WHY SaaS STARTUPS FAIL

What are SaaS Startups?

SaaS which is also known as 'software as a service 'is one of the main components of cloud computing. Basically, what SaaS companies do is host applications over the internet, and make them available for customers. The products only need to be on the company’s server, while users can access them remotely. With the advancement in technology, the barriers to developing a SaaS platform is at an all-time low. However, research has shown that a whopping 92% of SAAS startups fail within 3 years of establishment. This shocking statistic brings to mind questions such as, why do these companies fail? what mistakes did they make? and how would they have been able to avert the errors? This article is focused on answering the aforementioned questions.

Common mistakes made by SAAS Startups

Research has shown that there are several reasons why SaaS startups do not stay up to three years before folding up. This article discusses two of these reasons.

Lack of Proper Market Survey

Many SaaS startups, for fear of their ideas being stolen, do not make proper inquiries before launching. Hence, they end up creating products that simply do not fit into the market. According to CB Insights, about 42% of cloud startups stop operations due to this reason. A typical example is the SaaS platform, Eventloot which was built in 2014 to aid wedding planning professionals. The company had to shut down in 2017 because the product was not solving the problems that wedding planners had. The lack of a proper market survey makes many startups either create the right products at the wrong time, leading to a decrease in market interest or create products that are simply not needed at all, forcing them to fold up after a few years.

Poor Management Team

Another common mistake amongst SaaS startups is poor management. Many of these startups fail to understand that creating a product is not all there is, sustainability is core as well. On the outside, the development team may appear to do all the work, but the knowledge and expertise of the management team are needed for the growth of a SaaS business. Often, companies focus on gathering the best team to build products but pay little or no attention to hiring competent administrative staff. They pass the market-fit test, and their services are greatly accepted. The first few months are usually exciting, with so much rave about the service, both from sponsors and customers alike. However, after these first few months, there is usually a decline because while these startups focused on the technical part of the business, the managerial aspect was ignored.

Bring it all together…

Indeed, managing a business – any business at all is demanding, however, when certain things are put in place, these challenges can be surmounted, and the business can thrive. One of the foremost things that a SAAS company ought to do before putting out a product is to carry out thorough market surveys. These researches will enable them to determine their what, who and when. Furthermore, being accepted by the market is just one step to growing a business, hiring the right staff for the different sectors within the organization is key for sustainability.