14 Critical Things Investors Look for In A SaaS Startup 💰💰

0:00in this video i'm going to be talking about what investors look for in a sas business i'm rob walling i'm a startup founder with multiple exits author of three books on building startups and an investor in more than a hundred companies through my startup accelerator tinyseed i've evaluated thousands of startups i'm gonna talk about things investors look for in sas companies and i'm gonna break it down into two categories the first are traits and the second is progress so traits are relatively immutable they will not change over the course of let's say months maybe over several years they will change but over the course of weeks

0:32or months traits are going to stay the same progress changes rapidly over time especially with founders who are executing and it can change relatively quickly literally one week or one month to the next so under the umbrella of traits we have founder traits and we have market traits and while different investors think about these things differently i do think in general there's five maybe six traits that folks look for in successful founders and that you see in most successful founders so the first one is a bias towards action are the founders moving quickly are they shipping new features are they shipping marketing approaches are they doing a

1:07lot of things and not sitting back and waiting for things to happen second one is are they working on the right problems because if you're shipping a lot of things but nothing is working or the things that are working are not the right problems that you should be working on then you have a problem and you're not going to make progress the third trait is personality and there's not one personality that makes a great founder i've seen ambitious founders who really want to hustle i have seen laid-back founders who just grind it out over the course of several years of course intelligence plays a factor coachability the ability to ask for and

1:39take advice from advisors mentors investors is a big piece of it i think coachability might be one of the best personality traits or the most important personality traits that dictate the success of founders number four is their network are they well connected versus not in their space and with other founders the fifth one that i'll talk about here is chops and i put chops in quotes it's like tech chops are they a good developer do they know design really well do they know copywriting conversion rate optimization paid ads or audience building do they have sas chops they know pricing really well sales onboarding activation support retention

2:12do they have hiring or management shops they've built teams and they're really good at motivating people so in the interest of keeping it moving i'm going to look at six market trades the first is the size of the market and while venture capitalists often look at tam which is total addressable market i like to think of trm total reachable market and it's the the total market that you can reach in let's say a cost efficient manner the second trait is the ability to reach those people right the ability to reach the reachable audience and how much is it going to cost to reach each of them because if those folks are all

2:41online and they're all on the same forums and they all read the same websites then you can buy ads you can do cold outreach there's things you can do to easily reach them but if everybody's offline and it's all in-person events or visits to their office in order to sell them your product the ability to reach them is decreased and the cost to reach them is increased the third market trait is does this market adopt new technology so think about the legal or the medical space versus software developers right software engineers and developers they're always want to be pushing to the the bleeding edge of things and so they

3:11adopt new tech really quickly versus a lot of industries even finance i mentioned legal and you know and medical but finance is another one that i think is more averse to technology so if you're building for that space it's going to be a little more challenging to get your product into the market the fourth market trade is the willingness or ability to pay so think about an i.t department that has a budget and they're trying to be more efficient they're trying to be secure versus musicians right or creators often times they aren't making as much money as someone in an i.t department and so their ability to pay is reduced the fifth

3:43market trait is competition how much is it are they big companies or are there other startups oftentimes the big companies are clunky incumbents and you can use their biggest strengths against them if there are other startups in the space they're typically the companies that i'm more worried about and the sixth and final market trait is market sophistication so are you selling to consumers are you selling to aspiring entrepreneurs bloggers photographers are you selling b to small business so which is usually referred to as b to smb b to just straight b2b which is you know a regular sized business are you selling b to e which is enterprise which has long

4:16sales cycles fewer deals larger deals through all these market trades there is no ideal market each market is going to have its trade-offs but if all six of these things are against you if the market is small and they're hard to reach and they don't adopt new tech and their willingness to pay is low and there's a ton of competition those are bad signs so investors want some of these to be in your favor you know they want your ability to reach them to be high or that they adopt new technology or have big budgets or the competition maybe hasn't been moving so quickly and so you can easily get in so that's how i

4:44think about market trades and how investors might be looking at yours so i've looked at several traits now let's think about progress and i've grouped progress into three areas i'm guessing there are more imagine investors thinking about the progress of your traction the progress of your product and the progress of your marketing and sales so under traction investors are going to look at what is your monthly recurring revenue your mrr what is your average revenue per account your churn your growth your average acv and your lifetime values so that's traction in terms of like market penetration but in terms of your product investors will often look the product itself and say

5:19does it delight is it easy to use do customers enjoy it do they get onboarded and do they stick around are you shipping features like are you making progress on the product front and lastly in terms of progress investors think about what progress have you made on the marketing and the sales front has your team driven much traffic and what results have you achieved from that traffic or that interest you've generated what percentage of traffic or new leads convert to trial or demos or to paid accounts have the founders themselves been doing sales and learning from these experiences and frankly all of these feed up and they drive mrr they

5:54drive actual growth and you can tell there's a lot of numbers and a lot of concepts to think about but a lot of these things culminate in mrr it's not the one number but it definitely is an important number and if your revenue is growing that's the easiest way to show that you are shipping that you're working on the right things that the market is hungry for your product and that you are executing well that's not to say if your mrr isn't skyrocketing that you can't still have a good story to tell about the market size and about what you can do in that market and the

6:24progress you can make but i always come back to the sentence i've said for years it's that revenue is the best slide deck don't sit around and wait for permission and wait for investors to come and grant you this big check to go out and build your product build your product instead of your slide deck build your traction because the more traction you get the more likely investors will want to invest in you if you like this video there's a companion podcast called startups for the rest of us where i talk about this kind of stuff for 30 minutes every week and i have for more than a

6:54decade you can find startups for the rest of us anywhere greater podcasts are served if you've enjoyed this video i hope you hit the like button below and subscribe to this channel there's new videos coming out every week on topics like this plus all types of things about launching and growing sas companies [Music] you