Pioneered by Salesforce, Concur, and the likes in the early 2000s, SaaS has been on a strong uptrend ever since. Today, it is a multi-trillion-dollar opportunity and still growing quickly. It already has more than 50 publicly listed companies, as tracked by
BVP Nasdaq’s Emerging Cloud Index, and a large number of up-and-comers.
The broader SaaS market and the successful companies in it have been hot topics in technology publications for a while now. But one specific question, responsible for ~50% of the total market cap of SaaS companies, is yet to garner much media coverage. It is: how can someone approach creating a SaaS category, i.e., a new class of SaaS software that doesn’t yet have any directly comparable products in the market?
So, as co-founder and investor of MindTickle, a SaaS platform that’s the global leader of a rapidly emerging category called sales readiness, here are the top 5 learnings on SaaS category creation from our journey.
1. Identifying a category creation opportunity
As technologies are adopted more and more across our personal and professional lives, it’s only natural that many new SaaS categories will be created in the next few years. But how does one identify a specific opportunity among these?
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One way to start could be to look at the business functions and processes that don’t yet have an “operating system” in place. To draw historical parallels, this is very similar to how steam power and electricity were applied to modernise new industries during the first and second industrial revolutions, respectively. If the steam engines could be used to make blast furnaces more efficient, it was practically inevitable that someone would use them to improve other industries—say a flour mill or a paper factory.
Mindtickle, much like many of today’s SaaS majors from ServiceNow to Atlassian, has also followed a similar theme. We started our journey with a gamification platform for HR organisations. But while interacting with early customers, we realised that sales training or enablement functions in large enterprises didn’t have any operating system of their own and still relied on outdated or generic technologies. So right after, we decided to pivot to solve this newfound problem and built the world’s first sales readiness platform.
2. Targeting the right market
If you are selling something that has never been sold before, you already have a tough adoption battle ahead. To make it slightly easier, identify an early adopter group willing to try out new software products even before they are truly finished.
The canonical advice is that the two coasts and the large cities in the US have a higher concentration of early technology adopters. It’s also easier for budding international companies to sell in the US than other technologically advanced markets such as Europe or China, where cultural and legal barriers could be higher. However, these are more norms than rules, and you should consider what’d be the best given your specific problem statement, cultural experiences, and go-to-market capabilities.
The good news is that over the past three to five years, many buyers across geographies and functions have become increasingly comfortable buying SaaS online. Hence, if you have a compelling value proposition and can provide the necessary support in time zones acceptable to your early target customers, your geographic location is unlikely to obstruct your initial market reach. However, it’s often prudent to add customer-facing teams in places and time zones closer to the customers in the later stages of a company.
3. Evangelising the category
When you try to create a new software category, it’s imperative to create awareness in the overall market, even among the potential buyers and other stakeholders who might not become your customers immediately.
Many SaaS pioneers have done this “category evangelisation” incredibly well, such as Salesforce, Hubspot, and Gainsight. Some avenues that successful category creators have leveraged are:
- Publishing a steady stream of valuable content—think articles and blogs—containing unique insights and best practices relevant to your buyers and users.
- Engaging industry analysts who cover nearby sectors or your target buyers.
- Participating in industry conferences and forums, with a focus on sharing your unique insights and best practices.
- Incubating a community of like-minded people who eventually become influencers championing a narrative, besides helping each other get better at their jobs.
4. Making buyers successful
It’s often said that enterprise software products are in the business of making their buyers successful. This saying is perhaps even more true for new categories.
If your buyers and users are sticking their necks out to get through the internal approval processes and secure budgets to adopt your unheard-of software, you owe it to them to make them successful. Also, when they become successful, they’ll tell their friends and peers about you, generating invaluable word-of-mouth marketing. So, invest heavily in customer support and success functions. Actively listen to your customers’ feedback. Go any distance to make your power users successful.
At Mindtickle, shortly after we found our product-market fit, we decided to build world-class customer support and success functions. Today, our customers regularly rate our support and success experience very highly and often cite it as one of the significant drivers of their positive experience.
5. Being in it for the long haul
When done right, the creators of new SaaS categories reap huge rewards and become massively successful. However, the category creators often take a significant period to reach the critical mass of awareness and adoption. For reference, the largest 10 SaaS category creators to go public after 2015 took 13 years on average (median) to achieve this feat.
Also, the road is often far more complex than the smooth “hockey-stick” growth curve that’s often pitched as the ideal startup journey. So, when it comes to creating a new SaaS category, patience, persistence, and perseverance are the superpowers that often separate winners from the rest.
Category creation is cool, but will investors fund it?
While investors often use pattern-matching based on their experience for investing, they love true category creators. It is a well-known fact in the VC industry that category winners can create disproportionate value: Google owns >90% of the global search engine market, Uber commands ~70% of US ride-hailing market share and Apple accounts for 60%+ of global smartphone profits.
If you are a category creator, you will take higher risks, but you also have a leg up on the competition in your journey to category dominance and value creation. However, investors will differ in their conviction on the category itself as well as your ability to win the category. As an entrepreneur, you need to be able to convince them on the validity of the problem and the effectiveness of the solution, and prove it will work. An evaluation framework in the context of Mindtickle could have been the following:
- Is the problem real?
Is sellers’ productivity a problem for today’s businesses? A staggering 57% of sales reps don’t meet their quotas!Are the current methods of training/ preparing sellers working? Today’s sales reps forget 70% of the information they learn within a week of training, and 87% within a month! And this is not for lack of trying—companies spend $2,300+ per sales rep, annually, to train them!
- Is this solution effectively catering to the needs of different stakeholders? Conversations with different stakeholders, including Mindtickle’s customers and industry experts, validated that their current technology is offering a compelling solution to the stated problems.
- Proof that it is working: Mindtickle’s marquee customer base, publicly available and privately verified customer reviews, retention metrics and business growth showed us the proof of their product-market fit.
When Mindtickle started way back in 2011, the team barely knew the term SaaS and certainly knew nothing about “category creation”.
Our journey has been a mix of many things—some missteps, days and even months of unnerving struggle, relentless execution from our 600-strong team, occasional strokes of luck, the opportunity to innovate with leaders from our 220+ enterprise customers. But above all, through thick and thin, it has been a learning experience that we couldn’t have foreseen 10 years ago. We would wish nothing less for the next generation of founders who choose to chart this exciting, if uncertain, course.
Krishna Depura is cofounder and CEO of Mindtickle. Sumer Juneja, a partner at SoftBank Investment Advisers, is a board member and investor at Mindtickle.