How I'm approaching my next bootstrapped business
It’s now been over 6 months since selling my previous SaaS business, Jetboost. Crazy how time flies.
While I initially took some time off post-sale, since then I’ve been trying to answer the question, “What’s next?”
I’ve explored various different avenues so far, such as starting an indie game studio, an e-commerce clothing company, or even completely offline, in-person businesses.
However…
The more time passes, the more I find my energy levels returning, and ramping up for, starting another software business. I needed some time away to appreciate it’s what I truly love doing.
Since then, I’ve been reflecting on my experience with Jetboost and how I can use that to inform my approach for my next bootstrapped SaaS business.
In doing so, I’ve come up with my framework for evaluating potential SaaS opportunities. Of course, there is no perfect business. Every business has issues and trade-offs. My criteria are specific to me, my skills, experience, and ambitions.
I’ve broken this up into two categories:
- Must haves - anything I’m unwilling to forego or compromise on.
- Nice to haves - ideally the next opportunity would have at least a couple of these.
With that context in mind, here’s what I’m looking for.
Must haves
1) Not built on top of a single platform
I’m not looking to build another platform-dependent, add-on business like Jetboost. While this worked out with Jetboost, I’ve already been down that road and am ready to graduate to something more ambitious. There is a lot of opportunity in building on another platform, but I don’t want to once again feel like the ground is shifting from under me based on changes made by the platform.
2) Low technical support
This is another direct reflection of my experience with Jetboost. One of the biggest challenges we had was constant technical support, where we (usually me) had to go look at a customer’s website and debug why Jetboost wasn’t working as expected for them. Frustratingly, this was rarely a bug with Jetboost. Instead, the issue was typically due to problems with their Webflow project, CSS, or other Javascript running on their website. These were a huge pain to debug, required someone with technical expertise, and were almost always one-off issues specific to a customer’s particular setup. Many plugin businesses (for WordPress, Shopify, etc) have this same challenge, and it’s definitely not something I want to deal with again.
3) Not real-time, mission-critical
Again, referring back to Jetboost, because it was running on customer websites with live traffic, any second of downtime was immediately felt by our customers’ website visitors when features like search and filtering would stop working. This meant that downtime was extremely stressful. Usually within a minute or two customers would be reaching out to us. It also meant that doing things like database upgrades or other infrastructure maintenance was extremely challenging. We couldn’t just put up a maintenance page saying, “We’ll be back in a bit”, instead we had to continually rebuild the airplane while flying it.
This time around, I’d like to be solving a problem that is important, but not urgent.
Admittedly, of all my “must haves”, this is the one I’m most likely to budge on. While a real-time, mission-critical business is more stressful to run, it typically comes with some benefits as well, such as likely being a stickier, lower churn product.
4) A validated market
Jetboost started as the first solution in its market. There were no competitors other than users DIYing solutions. This is common for first-time founders, they tend to solve problems with more market risk than execution risk. Second-time founders are less fearful of competition.
Second-time founders and their investors often have more confidence in the Founders’ ability to execute, so they are willing to face down incumbents and competition in a proven market, betting on their ability to execute better than existing players. These ideas carry clear execution risk and less market risk up front. - James Currier
I find this rings true for me as well. I’m both more confident in my abilities and less apprehensive about competitors. Also, I learned that even if you do innovate and develop a novel solution in a market, as soon as you start to see success, others will take notice and pretty soon you’ll have competitors anyway!
5) A large TAM
Once Jetboost started to plateau, my investor told me, “I’m not surprised. You shouldn’t feel like you’ve done anything wrong. It’s just the size of the market.”
Smaller markets aren’t all bad. There’s typically less competition. Customers may be easier to reach. You can carve out a great business in a small market.
But…
The ceiling is much lower, which is frustrating. You can work just as hard, put in just as many hours, only top out at $1M ARR vs being in a 100x bigger market and topping out at $100M ARR.
Knowing that now, I don’t want to be limited by the size of the market that I’m going after this time.
Nice to haves
1) The SaaS is the system of record
There are a couple of reasons why I like the idea of building a vertical-specific SaaS tool that is the system of record for a particular industry.
First, as a product builder and creative, when you’re narrowly focused like that, you have the opportunity to truly understand your customers’ needs and craft an experience that delights them.
Second, from a business standpoint, this type of SaaS is much stickier. When your customers come to rely on your business to run their business, they aren’t going to churn. However, you don’t get this for free. The sales cycle and adoption of these products is more challenging. An organization must believe that putting in the effort to switch their business workflow to your product is going to get them to the next level that they’re looking for.
2) Clear expansion pricing metric
Compared to when I started Jetboost, this time around I’m thinking a lot more about retention and expansion. With Jetboost, retention was respectable, but not amazing. Churn usually hovered between 3-4%.
Expansion, however, was mostly nonexistent. I’d love to be running a business with a clear pricing metric that customers naturally grow into over time.
Think “number of email contacts” for Mailchimp or “file storage capacity” for Dropbox.
3) Ability to expand into adjacent areas, i.e. “land and expand”
It’s important to first make sure to solve one key workflow or pain point for your target customer. If you don’t nail that then you’ll continually struggle to onboard and retain customers. However, once you have a business that’s growing and working, it’s great to be able to expand into other adjacent spaces and not be pigeonholed doing just one thing.
HubSpot is a great example of this. They first started with inbound marketing software, then eventually expanded into CRM, customer support, and website hosting.
4) Potential to disrupt incumbents with AI
It’s a wild time to be building software right now. Nobody knows what the future holds as AI progress seems to be changing the landscape almost daily. While there’s a lot of uncertainty, this also means opportunity.
AI has made software an order of magnitude cheaper to build. Now, smaller teams can hang with, and perhaps even outcompete much larger teams. Incumbents made their pricing and hiring decisions in an environment that is rapidly shifting. Are they really willing to slash pricing and/or headcount by 75% to compete in this new world?
Lastly, I think AI will give crafty startups the ability to migrate customer data off of existing incumbents in ways that weren’t previously possible. Through a combination of AI scraping and agents, you could imagine creating a “one-click” migration button from an incumbent platform into your software.
Final Thoughts
If you’re a founder or someone interested in SaaS, I’d be curious to hear what you think of my criteria.
Do you agree or disagree with certain bits?
Do you find it overly limiting or strategically focused?
Hit me up at [email protected] and let me know!