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When Building B2B SaaS, Start With The Customer and Then Grow From There

May 9, 2022
Written by Golden Section

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Start with the customer – There is no greater task for a B2B software founder than to know the customer using and benefiting from their product.

Branding, scaling, growing, team, culture… there are thousands of things to think about when growing a B2B software company, but only one truly matters. This doesn’t mean the other things don’t matter, but rather if a founder gets this wrong, then Bowser wins… game over.

The main thing is the product must satisfy a true customer problem. This sounds hopelessly simple and reductionistic; but in practice it is extremely difficult to get right. It is the core of a B2B software company. It is the heart and life blood and without it, the other functions of the body do not operate.

The graveyard of founder dreams is filled with beautiful and complete products. Many of these products are functionally complete and functionally satisfactory to the customer’s specifications. But function isn’t all. If the customer can’t see their problem getting solved by the product, then it won’t work. There is no greater task for a B2B software founder than to know the customer using and benefiting from the product.

Getting customer knowledge

The shortest put to building a product that satisfies a true customer problem is to be the customer yourself. This doesn’t mean holding a skull and invoking the bard to embody them. Not at all. Being the customer means that you have lived that problem and are an expert at it.

Living the problem is not something that you can do easily nor is it something someone can teach you. It comes from operating in an industry, seeing a problem that you personally experience, and then envisioning a solution. It means thousands of frustrating encounters with the current solutions, trying every conceivable workaround and still seeing mountains of opportunity in front of you.

At Golden Section, our primary filter on a company’s knowledge of the customer problem (and therefore their ability to meet it with a solution) comes from the founder’s personal lived experience with the problem. Anything less takes a lot of convincing for us to get comfortable. We expect that the cost to acquire that knowledge and perspective will far outstrip our ability to finance the company and make the entire project unprofitable.

Why is customer buy-in so important?

The first few decades of software development were characterized by extremely high cost and taking customers from people driven paper processes to the easily superior electronic twin. Computation became automatic and accurate, and organizations flattened. These early wins created new opportunities for the second and third generation of software companies. Each generation could dig deeper into a niche and develop a system with a more natural language, hierarchy, and architecture.

Where the first inning of the software revolution brought the novelty of computational power into the enterprise, this later inning is centered on customizing the fit of that computational power into the norms and culture of the niche. Subsequent innings will continue this trend and further segmentation within software verticals will continue. The natural result of this segmentation will be best in breed solutions for culturally similar cohorts of customers.

The emergence of new computing norms can disrupt this cycle. For example, in the late 1990s on-premises solutions were following this trend and the number of small niche software companies exploded. Then cloud computing became a new computing norm which birthed large horizontal players that could dominate across cultures with an easier workflow driven by the novelty of the new computational power. This novelty is wearing off (as it relates to multi-tenant software companies) and the niche operators are proliferating. The emergence of a new computing norm (quantum for instance) could cause a similar shift in this otherwise secular trend.

How to get customer buy-in

Knowing the customers and their norms is the first step in defining what to build. The next step is fitting the software solution into the norms. Selling software is selling change and people like change about as much as they’d like a hole in the head. It is friction. The founder’s job is to smooth out that friction.

If the founder has lived this problem before, then there is a camaraderie that helps smooth out the friction. But friction must be smoothed out in other ways as well. Here are a few ways that we commonly see friction in product adoption:

  1. Price and pricing – This is more than just price. Obviously, price is friction you can’t remove. But the way the price is associated with the value provided and the way the pricing is conveyed are all very cultural norm-dependent for customers. Hence, price is a part of the product.
  2. Security permissions and user hierarchy – There’s the way we think an industry ought to operate and there’s the way it does. These are rarely the same. The outsider will insist upon ‘ought’ while the insider will swim with the current.
  3. Colors and tone of the user experience – This can be as heavy a friction item as anything. The system must meet the users where they are at now.
  4. Sharing and data access – Cultures have norms on sharing and data access which may or may not make sense to outsiders. They are driven by past practice and internal stories.
  5. First impression – Similar to the colors and ton friction mentioned above, but distinct in a few ways. This refers to the first encounter with the product. Some cultures need seamless interactions with features suffering; other cultures need feature optionality over ease of use.
  6. Reporting flexibility – Every SaaS company has heard the request for a flexible report builder. And the novices (me included) who have fallen for it then found that feature completely unused (despite consuming a herculean portion of development resources). Some cultures are more advanced than others in their data processing capabilities. These must be weighed out and met with an apt product.
  7. Interoperability and app access – Different cultures (and different products) have varying levels of reliance on a product ecosystem. This is a function not only of the cultural affinity to multi-solution tech platforms but also the depth of the ecosystem of applications serving that culture.
  8. Usability – This is a hopelessly broad section. Some cultures support large contract values because the economic impact of maximizing human labor input is extremely large. For others, this impact is smaller. The impact value sets the price of the product and drives implications for training that can be delivered. Every founder wants to bring a ‘no-training-necessary’ product to the market, but in many cases this isn’t practical.
Note: this is not a comprehensive or exclusive set of friction points. It is just the set that came to mind from my experience.

The founder’s job is to craft a product that meets the culture that she is serving. This product encompasses more than just the core workflow of the product. It encompasses the sales process, the onboarding process, the account management process, and the renewal process. These are critical components to how a customer interacts with the product and, ultimately, whether the product will bask in the warm sunlight of product-market fit or languish in the darkness of obscurity. If you build it, they won’t necessarily come.

Ditches to avoid

Software is an unusual product category. The function is so closely tied to the form and tangled in the cultural norms that two products with identical specifications can have wildly different adoption due to non-specification related items that have cultural impact. If someone has a use for a hammer – a core use not an edge case – most hammers will do. A ballpeen, brick or claw, all those hammers will drive a standard nail into a 2×4. Not so with software.

Software is not just a tool. It is a tool the user wears to execute tasks. It is an exoskeleton that must ‘feel’ right to the user to gain adoption. Many founders have fallen into the following ditches when bringing their product to market. Avoid them like the plague.

Mistaking customer enthusiasm for product market fit

Startup life is sexy. The industry might be four minutes into its five minutes of fame, or perhaps the religion of startup worship is entering its own as a major world ideology. Either way, customers love hearing about new products coming to their industry. They love this so much that most large companies have innovation departments – entire groups of people devoted to finding startups and trying out solutions.

This dynamic causes challenges for founders. In the early days, founders are particularly susceptible to hearing positive news. They have staked everything on this venture (or hopefully they have). And gravitate toward friendly audiences like a fly to the blue glowing hum of the UV bug lamp. Often it is too late when they realize the audience they were chasing was either:

  1. Not a relevant subset of the culture they are serving
  2. Not a person with budget at the company they represent

This is toxic and extremely dangerous. At Golden Section, we have encountered hundreds of companies that fit this profile. In looking over the current install plan and the pipeline, it is relatively easy to discern the true customer fit conversations from the self-reinforcing hivemind of corporate innovation discussions.

Founders thinking, they have lived the problem

The best way to know a problem is to live it and drink it the pain and discomfort. It is rare for someone with the aptitude and capability to bring a product to market to also have the stamina and discipline to languish in pain without action. But this is the exact paradox of the situations. Founders cannot access the nuance needed without living the painful reality far past most people’s breaking points.

As a result, some founders try to short circuit this. They find a veteran of the industry upon which they hang the hat of conveying nuance. Or, worse yet they fell for the siren call of startup life and then searched for a product to bring to market. And in this search concocted a story that they told themselves enough times to manifest it at real in their subconscious about how they have lived this pain.

This story telling is usual for founders and can be a key part of the psychological heft needed to overcome the darkness of starting a business. But it can also blind a founder to the cold hard reality that they don’t really know the problem. This story telling is so powerful that it can re-write memories and create alternate universes.

The founders who find an industry veteran to convey the nuance miss an important point: the veteran might be complicit with the way things are. Startups are sexy right now. This sex appeal can attract apostates to the belief nominally driving the startup. The veteran rarely works out.

Founders getting too pumped about the technology

Early-stage teams will always include technical people. Even if the technical execution is outsourced, the early-stage team will include people familiar with technology and the trends upon which it rides. Founders can get too enamored with the technology they are using and it’s relative popularity and miss the need to create an actual product.

This happens at the bleeding edge a lot but can also happen in more established domains. For example, when new file formats come out there is usually a flurry of startup activity. Sometimes this is justified because the format changes deliverability or permissioning or some other way that industry operates. But often, these startups are dress rehearsals for the format and not the real deal.

This isn’t just about formats but also happens with development frameworks, computing, and other aspects of the ‘how’ behind a B2B SaaS company. Founders need to be discerning when thinking about the product. Picking the right tech stack is important but ultimately it is not the product. The product is what is done with that stack and how it meets customers where they are and delivers them a context-rich value statement that they resonate with and enjoy.

This article is an extract from a case study we published recently published titled “A Founder’s Journey Through Building a B2B SaaS Company“, written by Dougal Cameron that shares some of our experiences building startups and journeying towards meaningful exits.

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