9 Things I Wish I Knew Before Starting My First SaaS Business

rollercoaster

I started HubLogix (formerly eCommHub) in late 2009 while still a senior in high school. After 6 years on the rollercoaster and growing the business to 30 employees with $7.5M raised, here’s what I’d probably do differently next time around.

Disclaimer: These lessons are specific to my own experiences and may not translate directly into advice that makes sense for you or your business. Every business and every startup journey is different.

#1 Have a technical co-founder

When I first started HubLogix, I was technical enough to be dangerous. I had built ecommerce websites before and knew front-end web development. I had just recently interned at a Ruby on Rails shop and was amazed by the agility at which one could build a new product using a framework like Rails. So I picked up the Ruby Pickaxe book and got to work.

I never finished the book, but I read enough to know the basics. I started building out a prototype for the idea using contractors on oDesk. I would code and style the front-end views, then have them “wire up” the backend stuff. It was a pretty good system that worked the first year or two (I was still in high school and Georgia Tech at the time).

While this was super scrappy and let me build up a base of a couple hundred “beta” customers (not paying). This early success fooled me into thinking I could get by without a technical co-founder. My thinking was that I could later hire a super talented developer or development team to take it over then.

What was wrong with this thinking? Well, a few things:

  • Developers are expensive. Not to mention, incredibly difficult to find and attract in the first place.
  • The developer(s) who inherit the pre-built application do not know its history. They also inherit all the bugs, problems, issues that come with it. This makes them less able to take full responsibility for its success, not to mention makes it difficult to fix bugs deep in the application’s guts without doing a complete re-write of the system.
  • It’s super hard to hire a development team later without having someone technical on the founding team

About a year into HubLogix, around the time I dropped out of Georgia Tech, I actually did go on a hunt for a technical co-founder. We worked for a few months but things ended up not panning out for a variety of reasons. One of those reasons was we could not come to terms on equity. Looking back, this was a foolish mistake of my younger self. If he was the right person the equity should have worked itself out. I think the mindset problem I had at the time was that I was “already a year and a half into this” and I was focused on the past versus solving for the future.

If I was to do it again, I would find the right technical co-founder from day zero and not let something as arbitrary as equity get in the way. There are also common vesting structures that protect the company if someone ends up walking away or not being the right fit.

#2 Don’t raise venture capital too early

I bootstrapped the company for the first 3 years. I got to 150 paying customers and nearly $20K MRR before we took $2.6M in venture capital. Granted, I did raise a small amount of seed funding from angels and friends and family before that.

Looking back, that was wayyyyyyy too early to raise VC money. Why? We had nailed the product but A) product/market fit is not stationary milestone and, more importantly, B) we had not figured out how to scale the growth side of the business yet. Everything up to the point had been inbound and organic. We had no predictable revenue or repeatable customer acquisition process yet.

So why did I raise money? To build a team.

Generally investors look for these things BEFORE they invest, in order of importance: Team > Market > Product. Somehow I had built up a business, but I had not built up a strong, foundational team. The team at the time of Series A was mostly part-time friends of mine that were helping keep day-to-day operations of the business afloat (who were doing an awesome job by the way!)

It got to the point where the business was severely lacking resources in key areas (e.g. no dedicated customer support team, no in-house development team or leadership, no sales team even though we were closing some big deals). For instance, we had just closed a deal where the customer was paying $2.5K per month and $10K implementation fee but I had to coordinate their implementation schedule around my team’s class schedule and finals. I knew I needed a team that was full-time and ideally one that was experienced. However, it felt like a chicken and egg problem as I did not have cashflow and credibility (or so I thought) to bring in an experienced team.

Now that I write this, it’s pretty obvious we were not ready for venture money. And I think that’s an important lesson as just because the money presents itself doesn’t mean you should always take it.

If I was to do it again, I would not raise VC money until I hit at least $1M ARR. I definitely think that’s doable with the resources available today (e.g. AWS, apps for everything, outsourcing) if you’re starting a SaaS business.

#3 Build an entrepreneurial support system

I met a lot of great people very early on in my journey, starting with Flashpoint the accelerator program I joined in 2011. I met other entrepreneurs that had been through it and were running some of most respected companies I looked up to. I had every opportunity to seek out mentors and advice from some of the best people in the business.

What did I do? I stayed heads down working on my startup. I figured my problems were so unique and times that I had reached out before I did not know how to ask for advice properly, so instead what I got was opinions. I found that the more opinions I got from smart people, the harder it was for me to make decisions.

Additionally, if you know me you probably know I tend to keep to myself. I am an introvert by default. So the times I needed help most, it was that much harder to reach out when I had not maintained the relationships as well as I could have. It’s also hard for someone to provide useful feedback when it’s been 6 months since they’ve heard about the business.

If I was to do it again, I would seek advice, but seek it from fewer people. I would focus on maintaining a regular cadence with those relationships (e.g. meeting for coffee once per month to talk about the good and the bad). Furthermore, I think every entrepreneur needs a person or two that they can use as a sounding board that’s totally independent. Who else can you go to about issues with your company, employees or investors? I find that other entrepreneurs makes great sounding boards because they have their own business to worry about and there’s no impression you have to worry about.

#4 Maintain a sane work/life balance

This one sounds obvious and something you could apply outside startups. But startups are particularly stressful environments because there is so much change and uncertainty. Each week brings new challenges and setbacks that have to be dealt with (e.g. employee issues, upcoming board meeting, new competition, etc.).

I used to deal with the stress by working more. I would routinely skip meals (not intentionally) and pull all nighters thinking I was being productive. I would view holidays and weekends as chances to “get ahead”. I was determined that if my startup failed, it wouldn’t be because I didn’t work hard enough.

Well, amateur mistake. I ended up having surgery 3 times for stress-induced collapsed lungs. That was a wake up call for me to make some life changes and take the whole work/life balance thing seriously. I started focusing on getting full night sleeps, always eating breakfast, “turning off” work at night, scheduling meetings around my makers schedule. Basic stuff, but it all makes a difference.

If I was to do it again, I would approach things like a marathon and not a sprint. The 18 hour work days and skipped meals catch up to you and are definitely not productive in the long run. It’s concerning that it’s almost become a startup badge of honor. It also sets a dangerous example when you start hiring employees. Everyone’s work/life balance is different, but it’s important to find what works for you and not blow it off completely.

#5 Training your employees is important

Startups are strapped for resources. You’re constantly in all-hands-on-deck mode with roles that need bodies in them YESTERDAY.

Typical startup recruiting process: You spend weeks interviewing various candidates for a particular role. They get vetted by multiple members for things like culture fit. You’re half vetting and half selling on these people joining your team. When they finally do, you pat yourself on the back and get back to the next 5 positions you have to fill.

Typical startup onboarding process: Day one, person joins. Person gets walked around the office, introduced to some people. Gets set up with their laptop. Finds the ping pong room. Finds the snacks. That’s the extent of the training.

Intentional or not, startups tend to throw bodies at problems especially when they have money. When they do this, they focus too much on the recruiting and not enough on the training once their employees start.

I’m sure there’s some companies that are much more disciplined and better at this than we were. But we didn’t have any sort of formal process for the longest time and “training” was usually a person buddying up with someone in their area or being thrown straight into problems to solve them. This proved to be inefficient for a business like ours that had lots of domain expertise required.

Looking back, I would have invested a lot more in employee onboarding, training employees about the business, product, and culture instead of relying solely on the “baptism by fire” approach.

#6 A C-Suite is not a replacement for having co-founders

After raising the Series A, I wanted to bring in the best, most experienced people I could find to the business. As a solo founder, my plan was to hire a C-Suite of the best executive team I could put together. I figured it would make later hiring easier as these people would have their own networks to pull on and also provide experience for younger employees to learn from.

What’s the problem with this? Well, 1) these people are expensive. 2) they can affect your culture in unintended ways, 3) they often want lofty titles and positions, leaving little room open for later senior hires.

While I was able to hire some rock-star executives, I found that they were not a replacement for having co-founders.  But one of our biggest hires, the CRO (later appointed CEO) which looked great on paper and to the board of directors, was in it for the totally WRONG reasons. Ideally this would have been aired out during the vetting process, but I was new to that and relying somewhat on the experience around me of my board.

Looking back, an executive team is not a replacement for a strong set of co-founders. I might even go as far to say that the more junior, and less experienced people were more bought into our company and mission, which brings me to my next point.

#7 Be wary of experience

Many startups are notorious for having a workforce with an average of in their 20’s. We were like that for a time. But then later it almost doubled.

I do strongly value experience, but it comes at a price. Experience can save you time (the most precious startup resource) when you have people that have solved a particular problem before. But running everything by the playbook from the last company can be devastatingly dangerous. Experience can blind you from opportunities and cause you to jump to conclusions too quickly before considering all the right options.

Worse, you may have people that play the “experience” trump card to put down other people’s ideas, especially younger employees. This is toxic and should be discouraged at all costs. Experience can save you time, but it’s important to manage the cultural baggage that comes with it.

#8 You can’t delegate leadership

What happens when you bootstrap a business as a solo founder to a hundred paying customers, then raise a Series A and hire an experienced exec team? Well, you end up building an inverted pyramid of a company all on top of your shoulders.

I made the decision when we had grown to about 20 people, to appoint our CRO as the CEO and hand over the reigns. Looking back, I think my decision was partly due to my humble personality and wanting to hire my own mentor, essentially. It seemed like the best thing for the business at the time, as this person had been a CEO before and was a sales and marketing background, which was exactly the area of growth the business needed.

However, I think this decision was also rooted in some of my own insecurities in the role of being CEO. Who was I to lead this company? To lead this team of people, many of whom were over double my age and had kids in college like me. These insecurities grew as they were exploited even in some of the day-to-day interactions with our CEO that I hired. Sometimes I was treated like I was a kid, even though I was the one acting the most adult there ironically. Our relationship didn’t start out this way. I had built up a rapport and trust with this person. But over time, the relationship changed and became toxic.

Looking back, I wish I had been more secure in my own role as CEO. I was a better leader for the company and vision, but I was not confident enough in myself. I made the mistake of delegating leadership to a more confident, but loose-cannon leader.

#9 Think hard before you drop out of school

Part of my decision for dropping out of Georgia Tech, was that I could barely focus on classes anyway. The business was taking off and I knew I wanted to be an entrepreneur. On top of that, I knew that the four years I would otherwise be spending in classes were the best point in my life to take the risk of starting a business and going all-in. I didn’t have kids, a mortgage, or any other baggage in my life.

Looking back, I think dropping out was the right decision for ME. But I don’t think it’s the right decision for everyone and it’s almost encouraged a bit too much by the entrepreneurial blogosphere these days. The benefits of staying in school are that you are going to learn a ton of fundamentals. Things like finance, accounting, and general management are good to know. On top of that, school is the best place to meet like-minded, smart, and hard-working individuals. People that can be future co-founders or employees.

So think hard before you drop out. I would encourage other young entrepreneurs to stick through school as long as you can. Soak up knowledge and connections while you are there. You may meet your future co-founder there. And don’t forget, it will most definitely be that much harder to go back later if you do decide to drop out.


Thanks for reading! Did any of these lessons resonate with you and your own startup experiences? I would love to hear your thoughts in the comments below.

2 thoughts on “9 Things I Wish I Knew Before Starting My First SaaS Business

  1. Thank you for sharing your experience, Kurt! We are in a very similar situation with my husband. We crated SaaS tool, he is responsible for the technical part, I helped with product and marketing after work. But two years in we clearly see that we needed a strong marketing co-founder from the beginning.

    As as you mentioned, now after we invested two years it is so hard to give equity away. But we see that without extra help all our efforts could be waisted. Still a hard decision to make.

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    1. Hi Aurelija – that’s great to see your progress so far! Yeah it can be hard to want to give up equity and you should rightfully protect that for the time you and your husband have invested into the business. However, in my case, I think I would have benefited more from having someone that was in the boat with me, to say. It’s good to have people bought in to your mission with ample skin in the game 🙂

      Like

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