Lost in

the cloud
How to create a standout
B2B SaaS startup
Sponsored by
 April 2024

Lost in
the cloud
How to create a standout
B2B SaaS startup
With its recurring revenues, high margins and a seemingly ever-expanding
pool of startups and scaleups to sell to, B2B SaaS is the business model
techies swear by. But at a time of economic uncertainty, when so many
companies are trying to perfect their B2B SaaS offering, how do you stand
out from the pack?

Lost in the cloud is a Sifted report and definitive field guide on how to build a
successful B2B SaaS company — even when times are tough.

Get in touch
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Sifted Pro can help.
2

Contents
3
FOREWORD FROM AWS

Software is (still) eating the world…

and it’s only just finished the appetisers

5
INTRODUCTION

A difficult moment to be starting out

7
CHAPTER I

Do people want what you’re selling?

12
CHAPTER II

Winning your first customers

18
CHAPTER III

Discovering the winning tools and

allies to grow your business

23
CONCLUSION

The essentials
3

FOREWORD FROM

Software is (still)
eating the world...
and it’s only just finished
the appetisers

Leon Rees Harumi Hirata Palacios

Startups and Venture Capital, AWS Software Startups Segment Lead, AWS

W
hen Andreessen Horowitz (a16z) any meaningful penetration of B2B SaaS companies,
speaks, you have to listen. It’s over or companies that we have not yet heard of. In 2023
a decade since it wrote “Software is the #1 spot in the Bessemer Cloud 100 was taken
eating the world”; its thesis describing by a company who hadn’t previously featured, and
how, as businesses moved online, traditional value cloud security company Wiz jumped 67 places to #15.
chains would be replaced by software. It foresaw the Software is eating the world and it really has only just
transition from inflexible, analogue “hard” value chains finished the appetisers.
to digital, agile and flexible value chains, ushering in a
new pace and scale of innovation. It was right. Mostly. So, the first decade of B2B SaaS has been good and the
The only thing we think it underestimated (perhaps next decade of B2B SaaS looks to be great. But 2022 and
intentionally), was the scope and reach of the disruption, 2023 have been challenging — inflation led to interest
innovation and change. We’ve only just begun. rate rises, interest rises led to discount factor rises and
discount factor rises led to much lower present values
When we’ve seen so much happen in B2B SaaS, it’s (PVs) of future cash flows, which led to much lower
tempting to think all the opportunities have been found valuations. We moved from a US risk-free rate of 0.91%
and all the excitement has been had. In 2022, the global in 2020 to a risk-free rate of 4.17% at the close of 2023.
B2B SaaS market had revenues of $2611bn, by 2032, Capital for startups has been challenged.
this is expected to be $1trn. The total value of the top
100 B2B SaaS companies in 2016 stood at $99bn. However, while not immune, B2B SaaS economics
In 2023, the top 100 were valued at $654bn. Further have built in anti-venom to a capital challenge. Those
growth will come from industries that are yet to see conditions that lit the fuse on a software revolution a
4

“
decade ago are the same characteristics that have made
B2B SaaS resilient compared to other sectors; B2B SaaS
infrastructure is built in software (not trucks or bridges So, the first decade of B2B
or satellites), software lives in the cloud and the cloud
waits for no capital investment. B2B SaaS businesses
SaaS has been good and the
can expense their build, with the right technology stack, next decade of B2B SaaS
back-to-back their cost growth with their revenue
growth, and optimise for frictionless onboarding of looks to be great.
customers. No need for back-loaded waiting for capital-
intense infrastructure to be built or “get big, then get to accommodate a new entrant, scaled B2B SaaS
revenue” customer acquisition strategies. businesses have a potentially unassailable moat with
the data they have built from years of serving customers
A segment with a proven track record, a bright future well. Using that data, particularly in a GenAI/CausalAI
and some built in resilience to economic shock — there world, to focus it back into the organisation to create a
has to be a downside? The risks to building a B2B SaaS new way of serving customers with radically different
business are where strengths become weaknesses and unit economics is an important strategy in B2B SaaS
opportunities become threats. The frictionless growth businesses standing out from the crowd.
and relatively low pre-revenue capital requirements mean
the barriers to entry are lower than other segments. The At AWS we’re really excited about where we’ve been with
target addressable markets (TAMs) are large and the B2B SaaS customers — we’ve worked with some of the
bets to challenge incumbents are relatively low given best (Snyk, Synthesia, Matillion). And we’re excited about
the size of the prize. Add to the mix the very nature of working with the rising stars and next generation of
how software defined value chains can out-innovate B2B SaaS companies (InfoSum, Luminance, Snowplow,
themselves and the incumbents and software isn’t just Ometria, Thought Machine). We hope you find the
eating the world, software is eating itself. The good news report insightful and we can’t wait to support you in the
is, while capital barriers to entry are low, and software opportunities and challenges for what is next for
defined value chains can reconfigure themselves quickly B2B SaaS.

SYNK
5

INTRODUCTION

A difficult moment
to be starting out
6

I
t’s yet more acronyms to learn, we know, but Chapter 1 explores the tricky early stages of a startup,
the slow and steady digital march of bricks- highlighting common mistakes and how to avoid them.
and-mortar businesses have made business- It details how to test and validate your product before
to-business (B2B) software as a service (SaaS) pushing it out into the world and how to collect the best
companies seem like the safe bet in tech. tips on identifying and really understanding your target
market, with advice from those who’ve lived it — and
Providing just about any service, from accounting to survived it.
product management, B2B SaaS promises to save
costs and boost the productivity of companies of all
shapes and sizes — all from the cloud. It’s scalable,
We’re here to offer the
customisable and, in 2024, all set to incorporate another definitive B2B SaaS field
VC darling: generative AI.
guide, based on lessons
Research company Gartner estimates that, in 2023,
end users spent $197bn on SaaS applications, up from
(both insights and
$167bn in 2022. This year, it reckons spending will come mistakes) from Europe’s
in at $232bn.
software masters.
But at the same time, it’s a difficult moment to be
starting out. Customers and investors alike are cutting Chapter 2 moves to the stage after your prep work,
back, the capital that was so free- flowing during the where you start to win customers (or want to win
last several years has largely dried up and expenses are customers). It examines how founders can discover the
under greater scrutiny. Despite all the chat about SaaS’s right strategy — and tools — to get their wares in front
“predictable revenue,”, no business model manages of top prospects and explores the art and science of
itself. Leaner times have companies thinking harder pricing.
about which SaaS tools they actually need.
Chapter 3 looks at your startup as it scales. It looks at
So how do you make sure your SaaS product is not first the metrics you need to know to grow and investigates
in line for the chop when times get tough? where is best to build inhouse and where you should
outsource tools and onboard partners.
We’re here to offer the definitive B2B SaaS field guide,
based on lessons (both insights and mistakes) from Finally, we provide a glossary of all those darn acronyms
Europe’s software masters: the ones that have survived — and sum up all the key insights into one easy-to-
and thrived during the current market lull. follow checklist.

SaaS spending is forecast to increase

Worldwide public SaaS end-user spending forecast ($m)

$167,342 2022
$197,288 2023
$232,296 2024

$490,977 $597,325 $724,566

TOTAL MARKET TOTAL MARKET TOTAL MARKET

Source: Gartner (April 2023)

7

CHAPTER I

Do people want
what you’re selling?
Before building anything,
SaaS entrepreneurs need to get
to know their customers
8

I The market conditions

t’s never easy to launch a startup — let alone
during a cost-of-doing-business crisis.
Companies are cutting spending amid soaring may be challenging, but
inflation and, given software is typically the
second-highest source of a company’s outgoings, companies large and
SaaS tools may find themselves on the corporate
chopping block. Cledara, a SaaS subscription
small do still need cloud-
management platform, estimates that as much as 27% based tools to run their
of software spend at companies could be considered
wasteful, including subscriptions to unused platforms. operations efficiently.
But companies large and small do still need cloud-
based tools to run their operations efficiently — For aspiring B2B SaaS founders, this means the first
despite challenging market conditions. thing on the to-do list should be to develop an intimate
understanding of the market and customers you want
In today’s market climate, winning B2B SaaS companies to target. So how can you figure out if you are building
will be the ones who can demonstrate how essential something people really need?
their tools are for operational success. They will be
able to articulate not only how their software saves WHO’S IT ALL FOR?
individual employees time, but how they contribute to a
company’s wider business objectives. Plenty of B2B SaaS companies start building solutions
before they’ve even defined a real problem that needs
solving. What happens next is a painful process of
Spend on IT and security tech is staying realising there aren’t enough customers to keep the
strong business afloat, followed by a pivot.
The change in scaleups' spend on different type of
software in the last three months, compared to the This is what happened to Naomi Owusu, the cofounder
previous three of Tickaroo. The original idea was to build a tool for
sports fans to post game updates, but attracting them
to the platform proved to be extremely costly. “We
60%
totally underestimated the investment we would need
50% for marketing in B2C,” Owusu says. “We had customers,
but we needed way more market share.”
40%

When a news outlet asked if Tickaroo’s tech could

30%
be repurposed to create live blogs, Owusu saw an
20%
opportunity to solve a burning problem. “There was a
war for clicks,” she says. “And we saw from the sports
10% field that we had a lot of page impressions and insane
-28% -13% -8%
retention rates. We gave [publishers] a tool where they
0% could produce content that is highly engaging to their
2% 3% 33% 42% 55%
audience.” Today, German news heavyweights like
-10%
Die Zeit, Der Spiegel and Süddeutsche Zeitung are all
-20% Tickaroo customers.

-30% It’s a similar story at Synthesia, a British AI startup that

has developed a text-to-video tool. “We started with a
t

HR

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uc

es

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rit
sig
tin
tiv

Sa

cu
od

cc

solution, where most companies start with a problem,”

ke

De
uc

Se
Pr

Su

ar
od

d
er

Pr

says Steffen Tjerrild, the COO, CFO and cofounder

an
om

IT
st

of Synthesia. “That meant we needed to apply our

Cu

Source: Sifted - Which SaaS products are getting cut? solution to many different [industries]. We were taking
(February 2023) every call and we really went down the rabbit hole.”
9

But, looking at the data, a clear picture was beginning

to emerge of where Synthesia’s target market really
was. The people who were signing up the quickest,
and who were using the tool the most, were people in
charge of learning and development at businesses. So
in 2020, Synthesia pivoted to cater to them, creating
a self-service platform that was easy for people with
no knowledge of video production to use. Things blew
up from there — today, Synthesia has more than 50k
Standing out in a crowded
customers, including nearly half of the businesses that
comprise the Fortune 500. In 2023, the company hit a B2B SaaS market
$1bn valuation, despite the broader funding slowdown. Seb Wallace is a VC at Triple Point and the cofounder of
Further, a SaaS business for investment funds. Here, he
Tjerrild describes the process of getting to that insight explains what stands out on the market today.
— which he also describes as “some of the hardest
years of his life” — as essentially being like a wide- “This is still a great time to be a B2B SaaS founder — but
ranging market research exercise, where Synthesia was the market has changed a lot in the last 5-10 years. You’re
learning how various industries operated, and in turn, now almost always competing with someone else, but new
understanding why its product would or wouldn’t work in entrants do still come up because feature sets [become
that setting along the way. “If we hadn’t had the painful outdated] or UI isn’t kept up to scratch.
three years of understanding why those other industries
would not work, we wouldn’t have had the confidence to The trend in SaaS is actually moving away from horizontal
understand this product-market fit was real,” he says. [which targets problems that apply to a range of industries,
such as HR or file management], because it’s so busy.

“
Verticalisation is now the name of the game, and some of
the most promising opportunities have smaller addressable

We had a network of markets. We saw this in customer relationship management

(CRM): yeah, Salesforce was great, but Affinity took over as
people who trusted us. the CRM of record for VCs because it was focused on them.
There’s so much software now that as a buyer, you’re asking
Laura Hutton, cofounder and chief customer officer at Quantexa for the software that’s built for you.

Advantages will come from network and experience,

In an ideal world, market research would take place as because on paper the software may have a very similar
early as possible, with a minimal viable product (MVP) feature set to competitors. Your ability to connect with and
ready to gauge customer interest. build trust with your buyer, and having the relevant domain
experience, has never been more important in B2B SaaS.
Take Dropbox: to test it was on the right track, the It’s important for cut-through, for getting to talk to [the right]
company’s founder Drew Houston made a three-minute people, for understanding what the feature set they now
video explaining how the tool would work. After the video want is. For most good startups, building the product’s not
was released, the waitlist blew up, going from 5k to 75k their issue. It’s negotiating with the buyer in a busy market.
people “literally overnight”, Houston told TechCrunch. It There’s not much a founder can do other than pick a space
was proof he was onto something. cleverly that they have an unfair advantage in.

Paul Taylor, who founded Thought Machine, which That nicheness will allow you to expand and grow, with
provides cloud-based core banking, in 2014, says there’s weaker competition around you. It allows you to learn what
nothing mysterious about what makes a good product. the customer needs and it gives you greater access to the
“It’s a combination of market need versus your ability to customer because it’s a smaller market and people haven’t
produce it,” he says. had so much attention, love and care.

Taylor says Thought Machine demonstrated its “bare The question is: once you have built the platform of
bones” pilot to banks in 2016. There was an app record, what will you expand into?”
10

customers could play around with, where simulated their product] is coming from,” says Lauren Pilgreen,
payments could go in and out, but it was far from the senior venture associate at climate tech consultancy
finished product. “It didn’t run on the full expanse of the Sustainable Ventures. “Businesses are struggling, and
cloud. But the essence of the information flow and what everyone is pulling funding left, right and centre. So it’s
users [could do] was correct,” he says. “We saw the really important that the proposition is spot on.”
bankers were impressed, and that validated a key thing:
are you really building a product that has potential?” Pilgreen also likes LinkedIn as a tool for reaching out to
people — her recommended script is to tell them you
IDENTIFYING AND UNDERSTANDING are making a product that could be useful to them, and
YOUR TARGET MARKET that you’d like to get some insights on the problem you’re
tackling. “You’d be surprised how many people have the
Several key questions need to be answered before you time,” she adds. “It’s not a sell — it’s a light-touch way of
push a product out to the market: gathering insights.”

• What problem am I solving? The process is easier for founders that already have
knowledge of their target customer — perhaps
• How big is that problem? from having worked in the industry themselves, or
experiencing the problem they are solving first hand —
• Whose problem is it? and a ready-made network that can be leveraged.

• Who will pay for my solution? “When we founded Quantexa in 2016, we had a network
of people who trusted us and that we’d previously
Sifted spoke to more than a dozen B2B SaaS founders delivered for,” says Laura Hutton, the data analytics
for this report, all of whom say they use a very manual
process of leveraging personal connections, scouring Spending on marketing and sales software is up
LinkedIn and networking at conferences to learn more % share of total SaaS spend across 1k companies
about their target market and the customers they want
2021 2023
to sell to.
25%
“[We] never actually worked in manufacturing,” says
Sandy Reid, cofounder and chief commercial officer
21.3
at Zaptic, a platform for manufacturing workers. “It
would have been easier for us if we were the buyer in 20%

the first place, but we had to learn that all from scratch, 17.5
essentially by being good listeners, networking and
reaching out to people who looked relevant on LinkedIn 15.4
15%
to pick their brains.”
13.2

There is no limit to the number of market research 11 11

10.4
interviews you should do — but you need to do enough 10% 9.5
8.9
so that patterns can begin to emerge. A 2002 study
7.7
by Carnegie Mellon University academic M. Granger
Morgan found that 20 is the number at which interviews
stop producing new concepts, and that the majority 5%

of new data emerged within those first five or six in-

depth interviews. This has come to be known as the
“20 Interview Rule” among SaaS circles, where it’s
0%
recommended that founders complete 20 interviews y
tin
g
rit ps HR les
before writing a single line of code. ke cu vo Sa
ar Se De
M d
an
IT
“We try to get companies to think very critically about
who they’re targeting, and where the money [for Source: Sifted/Vertice (February 2023)
11

platform’s cofounder and chief customer officer. Her Why do some SaaS startups
career to that point had been in data decision-making
— exactly the field Quantexa was tackling — and
struggle to sell their tech?
those contacts were invaluable. “Going in cold as a
new company with no reputation in the market is really IT WAS BUILT WITHOUT ANY
difficult. Leverage your network as much as you can, CONVERSATIONS TAKING PLACE
building on the trust you’ve built before.”
Anyone can use Google, but the most
Another important thing to clarify at this stage is not intriguing insights can only be discovered
only who the user of your product is — but who’s through talking to people in the know. Before
actually holding the purse strings. At Tickaroo, for building anything, it’s essential to run ideas by
example, Owusu says that editors are the ones using the prospective customers to make sure you are
product day-to-day, but the budget is actually held by on the right track.
the publisher’s product teams. Knowing this allows you
to tailor your pitch and make sure you’re satisfying the YOU’RE SOLVING AN EMPLOYEE’S
priorities of both the user and the budget holder. PROBLEM, NOT THE BUSINESS’S

FROM MVP TO MARKET READY Solving some problems will create more
impact than others. Conversations with
The payoff from all this extensive networking and tapping customers will reveal not only the biggest
up of former colleagues goes beyond acquiring the problems employees have — but also how
requisite insights to properly solve their workplace pains. the wider business will be impacted if they
You may also find yourself with a ready-built base of early are solved.
testers who can help you build the market-ready version
of your product. THE COMPETITION WAS UNDERESTIMATED

Taylor says Thought Machine demonstrated the MVP There’s an app for everything these days
of its core banking software to Atom, Lloyds Bank, SEB — including what you’re selling. Figure out
and Standard Chartered. All four went on to run pilots where your competitors’ weaknesses lie by
with the startup, and within the space of three years, monitoring the competitive landscape closely
they all became full-fledged customers. “The banks had and asking customers which of their problems
small innovation budgets and bits of money that could still aren’t being solved by what’s already on
be spent,” Taylor says, explaining that Thought Machine the market.
would use their feedback at each stage of the process to
make improvements to the product. “They got more and
more serious, and we signed them all as proper deals
in 2019.”

If a founder’s network doesn’t provide, there are also

plenty of accelerator programmes and grant schemes
that hook up startups with corporates. “We’re seeing
quite a bit of commercial R&D and commercial trial
partnerships,” says Pilgreen. “It’s a great way [for] an
early-stage software company that may or may not
have defensibility in place to work out the MVP with the
potential customer as they go, in a low-risk environment.

“We love the validate stage, because a lot of the time

[founders] have the wrong idea about why their product
or service is valuable,” she adds. “You think it sells in
learning and development, for example, but actually it sits
SUSTAINABLE VENTURES
in procurement or logistics.”
12

CHAPTER II

Winning your
first customers
You’ve done all your prep work —
now it’s time to sell, sell, sell
13

Y
ou’ve built your MVP, you know exactly 1. ACCOUNT-BASED SELLING
who you want to sell it to and you’ve even
zhuzhed it up into a market-ready product Drilling down on precisely who the ideal Zaptic customer
with some supportive early backers. Now is has been a “foundational” process, Reid says. Zaptic
all that’s left is to open the floodgates and let those now prioritises high-value manufacturing companies
customers pour in. But it’s unlikely your first proper with $1bn in revenue, and which have departments
customers will come knocking — so where will you find focused on digital manufacturing or operational
them? And once you’ve got a few on board, how can you excellence (Reid says scouring LinkedIn for specific
make the process faster and better? job titles is a way to figure this out). “That means you’ve
got people whose jobs are focused on deploying what
One of the unique challenges in the world of B2B SaaS is we are doing,” he says. “Even before we’ve spoken to
the length of time it takes to get customers on board. It a customer, we’re mapping who the key people are to
can take months — even years — with multiple meetings speak to.”
and product demos along the way.
2. QUALIFYING LEADS ASAP
Connected worker platform Zaptic currently has 700m
industrial workers around the world using its platform. Broaching the topic of money early on might
Cofounder Sandy Reid says the sales cycle at his feel uncomfortable, but it’s an important part of
company typically takes between 6 and 12 months, but understanding if a prospect is actually in a position to
it hasn’t always been so efficient. For instance, one of buy your product. Reid says Zaptic now tries to ask
the company’s early customers took a full year and a questions about budgets and timelines early on, to suss
half of convincing to get on board. Since it was founded out how serious they are about finding a solution, and
in 2015, Zaptic has done three major things to shorten whether or not that company should be put on Zaptic’s
that cycle as much as possible: dealboard. “Every deal is different, but every customer
has a financial year. So [you can] align the sales cycle to
In 2023, there were over 30.8k SaaS their buying process.”
companies worldwide
Number of SaaS companies 3. PRODUCT WORKSHOPS
20,000
In 2022, Zaptic started offering workshops to its
customers, where it would get in a room and “do a proof
17,500 17,000 of concept in a day”, Reid explains. This can save huge
amounts of time, particularly if a client decides it doesn’t
need to pilot the software — a process that can take
15,000
around six months — after seeing how it works. “We
can do it in a day if we get six hours of [the client’s] time
12,500 and systematically go through their questions in
a workshop.”
10,000
HOLDING OUT FOR A HERO

7,500
Finding a “champion” at the company you are targeting
who has both the internal clout and the interest in your
5,000 product to advocate for it within the business can be the
difference between making a sale and finding the door
closed. That champion will also likely be your source for
2,500 2,000 2,000
some of the more mysterious details about the company
1,000 1,000 994
702 647 631 you are targeting — such as what its procurement
0 process looks like, or when its financial year starts.
da y a il
US
A UK an ce di ina az ra
lia
na rm an In Ch Br st
Ca Fr
Ge Au
“It’s so important to [find] customers that believe in your
Source: Demandsage vision, and who want to help and champion you. If you
14

find a few of these customers, they will really help you go

far,” says Raphael Güller, the cofounder and chief design
Westendorp’s Price
officer at carbon accounting platform Sweep. “It’s easier Sensitivity Meter
said than done, but being quite strategic about who you
even pull into the funnel, and who you think fits your In the 1970s, Dutch economist Peter van
vision, is key.” Westendorp came up with the Price Sensitivity
Meter. It’s a way of pinpointing how much a product
The champion’s support can get you in the room with should cost, depending on how customers perceive
top decision-makers — but you mustn’t let them do all its value. The questionnaire takes many forms today,
the work. Offer to attend any meetings your champion but it generally asks potential buyers to consider the
is organising with colleagues about your product, so following questions:
you can gather feedback from within the organisation
first-hand. And remember, you will need to tailor your
AT WHAT PRICE WOULD IT BE SO LOW
pitch to whoever is in that room with you (something
YOU START TO QUESTION THE
the champion may not think to do). Reid also warns that
PRODUCT’S QUALITY?
you may need to temper your champion’s enthusiasm
— they might suggest that getting through the legal
AT WHAT PRICE WOULD YOU CONSIDER
department will be a breeze, for example, but the
THIS PRODUCT TO BE A BARGAIN?
company’s lawyers likely have a different idea.

Dirk Hoerig, the founder of headless commerce AT WHAT PRICE DOES THIS PRODUCT
software business commercetools, says that while IT BEGIN TO SEEM EXPENSIVE?
teams normally champion his product, the pitch has to
shift focus once different departments get involved. AT WHAT PRICE IS THIS PRODUCT
“The tech team normally does the pre-evaluation, TOO EXPENSIVE?
and then the business team is where you need to
focus around the use case, value drivers and business
problems,” he says. “In reality, the larger your customers
get, the more complex it gets. Because it’s not like the Companies use an average of 371
IT and business departments are always best SaaS applications
friends. When you go into big organisations, there’s The average number of SaaS applications used
politics, even if you have those champions in there
2023 2021
supporting you.”
500
473
EVERYONE LOVES A FREEBIE

In SaaS, the “aha!” moment refers to the precise moment 400

a lightbulb flicks on in a customer’s head and they gain
a profound understanding of just how game-changing a 335
317
piece of software could be for them. 300
253
242
How can you lead customers to that epiphany? The 238

easiest way is to let them have a go on your product.

200
Pilots and live demonstrations can do this job, but
Eleanor Lightbody, the CEO of legaltech SaaS company
Luminance, says her preferred method is to offer a free
100
trial. “That’s the best way to start the partnership with
the end buyer I think,” she says. “People are more likely
to buy when they see the return on investment within
0
their own environments.” Small business Mid-market business Enterprise

Her advice is to keep the trial short — around one to Source: Demandsage
15

two weeks — and to get feedback on how it’s all going they said ‘Okay, we can see that if the implementation
during this period. Once the client has seen exactly goes well we will save time’,” Lightbody says. “That’s why
how it’s saving them time or money, you should work that free trial, if you can do it, is so powerful.”
collaboratively with them to figure out how that impact
could be even greater. “Really understand what the
return on investment is that your product can deliver. THE ART AND SCIENCE OF PRICING
For us, it’s that you can save up to 90% of time when
it comes to contract negotiations,” Lightbody says. Coming up with the right price for your product is a
“You’ve got to understand the value and why someone’s test of a founder’s mathematical and psychoanalytical
buying before you can even think about how you price skills. On the one hand, you must crunch the numbers
your software.” to get to a number that, once you reach a critical mass
of customers, will mean you start turning a profit. On
Using Luminance’s software, Hitachi has been able to the other hand, you will need to conduct a philosophical
save its legal department 500 hours per year, which can enquiry to figure out how your product will be perceived
now be used on higher value work. “It took them a year by the market, and how much money customers will be
to see that, but we did a two-week trial with them and willing to part with based on that.

“
There is the context for your competitive category.
You can’t do $1m where everyone else is doing $100k.
But you could do $120k.
Oren Greenberg, founder at Kurve

SWEEP
16

You will also need to decide if you want to charge your $1m where everyone else is doing $100k. But you could
customers upfront, and for what period of time that fee do $120k.”
covers. There are big implications for your business
here: charging monthly will create a smooth and steady Most SaaS startups operating at this end of the market
cashflow, while lumpy three-year contracts will provide won’t have prices listed on their websites for you to
big, irregular income boosts. Things like set-up fees can snoop — but Greenberg says that if you hang around in
also provide additional income while you are waiting the right online communities for long enough, you might
for other revenues to come in. You also need to choose find your competitor’s prices up for discussion. “It’s
your pricing model (below). more transparent than businesses think, and because
it’s transparent you really have to be on top of your
In categories where contracts are typically high value, pricing,” he says.
pricing based on the value your product can bring an
organisation is a good strategy. “You really need to For categories where contract values are typically lower,
understand the pain. The more pain a business has, customer research may be needed to find a price point
the higher the price point,” says Oren Greenberg, the you can realistically sell at. Greenberg recommends
founder of marketing consultancy Kurve. “But there is Westendorp’s Price Sensitivity Meter as a tool for doing
the context for your competitive category. You can’t do this (see box).

Popular SaaS pricing models

What is it? Pros Cons

Licences are sold where the Engaged customers with real Custom pricing can be difficult
fee covers not just the cost of pain points will be willing to pay to implement. Sales cycles will
Value-based providing the service (plus margin), higher prices and may pay for increase as time is needed to
but relates to the value customers additional services as the product assess the value the product
get from using the product suite grows brings to the customer

Customers are billed monthly The cost to the customer is Billing amounts can be
Usage-based based on the features or data aligned with what they are getting unpredictable, creating bumpier
they use each month out of the product cashflows

Companies can select team

The subscription fee charged It can be difficult to convince a
members who they think will get
Per-user pricing relates to the number of company to scale the software up
the most use out of the product,
employees using the software throughout the organisation
reducing wasted spend

Some services are offered for free,

A good way to entice customers to The cost of servicing free users
with customers encouraged to
Freemium actually use your product and see may outweigh the benefits if not
upgrade to more comprehensive
the value it can bring enough customers convert
subscriptions
17

The thought of making the sales pitch might be off-putting

to many founders — but it’s not a task to be outsourced.
Brutal feedback can provide key insights about where the
true value of a product lies, while a founder’s passion for
solving a problem is near-impossible for even the best
salespeople to replicate.

Still, selling to corporates is complicated. Founders will have

to learn who holds the budget, and what their procurement
Shoe-leather sales process, security standards and budget cycles are. “I look
[back] at the complexity, the compliance and the teams we
Pounding the pavement, knocking on doors and never have now for procurement, and I wonder how we ever got
giving up. Emma Sinclair MBE, serial entrepreneur and our first five deals,” says Sinclair.
the founder and current CEO of EnterpriseAlumni, says
founders should not underestimate their role in the But it is possible. Today, EnterpriseAlumni counts LinkedIn,
sales process. M&S and BlackRock among its clients.

“Every day I send one cold email about sales,” says Sinclair And through this process, founders will develop a sixth
(she founded startup EnterpriseAlumni in 2016). “Because sense for who is actually interested in buying their product
if I’m saying to you we’ve got four of the biggest banks in — and why. This is important, because of the time it saves.
America, but I want 100 — I’ve got to make some calls.” “Qualifying your buyer is something we didn’t understand
was a smart way to use our time in the early days,” Sinclair
Her advice for B2B SaaS founders is to embrace the manual says. “When you’re a tiny team, you can get engulfed in
side of sales, and to take the lead on closing deals, at least conversations that don’t lead to sales. So ask the questions:
in the beginning. do you have the budget? Is this on this year’s to-do list?”

“I reckon in the first five years of trading, I spoke to a few

thousand people,” she says. “I used to do most of the sales,
and I still do a bit. Until you get to a really mammoth size and
scale, anyone who [says] they’ve automated [it], I don’t think
“
Every day I send one cold
email about sales, because
is telling the truth.”
if I’m saying to you we’ve
It took about two years of pitching for EnterpriseAlumni to
land its first clients, with Sinclair herself running between got four of the biggest
meetings (including a 30-minute jog through the streets
of New York to make one pitch in time) and travelling,
banks in America, but I
even internationally, for coffee meetings with prospective want 100 — I’ve got to make
customers. “They were companies that had expressed an
interest after we’d done loads of outreach,” she reflects. “We some calls.
did a lot of punting in the early days, and we learnt on
Emma Sinclair, founder and CEO of EnterpriseAlumni
the job.”
18

CHAPTER III

Discovering the
winning tools
and allies to
grow your business
Your customer base is growing,
and you’re shooting for the moon.
Next comes the “measure and iterate”
bit of the journey
19

T
he wheels are turning on your sales strategy The average contract length for a SaaS
— and that means the work of scaling is application is 1.3 years
just getting started. As your business starts
to grow, you will need to get serious about
how you manage all of the tasks and processes that
come with that increased size and complexity. Bigger
customers will also expect you to start growing up, and 11%

they’ll want you to be operating in a way that matches

their own rigorous security standards. 8%

This is also the stage where the numbers get truly

interesting at a young startup — and so long as you
10%
know your CACs from your ARRs, you’ll be able to use 57%
this data to make your product better and supercharge
your growth. But get it wrong, and you could run out of
money before you’ve really got started.
14%

THE METRICS YOU NEED

TO PAY ATTENTION TO

In the early days, it can be hard to measure some of the

numbers that are often boasted about in the startup
sphere. Customer acquisition costs (CAC) and lifetime
value (LTV), by their nature, are numbers that require 1 to 2 years 2 to 3 years 3 or more years
time in the market to accurately figure out. If a founder Month-to-Month Less than 1 year
is still doing most of the selling, for example, then the
It has shortened from 1.5 in 2015
company’s CAC might appear artificially low since it
doesn’t take into account the cost of the sales hires that Source: Insivia
will inevitably come later.
customers you lose are made up for with expansion
Instead, startups that are just starting to scale up their by your existing customers. That’s the building block
customer base should focus on the numbers that show of SaaS, it’s what makes it so exciting,” he says. “But
they are not only growing, but also providing value to it’s also an interesting proxy [for investors] — do they
their customers. “The cheapest form of growth in the understand the customer?”
early stage is not to lose your customers,” says Seb
Wallace, VC at Triple Point. Churn and net revenue NRR can also be cohorted, so a founder could look at,
retention (NRR), he says, are the numbers that will show for example, how that number changed when they were
if you are achieving this. doing all the selling versus their new sales hire.
“You can see product-market fit through that metric,”
NRR takes into account your monthly or annual recurring says Wallace.
revenue (MRR or ARR), customer churn and any reduced
or increased customer spend. The formula to figure it Few B2B SaaS companies will be turning a profit from
out is: their first sale, so growth metrics such as these should
serve as a North Star for getting to that goal. However,
NRR Wallace warns: “The quid-pro-quo of burning [capital] is
MRR + EXPANSION - DOWNGRADES - CHURN)/MRR growth. If you are not growing fast, you must pare back
the spending until it slows your growth further.”
If the number comes out at above 100%, it means your
revenue will continue to go up even if you don’t bring Tom Wills, the cofounder and CFO of adtech company
any new customers on board. Below 100%, and your Novatiq, agrees that it’s more important than ever for
revenue is on a downward spiral. Wallace says startups startups to use these data points to protect their runway
should aim for a minimum NRR of 110%. “It means the and cashflow, given the general downturn in funding for
20

B2B SaaS startups. In 2023, VCs invested just $6.4bn in

these companies — way down from 2022’s $18.4bn.
“It’s become challenging to raise funds, and the cost
of raising has increased as well. To maintain runway,
you need to do two things: grow the top line and
minimise expenses.”

“
If you are not growing
fast, you must pare back
NOVATIQ

The healthy business glossary

the spending until it slows All the acronyms and jargon you need to know

your growth further. ACV

Annual contract value
Seb Wallace, VC at Triple Point
ARR
Annual recurring revenue or annual run rate
Since the pandemic, Novatiq, which was founded in
2019, has been focusing on lean growth. It has given up ARPU
its headquarter office and shifted to a fully remote hiring Average revenue per user
strategy, where contractors abroad are now also part of
the mix. The business currently has 24 employees and Churn
Customers that unsubscribe from your services
15 offshore contractors. Wills says Novatiq has also
been able to reduce its cloud costs from around 30-35%
CAC
of sales to 15-20%, by signing up for longer contracts Customer acquisition cost
that offer discounts.
CAC Payback
“A good cashflow model is key for any B2B startup. One How long it takes to earn back your CAC from that customer
thing you can be certain of is [your own] recurring costs.
It’s also important to understand how long customer LTV
Lifetime value
collections take — how long it takes you to generate
(sometimes called CLV - customer lifetime value)
cash,” Wills says. He recommends that founders “stress
test” their financial models by seeing what would CAC:LTV
happen if it took longer than expected for a customer A ratio that compares the customer’s lifetime value to the
to start making payments, which will reveal the pressure cost of acquiring them
this would put on the business.
MRR
“My advice would be to try and consider the implications Monthly recurring revenue
of that revenue being delayed by three to six months.
Invariably, things take longer than you think, and if you
NPS
Net promoter score
don’t consider that, it’s going to have a serious effect on
your liquidity,” he says. “It can be the most innocuous NRR
thing. The legal person goes [on holiday] and your whole Net revenue retention
timeline is pushed out by a few weeks.”
PLG
BIG CUSTOMERS, BIG EXPECTATIONS Product-led growth

Keeping the pipeline of potential new customers

PLS
Product-led sales
healthy is also an important part of the growth puzzle.
Partners can help young companies get in front of large Sales velocity
customers that are ready to buy a solution. The time it takes to make a sale
21

Paul Taylor, Thought Machine’s founder, says his strict requirements set out by these companies’ legal,
company spent time building relationships with procurement and compliance teams.
consultants at McKinsey and Accenture — the reward
being that when these firms are called in to solve a Jon Topper, the CEO and CTO of SaaS business
business problem, they might bring Thought Machine consultancy The Scale Factory, says this is the stage
up as a solution. “The bank CEO phones someone up when startups typically start looking to external partners
at McKinsey, they give them a few options and one that for help. “What tends to happen is they bump up against
they put on the table is Thought Machine,” Taylor says. procurement,” he says. “Procurement gives them
“They don’t say go buy Thought Machine, but take these huge documents about information security and
a look.” compliance. The sort of grown-up questions where, if
you’ve been sprinting to your MVP, you probably don’t
Large enterprises are appealing for B2B SaaS startups have good answers.”
because they tend to have bigger budgets and are able
to make longer commitments than a smaller business Topper says that often the action taken is to beef up
can. Research from private equity firm Redpoint found a startup’s cloud security — to satisfy a big chunk of
that while annual customer churn for SaaS products is the procurement department’s questions, but also to
31-58% among small and medium-sized businesses, at make sure they don’t put themselves at risk of data
large enterprises that number is just 6-10%. leaks or losses that could lead to fines or lawsuits. The
Scale Factory is an Amazon Web Services partner, so it
The problem is, these are very picky customers. Not recommends its Control Tower product for this purpose.
only will SaaS startups have to navigate complicated
sales processes, as covered in Chapter 2, but they “It’s a good thing to bring a partner in to do this because
will also have to make sure they can keep up with the you will only ever need to set it up once,” he says. “We

“
It can be the most innocuous thing. The legal person
goes [on holiday] and your whole timeline is pushed
out by a few weeks.
Tom Wills, cofounder and CFO at Novatiq

THOUGHT MACHINE
22

know how it works, where the sticking points are and “It’s undifferentiated heavy lifting — the hard work you
what the decisions need to be, so we walk customers have to do but isn’t unique to your industry or your
through the process.” There are also software firms that business. Anything that looks like that, you should give
focus specifically on getting companies compliant with it to other people because it’s not worth your time,” he
ISO 27001 (the information security standard), such as says. “Exchange money for it because although your
Hicomply and Vanta. own team is certainly capable of it, they shouldn’t be
spending their time on things that are not differentiated.”
WHEN TO BUILD, AND WHEN TO BUY?
Particularly when it comes to security, Topper says
As a startup grows and its need for new tools increases, startups should think carefully about the opportunity
it will need to decide where it’s best to invest. cost that could result from not making the right
Luke Shipley, the cofounder and CEO of employee investment. “It can be difficult to convince companies to
background checking tool Zinc, says the company will put money into risk mitigation, because they don’t see
only bring new software into the business where an it as being as valuable as investing in the product,” he
employee is already “feeling the pain first-hand” and can says. “But you’re essentially investing in protecting the
clearly define the problem that they want to solve. revenues you have.”

From there, a decision is made between bringing He says that it is common for startups to invest around
software in or hiring for extra hands or specialist 5-10% of revenues per year on revenue protection,
knowledge. “That’s served us quite well in not becoming which includes things like security vendors, penetration
too overburdened with new processes and tools in testing and making design improvements to the product.
a phase of the business where there’s an unlimited
number of burning fires,” he says. “It’s helped us stay “You absolutely cannot sell B2B SaaS to enterprises
focused on today’s issues.” over a certain size if you don’t have these fundamentals
down,” he says. “Eventually, the mates you worked
For some tasks, there can be a temptation — particularly with at Barclays run out, and you need to sell in the
among first-time CTOs — to build new tech inhouse. traditional way.”
Topper says this often ends up being a false economy,
with weeks spent building something that’s half as good
(and needs even more time to maintain) than a product
that can be bought off the shelf.

Top B2B SaaS companies in the UK

These five software-as-a-service companies (all private, high-growth businesses headquartered in the UK) have secured the
most equity funding in the UK’s B2B SaaS sector.

£1.36bn £715m £664m £398m £358m

TOTAL AMOUNT RAISED TOTAL AMOUNT RAISED TOTAL AMOUNT RAISED TOTAL AMOUNT RAISED TOTAL AMOUNT RAISED

4 9 7 7 2
TOTAL EQUITY ROUNDS TOTAL EQUITY ROUNDS TOTAL EQUITY ROUNDS TOTAL EQUITY ROUNDS TOTAL EQUITY ROUNDS

2012 2014 2012 2015 2019

ESTABLISHED ESTABLISHED ESTABLISHED ESTABLISHED ESTABLISHED

Source: Beauhurst
23

CONCLUSION

The essentials
24

The essentials
We interviewed more than 15 B2B SaaS founders, investors and experts for this report.
The insights are many and varied, but here we’ve tried our best to distil them into one checklist:

First things first: don’t build Use data to understand Interview your target market
something people don’t want your target market Leverage personal connections,
Define a real business problem that Conduct market research and scour LinkedIn and network
needs solving and work out if there evaluate what kinds of companies at conferences to learn more
are enough customers (who are and profiles are actually interested in about your target market and the
willing to pay) for a business to your product. customers you want to sell to.
be viable.

Leverage your market research Move away from the horizontal Don’t underestimate the
into paying customers and into the vertical competition
Keep in touch with companies you A trend in SaaS is moving away from Monitor the competitive landscape
run pilots with and keep improving horizontal [which targets problems closely and ask customers which
your product; they may turn into full- that apply to a range of industries, of their problems still aren’t being
fledged customers. such as HR or file management] solved by what’s already on the
and into verticalisation, as the market.
promising opportunities have smaller
addressable markets.

Suss out whether companies are Consider offering product Hold out for a hero
interested early workshops Find a “champion” at the company
Try to ask questions about budgets Save time on long pilots by holding you are targeting and use them to get
and timelines early on to avoid “proof of a concept in a day”. in the room with top decision-makers.
wasting resources. But don’t forget to tailor your pitch to
new departments — and preferably
the people who hold the budgets.

Offer up a freebie Decide on a pricing model that Focus on numbers that show you
Don’t be afraid of free trials; they works for your company and goals are growing and providing value to
are one of the best ways to win Find that sweet spot between making your customers
customers. money for your business and being Churn and net revenue retention
too expensive for the customer. (NRR) are the numbers that will show
if you are achieving this.

Decide where it’s best to invest

Consider using external partners
or other products as you scale to
keep up with your customer’s legal,
procurement and compliance teams.
25

Acknowledgements
OREN GREENBERG RAPHAEL GÜLLER DIRK HOERIG
Founder, Cofounder and chief Founder,
Kurve design officer, Sweep commercetools

LAURA HUTTON ELEANOR LIGHTBODY NAOMI OWUSU

Cofounder and chief CEO, Founder,
customer officer, Quantexa Luminance Tickaroo

LAUREN PILGREEN SANDY REID EMMA SINCLAIR

Senior venture associate, Founder, Founder and CEO,
Sustainable Ventures Zaptic EnterpriseAlumni

LUKE SHIPLEY PAUL TAYLOR STEFFEN TJERRILD

Cofounder and CEO, Founder, COO, CFO and cofounder,
Zinc Thought Machine Synthesia

JON TOPPER SEB WALLACE TOM WILLS

CEO and CTO, VC, Triple Point; cofounder, Cofounder and CFO,
The Scale Factory Further Novatiq

This report was written by SARAH DRUM, edited by STEPH BAILEY, subedited by GEMMA TAYLOR, designed
by MANGO DESIGN, illustrated by ANJA SLIBAR and produced by EANNA KELLY and TANYA MAHESHWARI.
26

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