A Look At The Challenges of 2020 in Startups

Despite a whole lot of health and economic challenges in 2020, our portfolio companies did well with our product-led strategy. A retrospection only made us realize how much we have learned and accomplished this year. We are super proud of what we have achieved and looking forward to another safe, healthy, innovative, and successful new year. Let's examine the many aspects of Product Led Growth in 2020 for Product10x.

COVID-19 Guidance

Product strategy pivots are necessary to capitalize on market opportunities when the Covid-19 situation ends or stabilized.

Pricing plans require creative adjustments to incentivize for the short term with the ability to scale back up for the long term.

Look for opportunities in M&A to drive inorganic growth to be ready for the uptick.

Many startups in the SaaS market have paused some bold product moves and are focusing on helping the "existing customers".

After the bullish backdrop of SoftBank, typical VCs and PEs are looking for customer/user engagement - not just number of users.

Startup Strategy

Startups fail because they can either not make something people want or they can be bad at selling it. - Paul Graham

Here are three of the common landmines founders hit on their startup journey— 1/ Chasing the wrong problem, 2/ Overinfluence of authority, 3/ Thinking the idea is all the work - by Garry Tan

Strategy is all figured out, until customers and internal teams can't understand it.

During early stages, very quickly founders realize either they are driving the sales and customers or, sales is driving the founders. Leads to very different outcomes.

Innovation💡and Commercialization 💸 is an Art that even best companies may not get it right. But the idea is to keep innovating and keep testing the viability of the technology and business.

If you hear a startup talking about a product doing "anything" customer wants, that’s a huge RED flag. All successful early-stage companies tend to have a laser focus on a specific segment of industry and users. 

Product & Marketing Strategy

Many startups say, "We have already validated this idea". Our advice was to understand and realize the relationship with so called "users". If most of these relationships result in "Friend, Friend of Friend, Colleague, ex-Colleague, Family", clearly this does not help.

According to a recent advise from Brad Feld, Total Addressable Market (TAM) doesn't matter much in early stage companies - as long as there is a specific problem the founder(s) are trying to solve.

As your Startup takes on the Product-Led Growth, make sure that you build the continuous feedback loops in your product. Take the simple strategy of Outside-In and Inside-Out.

As part of the marketing strategy, do you delight loyal customers with more? If not, this is a good time to rethink and strategize your loyal customers.

SaaS startups must look for paying seats, # of engaged users, frequency of engagement - If product is paid for and not used, it will affect renewal rates.

Founders underestimate the power of marketing until they keep hearing from potentials and prospects that they never heard about you. Or ask the hard question, "How come we never heard about you?"

Founders have their own idea of what a MVP is. This means, multiple features are launched without thinking through who is going to use it and how they are being used. This causes confusion to users and sales. Instead, build features that provides a value. Have adjacent features to test out the usability. The key is the product is useful from the day one.

Many founders are super optimistic about the product that they are building/built. But careless to focus on a specific market/geography. e.g. it does not serve the best interest when the product is launched in multiple continents and wondering where the sales will pick up. Realize that users are not the same across geographies, industries, or experience levels. When introducing the product control the variables to learn by focusing on specific user segments and industries.

When rapidly scaling startups don’t have effective product management, one of two things happens. First, they just super small features. They polish and fix bugs and usability issues, but they don’t ship tentpole features, new products, and major releases. Or when they do, they end up going wildly over schedule.

Sales Learnings & Outlook

"We have built a great product - it's all about sales", is what we keep hearing from founders multiple times. Realize that a product can be only great, if users like it and sales is able to sell it. Until we start selling or users are signing up, its just a product waiting to be discovered.

In the last couple of months, the CAC has increased tremendously or the sales are delayed. Focus on the value creation.

Sales is super easy, until you start selling the product.

The sales velocity decreases for SaaS products during November month. Thats a fact, don't try to over promise on the sales targets - a lesson for founders and sales teams.

Keep at least 30% buffer time to train sales teams due to the high churn.

AI businesses often have lower margins, issues scaling, and defensibility challenges — and behind these challenges is often a long-tailed distribution of data.

Product Led Growth in 2020 for Product10x should be illuminating. If you want to know more about how to accelerate your startup in the new year or want to learn more about the startup strategy, contact us at hello@product10x.com.

About the Author: Suresh Madhuvarsu is a serial entrepreneur and investor. He is the Managing Partner of Product10x Accelerator, a SaaS accelerator that helps founders build and launch successful startups. He is also the Co-Founder and CEO of Salestable, a purpose-built sales readiness platform for SMBs.

Suresh has over 20 years of experience in the technology/SaaS industry. He is a 4x founder with 2 exits. He is also an active angel investor and mentor to early-stage startups. Suresh is passionate about helping entrepreneurs build successful businesses. He believes that technology can be used to solve real-world problems and improve people's lives.

About Product10x: Product10x is a SaaS accelerator that helps founders build and launch successful startups. The accelerator is run by experienced operating partners who have "been there and done that." Product10x provides founders with mentorship, advisory, and access to a network of investors and partners. The accelerator focuses on Product Led Growth (PLG), Sales readiness, and Fundraise readiness, helping founders all the way from product to go-to-market.