Hidden Cancer in Mediocre SaaS Start-ups

Tl;dr; I built a mediocre SaaS startup, SharpScholar. Running a mediocre startup is like cancer: slowly attacking each part of your company – team, vision, etc until it becomes a zombie. You are constantly fighting the disease instead of building the company. The solution? Extract learnings and restart. *(See Caveats)

I have been taking stabs at creating companies for about 4 years now. The most committed project has been SharpScholar – consuming 50% of the journey. If you are building a SaaS venture, you would want to ensure you don’t become a “mediocre SaaS” as it will slowly kill all that you made – culture, team, momentum etc.

That is precisely what happened when we created, SharpScholar.

What is a “Mediocre SaaS Startup”?

SharpScholar operated for 2 years and had little to show for its progress quantitatively – only $100K in recurring sales. No consistent growth rate, could not raise Seed/VC capital, lack of product-market fit – all emerging from fundamental business issues. That is the definition of a “mediocre SaaS startup”. (See Caveats)

Most start-ups that fall in this category are ticking time bombs disguised as modest success. Why? Because;

Businesses like evolution are in the game of survival of the fittest and if your baby is deformed it will not survive.

Bottom Line: No Growth in Users = No point of existence.

Cancer That Kills Mediocre SaaS Startups

Fortunately and unfortunately, I have come to experience that there are significant downsides of running such a venture – ones that slowly take the toll on the company.

The problem is going too long without a treatment for the cancer that you have – whether it be capital, pivot, or restart. (*See Caveats) You and the team get exhausted by just putting out fires in all sides of your startup;

Operational Side – The Day-to-Day Stuff

• Endless Labor – You have too many leads in sales funnel to follow-up with and don’t have money to hire a team to handle such admin work. Overtime, it keeps increasing.
  
• Working “in” the Business – You are out there selling  – a must do when you start. However, terrible after 24 months. You are caught up in busy work … who will make the critical decisions for the venture?
  
• Doing Bare-Minimum: Many times in business it’s going that extra mile that makes all the difference. But when you are mediocre, you do bare minimum to keep customers happy – product development, customer support, sales etc and that is not a winning strategy.
  

Business Side – What Makes It Grow

• Competitive Advantage – You can’t develop one as you can’t attract resources (capital, business innovation, human resources etc.) Even if you (think you) have one – which we did – it becomes absolute overtime as you are not sustaining it.
  
• Lack of Purpose/Mission/Vision – If there is no central compelling message (i-e What, Why, How) the team can hold onto, then it eventually falls apart. Imagine being in a relationship without it, it won’t last long.
  
• Team Falls Apart – Your team is like a wolf pack with different roles to support each other. A wolf-pack in which the hunter is not hunting, watcher is not watching, and leader is not leading will be led astray. Likewise, your technology lead will pack up his tools as they were catching dust. Sales person will not go that extra mile to close a deal because he does not believe in what he is selling. The business development lead will be do consumed with putting out the fires in various parts of the business.
  

Psychological Side – The Inner-Strength 

• Thinking Small – Worst of all: you start to think small – you begin running a hobby grandpa-business. You are so caught up with busy work and with lack of dollar bills you can’t afford to spend an extra nickel and as the years roll on … you abandon the big vision and your psyche has been taken over by “begging everyday”.
  
• Zombie Business – Even worse – if you fall in these category – there is a high chance that you are a zombie business. Literally. You don’t have a soul, vision, you will eat any customer (even the bad ones), identity, sense of direction.
  
• Identity Crisis – This happens for both – the founder and the company. Founder and the startup are married and the divorce hurts. Do you take the blame or blame the startup?  But, venture was your creation so is it not all your fault? Learn to separate your identity and dependence for self-actualization from your startup.
  

R.I.P of Mediocre SaaS Startup

The cancer slowly creeps in on the operational, business, and psychological parts of the startup – and even on the founders. The damage caused by the cancer eventually allows competition to kill your company or make it commit suicide. (note: not YOU. Your company or the team).

Lessons Learned

• Tl;dr: I built a mediocre SaaS startup, SharpScholar. Running a mediocre startup is like cancer slowly attacking each part of your company – team and vision etc until it becomes a zombie. You are constantly fighting the disease instead of building the company. The solution? Extract learnings and restart.
• Entrepreneurship:
  
  • Survival – Businesses like evolution are in the game of the survival of the fittest. If you have a mediocre business, it will eventually be wiped out. Weaker get wiped out first.
    
  • Survival – The only way to mitigate yourself against the above is to focus on growth.
    
  • Financing – Bootstrap only if growth is self-sustainable otherwise you are giving aspiring to a dying patient.
    
  • Entrepreneurial Gut – Seize the opportunity to learn from creating a mediocre company and go back to drawing board to do it right.
• Communication / Teamwork: Clarity of mission, vision, and purpose (who, what, how) are key for a high-performing team to function – just like a wolf-pack.
• *Caveats – There are far too many to be listed here. Best way to summarize in one-sentence is that I would not have it any other way. My philosophy in life is to learn from it and try again – as there is no permanent failure.