward, we should stop using this language in VC board rooms, founder conversations, and across the tech community.
Now, how do we explain this framework to anyone? What is the new metaphor? What is replacing the word ‘hunting’?
I tried coming up with a metaphor that has a neutral tone and no reference to any form of violent usage of language. Here is what I had come up with (and I’m open to other ideas)
The mice are now scooter, the rabbit is now bike, the deer is now car, the elephant is camper (the icon is inspired by Volkswagen camper), and the whale is now the bus.
We don’t need to hunt anything. We can start “chasing” the scooters, bikes, cars, campers, and buses. So long flies, mice, rabbit, deer, elephant, and whale. You are free.
X-axis - #Customers, Y-axis - ARPA in 1 year
To build a $100 million ARR business, you need:
100 large enterprise customers (buses) paying you $1m per year each; or
1,000 enterprise companies (campers) paying you $100k per year each; or
10,000 mid-sized businesses (cars) paying you $10,000 per year each; or
100,000 SMBs (bikes) paying you $1000 per year each; or
1 million active consumers (scooters) who you monetize at $100 per year each by offering an email service like hey.com
I have tried few more versions of the same metaphor.
X-axis - ARPA in 1 year, Y-axis - #Customers
Here is the graphic in dark mode. I have added the vertical lines to make it explicit for someone who is looking at the graphic for the first time.
I also made another graphic for this framework which includes $10 ARPA. I understand it is difficult to get 10,000,000 users to pay $10 a year in SaaS and maybe the $10 ARPA product business math might not make sense for VCs. But I would love to have it there so that it encourages an Indie Hacker or a founder to start small and build a bootstrapped business over two decades.
The $10ARPA would be a scooter and the $1,000,000 ARPA would be a rocket (the icon is a tribute to SpaceX).
X-axis - #Customers, Y-axis - ARPA in 1 year
Lastly, I have designed one more graphic to present 5 ways to build a $100 SaaS business with Space X theme as a tribute to the recent launch.
All SaaS founders, VCs, and the community let’s change the dialogue. Let’s start chasing scooters, bikes, cars, campers, and buses. If possible let’s chase the rockets too!
Thanks to Rajan from Upekkha and Ariane Gogny for reading drafts of this. Thanks to Ram for helping me with this design.