3 revenue models for B2B SaaS Startups
I have built a multi-million dollar revenue business from scratch. Here are the top 3 ways to generate revenue for your B2B SaaS Startup:
1. Pay-per-outcome model: In this model, you charge on a per-outcome basis. For instance, if your Product helps the business generate more leads, you charge on a per-lead basis. For this, you need to have a sound knowledge of the domain because the cost of a lead in say banking, would be very different in the Edtech industry. So you should be aware of that for your industry. An example of such a pricing model is Google PPC (pay-per-click) ads.
2. Pay-per-usage model: In this model, you are basically the infrastructure provider to the customer and so, the risk of the outcome is on the customer. You only charge on a per-usage basis. A simple example is WhatsApp Business API where Meta charges on a per-conversation basis. Meta doesn't get into the specifics of how the conversation is helping your business. They will deliver the message and charge you for that. Other examples - Cabs, AWS, etc.
3. Pay-per-seat model: In this model, you charge the customer on a per-user basis. As the customer grows in size, you generate more revenue. An example of this pricing is Slack. Other examples include Google Workspace and a dozen other tools. This is quite a common pricing model simply because it helps you build a steady revenue stream from the customer, irrespective of usage or outcome.
There are a few other ways to increase revenue from your customers:
1. Upselling more users: If your customer is on a 100-user plan, can you convince them to add 20 more users/agents? If your product is doing well, most customers would automatically increase the number of users.
2. Upselling a higher plan: If your customer is on a basic plan, can you explain to them the value of your premium plan, so that they upgrade? For instance, your basic plan could have limits on the data storage or the type of analytics you provide. The premium plan will have higher limits.
3. Cross-selling your other products: Do you have other products that you can sell to the same customer? Go and showcase it to them. If they are the buyer, they are more likely to buy from you, than someone else, simply because they already know you and are comfortable working with your team. If they are not the right buyer for the other product, ask them for references.
What other ways do you think you can add more value to your customers so that you can get more revenue?
#startups #business #entrepreneurship
Sunday, 5 February 2023
3 revenue models for B2B SaaS Startups
Saturday, 4 February 2023
6 hiring mistakes to avoid.
1. Hiring by pedigree only. Recently I was talking to a friend who hired a 10+ year experienced IITian from one of their large competitors for their early-stage 10-member startup. She didn't interview the candidate properly and no wonder it was a disaster. She blindly trusted the pedigree of the candidate - IITian and past experience at a unicorn and obviously it didn't work out for her. IITians are not always smart. I'm sad to say that some of them have a lot of arrogance and ego. If you're hiring for an early-stage startup, you want people who can get their hands dirty and get things done. Focus on that rather than just the pedigree of the candidate.
2. Hiring from really large companies. If you are an early-stage startup, it's generally not a good idea to hire people who are working at the opposite end, which is, large and funded companies. Early-stage Startups require generalists. Large companies require specialists. If you mix the 2, you might end up hiring a candidate who is misaligned.
3. Not having clarity of the Job Description. So many founders build an 'approximate' job description. I think half of the job is done if you just spend time nailing the job description well so that the candidate, and you, both have clarity on what is expected of the job role and what isn't. Be as clear as possible on various parameters like the background of the candidate, experience, competencies, etc.
4. Not doing reference checks, especially for senior roles. So many startups just interview candidates and take a bet. While the bet may go well, there is a chance that the bet completely goes wrong. By doing reference checks, you can significantly increase the chance of the bet going right. Reference checks help you verify that whatever the candidate told in the interview, is indeed true. Trust, but verify.
5. Not interviewing the candidate properly. A lot of Founders just talk to the candidate at a high level rather than digging deep into their behavior, competencies, skills, beliefs, values, etc. So many founders do the talking themselves rather than listening to the candidate. Don't do that. Your job in an interview is to let the candidate speak so that you get to understand them better.
6. Not spending time on employer branding. Today, candidates look at the online presence of the company. They look at Glassdoor, LinkedIn pages, and founders' profiles before even applying. If you don't have decent employer branding, you're sure to lose out on good candidates. As a founder, you should go and share your thoughts online so that people get to know you better.
Important note: There are exceptions to all the above points. These are broad guidelines and not thumb rules. There are no thumb rules in Business. Whatever works for 1 company may not work for others. Use these broad guidelines to experiment and figure out what works best for your startup and apply the learnings accordingly to improve your hiring.
Friday, 3 February 2023
5 misconceptions about starting up.
1. You need a lot of capital to start a business. Nope. There are indeed some businesses that may need a high capital investment upfront. But, almost always, you only need a little capital *to start*. You can always build an MVP with a small amount of money. This is especially true for Software businesses because if you are a programmer, then you can write the first version of the product yourself. If you are not a programmer, then you can either 1.) get a technical cofounder or 2.) use no-code tools.
2. You need job experience before starting a business. Nope. I was a college fresher when I started Cogno AI and today, we have 200+ large enterprise clients. So long as your learnability is high, you don't need prior experience. Prior job experience does help, but it is not a prerequisite for starting up. There are countless other examples of college entrepreneurs who made it big.
3. You need to have a network before starting a business. Nope. Network definitely helps a lot to get access to enterprise customers or investors. But you don't need to have one in order to start a business. Today, there are so many startup incubators that help you with mentorship, guidance and help you with access to investors. All you need to do is to dilute a small percentage of your company.
4. You need to have domain expertise in the area where you are starting up. While it definitely helps to know the domain well, it is not at all mandatory. For instance, we started Cogno in the Financial Services space with ZERO prior knowledge of the space. Our first 5 clients were the State Bank of India, SBI Life, SBI Mutual Fund, ICICI Bank and Kotak Mahindra Bank.
5. You don't need a cofounder for starting up. While there are cases of a single founder doing well, it is highly recommended that you get a cofounder so that you can discuss ideas, keep a check on each other, help each other during tough times and build a team that has a complementary skillset.
Important note: All the above points have exceptions. There are no thumb rules in business. The above points are guidelines to help you increase the probability of success as has been seen in multiple cases. The above points do not guarantee any form of success and the reverse is also true - not following the above points doesn't mean that your startup will fail.
Thursday, 2 February 2023
My startup was on the verge of bankruptcy because of an abrupt Cofounder exit. 2.5 years later, we did $1M in annual revenue and then got acquired in a multi-million dollar transaction.
Here are 7 ways to grow your startup:
1. Expansion within existing customers. Make a list of your top 10 customers and go and meet them personally. Ask them what other problems they have which they are looking for a solution to. See if there is a pattern and if you can find other problems to solve.
2. Expansion to other Sectors/Industries. Talk to the prospects in the other sectors and see if a small 10 - 15% change in your product can help you open up a new industry. Then you can gradually start setting up a team that is dedicated to that industry.
3. Expansion to other Geographies. Can your product be sold to a nearby country? Travel to the nearby countries and talk to the prospects and see if they also have a use-case for your product.
4. Go up-market. Are you selling to SMEs? Try selling to 1 large enterprise. Then 1 more. Then hire a dedicated Enterprise Sales Head and then ask them to build a team. Large customers are definitely more demanding, but they also pay well.
5. If you're Sales-led, explore some Marketing channels. Try running LinkedIn/Instagram ads. Explore Google ads, Facebook, YouTube, Tiktok, etc. Hire 1 person to just experiment across marketing channels and see if they can find a channel from where you can start acquiring customers. Then double down on that channel.
6. If you're marketing-led, explore Sales channels. Try hiring 1 Salesperson and ask them to meet some prospects and pitch them your product. Give them a goal of 3 - 6 months within which they have to sell enough to fund their salary.
7. Explore channel partnerships. Ask yourself - which companies can sell your products to their customers as a bundle or as an upsell. Become their Product partner and let them be your Sales partner. Refer point #1 above for more details on this.
A lot of you might be tempted to try out everything I mentioned above. Don't do that. Figure out 1 of the 7 points above which is relevant to your business. Execute it. Then delegate it to someone. Then pick another point. Repeat. Don't try everything at once. It's a recipe for disaster.
What other methods can be used to grow your startup? Share your thoughts below.
Wednesday, 1 February 2023
13 mistakes to avoid in your startup:
1. Not getting Founders agreements done. I had a cofounder exit the company abruptly after some 1.5 years of starting up. I could save 50% of my startup only because we had a cofounder agreement. Make sure you have a lock-in of no less than 3 - 4 years.
2. Being slow with decision-making. I see so many founders getting into analysis paralysis over small things. Startups are all about moving fast, getting feedback and iterating because you cannot take decisions independently without customer feedback. So best to try and fail rather than over-analyse and not even try.
3. Not meeting customers. So many founders spend too much time on laptop building so-called "strategies" rather than actually meeting customers and gathering their feedback about their problem statements and what they want. Don't be that founder.
4. Not building a Customer Success team early on. The moment you have 2 - 3 large clients, start building a Customer Success team to retain these clients. It is easier to get revenue from existing customers who trust you than getting new, unaffiliated customers. Especially true for B2B SaaS.
5. Only chasing money. Remember that you are doing business to solve your customer's problems. Money is a byproduct. Focus on customer delight and money will follow. Focus on only making money and customers will leave.
6. Not treating your team members well. Your team members are the reason for your success. Without them, you are nothing. Take good care of them. Treat them well. Guide them and help them achieve success in their job.
7. Not being focused and chasing everything. Don't chase every sector, every industry, every geography. As Kunal Shah says - "If you try to become everything for everyone before becoming something for someone, you will become nothing for everyone".
8. Focusing too much on competitors rather than customers. If you like a girl, would you focus on what other boys are doing for that girl or would you focus on what that girl likes? Same for the customers. Focus on what the customer wants and not on what competitors are doing, and you will have a sustainable business in place.
9. Not delegating work and trying to do everything yourself. Look, we all have only 24 hours a day, of which the productive hours can be at most 8 - 12. Don't be that founder who wants to do everything perfectly and then ends up doing nothing and gets burned out. Remember - "Done is better than perfect".
10. Chasing investors rather than chasing customers. The customer is the only one who will pay you money. Everyone else will ask for money. Investors invest so that they can get more money back. Focus on the customer and the investors will follow.
11. Not planning things. Not everything can be planned because startups, especially early stage, are chaotic. But not having a plan is worse because you can't be chasing every new thing every day because you haven't prioritized your work.
12. Not taking risks/bets. Startups are all about taking calculated risks and then making them work. If you are too conservative about taking bets, your growth would be slow and that might demotivate you. It is better to take bets and fail and learn than not progress at all.
13. Quitting too early and trying too many ideas. I see so many founders trying out every shiny startup idea and then hitting a roadblock and then trying something new from scratch after a few months. This way, you definitely cannot progress. Every startup idea will have some roadblocks. Don't quit too early.
What mistakes did you make in your startup? Share them in the comments below.
Tuesday, 31 January 2023
7 best books that every single entrepreneur must read
1. The Lean Startup. This is one of my favourite books. It talks about a structured process of building a startup. So many of us think of a cool technology or a solution in mind and then try building a business out of it, only to realize that no one wants it and definitely no one would pay for it. This book talks about a structured approach of talking to customers, getting their feedback and then working backwards to build what they want. So many startups won't fail if only their founders read this book before starting up.
2. The Mom Test. This is another excellent book that talks about a structured process of customer discovery. When we interact with our prospects, we are so much tempted to talk about our startup idea rather than trying to understand the prospect's pain area. The book talks about why this is the worst way to do customer discovery. The book also explains how to ask the right questions which will truly help you discover insights about the pain area.
3. Blue Ocean Strategy. So many of us are worried about the "competition". Look, Lamborghini is a great car. But then you cannot drive it on Kanpur roads and so, for someone in Kanpur who has a million dollars to spend on a car, they'd rather buy a car with a higher ground clearance. Does that make Lamborghini a bad car? No. Customers don't care what product is "better". They care about the product that solves their problem. This book talks about what I just said, in great detail.
4. The Hard Thing About the Hard Things. Social Media influencers have glamourized entrepreneurship. We all keep hearing stories about 21-year-olds who made millions of dollars with some shortcut. This book talks about the real struggles of entrepreneurship which we don't really here. The stress that a founder goes through in day-to-day life. The anxiety. The pressures of investors. The deadlines. Running out of cash. Layoffs. The book talks about many such issues and also explains solutions to some of them.
5. Atomic Habits. This is one of my favourite books and should be read by everyone, whether or not they are an entrepreneur. We all are fascinated about doing BIG things in life like building a BIG business or making a BIG change to our life habits. But the reality is that when we actually start to execute our BIG plan, we all fail miserably. Why? Because taking too many BIG steps in life makes life difficult. The book talks about how small, consistent steps can help us achieve similar goals in a sustainable manner.
6. Think and Grow Rich. This book talks about the principle of autosuggestion, which, according to me, is one of the most powerful things that anyone can learn. Thoughts lead to belief. Belief leads to action. Action leads to behavior and behavior leads to identity. So, whoever we are, or whomever we want to become, starts with our thought process. If we can master controlling our thoughts, we can control our destiny. This is what the book explains.
7. Rich Dad Poor Dad. Every single entrepreneur must read this amazing book that explains how money really works. We all want to earn money, but we won't be able to do that at scale if we don't understand how money really works. This book talks about that in great detail with an interesting story of a guy, his dad (poor dad) and his friend's dad (rich dad).
Monday, 30 January 2023
2 most important skills that every founder must learn.
I see so many founders who are great at Engineering and can hack their way through any kind of Technology quite easily. In fact, I was like that in college where I did my undergrad in Computer Science and Engineering.
However, now I don't actively write code anymore.
Because my startup needs me more for other things.
What other things?
Here are the 2 of them:
1. Acquiring more customers
2. Building a great team
My job as an entrepreneur is to build a system that generates profits. Who will pay the money for these profits? Customers. And who will serve these customers? The team.
That's it. If I can do these 2 things really well, I don't have to worry about anything else. Essentially, every Founder must learn 2 skills:
And then repeat it again, and again, and again. Every single day. Acquire more customers. Build a great team. Acquire more customers. Build a great team.
Sunday, 29 January 2023
Get Cofounders who are opposites.
Many college entrepreneurs team up with their friends to start a startup. Unfortunately in many such situations (including mine), we end up partnering with our friend who is exactly like us - they'll also know programming, same college, same batch, and have similar skills. Today, for instance, I met 2 friends trying to do a tech startup and both are CAs.
This is the easiest recipe for disaster. Let's understand why.
To run a startup, you need a bunch of different skills - Engineering, Product Management, Sales, Customer Support, Recruitment, etc. When 2 friends, who are similar, start together, they bring in 1 or 2 skills very well to the table. But what's missing is the other skills. For instance, when 2 Software Engineers start together, they'll be able to build cutting-edge technology. But none of them would know how to take it to the market and make a sale.
This is where the problem lies when it comes to partnering with Cofounders who are your college friends from the same branch and have a similar skillset as yours.
I made the same mistake when I started Cogno AI (my startup) back in 2017. My former cofounder was a friend from IITB CSE. We both were great at technology. We both had similar strengths and similar weaknesses. Needless to say, our partnership didn't work and we could not get the startup off the ground. He eventually left after a year, trying to pursue something else.
When my former cofounder left, I got my friend Harshita to join me as a co-founder. In the 1 year that I did business with my former cofounder, customers had started to know me and at the same time, none of them knew Harshita. So Harshita and I divided the roles. I looked at all the customer-side stuff. She looked at all the internal stuff.
So basically I became the face of the company in front of the customers and she worked in the backend, providing all the necessary support once the customer was onboarded. That worked like a charm and we could scale the Business to multiple millions of dollars in revenues.
In fact, personality-wise also, Harshita and I are very different. For example:
1. I'm a huge risk-taker. She is very conservative.
2. I speak a lot. She speaks less.
3. I am really active on Social Media. She is not that active.
4. I love talking to the outside world. She prefers to not do that.
5. I look at the big picture. She is great at attention to detail.
Needless to say, we both form a great team because of our complementary skills and personalities. We both joke with each other that if both of us were like us, we would have gambled the company away, and if both of us were like her, the company wouldn't have started in the first place.
This balance helps us a lot. Whenever a crucial decision is to be taken, we both are able to evaluate the upside and downside really well. This ensures that we take the right decisions.
While the Founders of a Startup must have complementary skills, it is important that the vision is aligned in the same direction so that all the Founders can work together towards the common goal of building the Business.
What's your skillset and does your cofounder carry a complementary skillset?
Saturday, 28 January 2023
The importance of a Cofounder Agreement.
I started my startup in April 2017 with a friend of mine from college. We both were good friends and knew each other for about 4 years. We started on a positive note. Incorporated a company and had an equal 50/50 stake in the business.
Later, we got incubated at SINE, the IIT Bombay Startup incubator. SINE invests a small amount of money against a small amount of stake and helps startups get off the ground by providing them guidance, mentorship and access to investors. We got incubated at SINE in June 2017.
As a process, SINE asked us to mandatorily sign a Cofounder Agreement. My co-founder and I were less than a few months out of college and so, we didn't really realize the value of that agreement. But we had to do that as a process of SINE incubation.
We quickly did a Google Search for the Cofounder Agreement format, went through it and started customizing it to our requirements. One of the clauses talked about a Lock-in period. Both of us were naive and so, we didn't really go through it in detail. Here is the clause:
"The Founders hereby agree that the shares held by them in the Company shall be locked in for a period of [*] years (“Lock-in Period”) from the Execution Date. The Founders and the Company hereby agree to take such steps as may be required to give effect to the provisions of this Clause."
Here, the [*] was to be filled by both of us. We both decided that 2 years is a good enough timeframe and so, we made it 2 years and filled in the rest of the details in the agreement and signed it and submitted it to our incubator.
This agreement was signed on the 29th of July 2017, 3 months after we incorporated our startup. Fast forward to the 6th of August 2018, slightly more than a year after signing the Cofounder Agreement, my cofounder decided to quit. He owned ~50% of the shares of the company when he quit.
Only and only because of the above clause, I could save that. Otherwise, I would be forced to lose 50% of the company to a cofounder who quit barely after a year of starting up.
That incident taught me a lot of things:
1. Legal Agreements can be a big saviour when things go wrong.
2. Not everyone thinks long-term.
3. People can quit abruptly without any notice.
After this incident, I have been generally very particular about all legal agreements, especially the termination clauses like the one above. These clauses help ensure that your rights are protected and that the parties don't end up fighting with each other because of prior verbal discussions.
If you are running a startup and do not have a Cofounder Agreement signed yet, please do it now. You will do a big favour not only to yourself but to your customers, team members and investors.
Thursday, 26 January 2023
Sunday, 22 January 2023
Thursday, 19 January 2023
I sold my startup in a large multi-million dollar transaction making me a Millionaire at 26. Here are the lessons I learned in the journey:
1. Focus on giving rather than taking: I see many people wanting to earn millions but not making any effort. Look, money is just a measure of the benefit that you've done for others. So focus on creating benefit/value for others rather than chasing money. If you help others solve their problems, they will surely pay you and you will end up making money.
2. Take care of your team members and they'll take care of your business: You can never succeed alone. You will have investors, advisors, and most importantly, team members who will give you 9 precious hours of their life, every single day to help you achieve your goals. You should take good care of them so that those 9 hours that they spend for you, they do it with their full heart and soul.
3. Focus on customers rather than chasing investors: So many young founders chase investors. At my startup, we completely were customer-funded. Our customers used our product and got benefits, and in return they paid us. So, we never had the need to go out in the market and ask for money. Investors will chase you if you have paying customers.
4. Get Cofounders who have a complementary skillset but a similar vision: My cofounder Harshita and I are completely opposite. I look at the business side, she looks at Product and Engineering. I am an extrovert, she is an introvert. I love to think about the big picture, she is great at finer details. I love to be active on Social Media as the face of the company, she has to spend considerable effort to write a simple post on LinkedIn. But, that's exactly what is helping is move the company. If it was 2 people like me, we would have gambled the company. If it was 2 people like Harshita, the company would have never even started. Striking the right balance is the key.
5. Think big and take risks: Imagine a 21-year-old guy who comes from a family that earns less than Rs. 10 lakhs a year and gets a US package of Rs. 1 crores per year and an Indian package of Rs. 47 lakhs per year. Imagine that guy telling his parents - "I will not go for any of these job offers, but rather start something of my own. I have no clue what I will do, but I want to give it a try." Yes, that was me. Can you take such risks? In any such risky situation, there is the downside and the upside. Many people focus on the downside. Millionaires focus on the upside.
6. You can earn more money but you can't earn more time: You can earn as much money as possible, but the time once gone is gone forever. So, utilize it wisely. Don't waste it. Manage it properly. Focus on the high-impact activities and delegate/drop the rest.
7. Be a learning machine and read a lot: I spend several hours of my day in learning. I read books, I listen to podcasts, I read articles, I consume startup news and whatnot. I try my best to keep myself updated on the ongoing market trends, technologies, etc. That's how I am able to take better decisions.
8. Think big, Act small: I see so many people spending infinite time just thinking and not executing at all. Don't be like that. Have big dreams, but then find out what is the smallest step that you can do today, to reach a step closer to your dreams. If you want to earn millions of dollars, you have to start earning $100 today!
Tuesday, 17 January 2023
I see so many students these days, wanting to earn money and be financially independent right in college itself. I was like them - I never took a penny of money from my parents after I went to college. FIITJEE, my JEE coaching institute gave me Rs. 4 lakhs of scholarship and I also won another Rs. 1 lakhs of scholarship from some of my FIITJEE teachers who left FIITJEE to start a coaching institute of their own.
Here are some ways by which you can earn money while in college itself.
1. Internships: I did my internship at Rubrik's US office and they paid a stipend of $8000 per month. I spent $1400 a month on accommodation and another probably $600 a month on food and other expenses during the internship. Less the taxes, in Indian currency, I saved almost Rs. 8 - 9 lakhs. Rubrik also paid for round-trip flight tickets from India. Find ways to upskill yourself and get a good Software Internship.
2. Freelance Web and App Development: Another great way to earn money. So many startups and small companies want someone to build a Website or Mobile App for them. You can post on Social Media and find such companies. Alternatively, there are freelancing platforms like Upwork, Fiverr, etc., where you can find such work. Of course, you'd have to spend some time finding clients. But I think freelancing is an amazing way to make money.
3. Teaching Assistant. I was a teaching assistant in 5 different courses across 5 semesters. I got paid Rs. 6000 a month for taking an hour-long class every week. That's a cool Rs. 1.5k per hour for teaching others and improving my own communication skills. I earned roughly Rs. 1 lakhs by being a Teaching Assistant.
4. Solving and creating questions for competitive exams. So many Edtech startups want to hire smart people part-time to create questions and solutions for competitive exams. I worked part-time at Toppr and Slader during my college days and earned a few lakhs.
5. Coaching classes. I never did this, but some of my friends did. So many students want to learn Physics, Chemistry, and Maths from IITians who have been there and done that. Many people pay as much as Rs. 5k per hour. Yes, you read it right. You can earn that much in college.
6. Freelance Content Writing. If you are not good at Programming, you can go for Freelance Content Writing. For standard articles, the pay isn't that lucrative. But if you can write articles on specialized topics, you can earn as much as Rs. 2 per word. For a 1000-word article, you can make Rs. 1500 - Rs. 2000 which isn't bad. You can write 2 articles a week and make Rs. 15k - 20k a month extra. I made lakhs of Rupees by writing articles on specialized topics like Machine Learning, Face Recognition, Web Development, Python programming, etc.
7. Stock Trading. I have never done this, but I know of folks who made money trading in the stock market. It is risky and usually not advisable, but I am mentioning it here because these days, there are so many courses in the markets that teach Stock Trading. Again, I would like to repeat that Stock Trading is risky and I haven't done it in college and neither do I do it now. I am a long-term fundamental investor rather than a Trader.
8. Affiliate Marketing. I made lakhs of Rupees via Amazon Affiliate Marketing. I wrote a blog on JEE preparation and received tens of lakhs of page views. So many students asked me about the books I used during my JEE preparation. I shared Amazon links to those books in my blog and Amazon paid me 10% referral fees on each sale. I remember, during the peak seasons, I earned as much as Rs. 25k a month in referral fees. Of course, Affiliate Marketing requires a lot of effort in creating a credible brand for yourself.
What other ways can you earn money in college? Share your thoughts in the comments below.