Offer software as a service (SaaS) poses its own highs and lows. As a SaaS company, you may not need heavy machinery, expansive factories, or a huge workforce to function optimally. However, you will still go through a pretty similar development path as traditional and brick and mortar businesses.
It’s important to understand these different stages more deeply to be better prepared for what’s to come. Join “SaaS Solutions”, a fictional SaaS company, to learn more about the 4 main growth stages below:
Stage #1: Cash-intensive, Research, and Development
The beginning stage can be a merciless one for any SaaS company, and SaaS Solutions is going through a number of challenging tasks to answer the question:
“What problem do we want to solve, and how can our service serve as the solution?”
Research and development require a lot of resources, so the company’s pouring its energy, time, and money into communicating with potential customers, establishing business connections, and seeking capital.
It was also able to develop a beta version of the software, and it’s asking early joiners to test the product out.
Stage #2: Product Launch
SaaS Solutions has now launched their software, and is encouraging users to refer their friends and family to download/install, and use the product. The increase in downloads and users leads to higher and more stable revenue, but the cashflow’s still limited at this stage.
It’s considering different funding options and would very much like to avoid anything that would require giving up equity or ownership. It’s a good thing that there are non dilutive funding options, such as revenue-based funding.
Stage #3: An Established User Base
Now that SaaS Solutions has a reliable software that has an expanding and established user base, it can grow further. Of course, with the help of one of the trusted revenue based financing firms it tapped a couple of months before, it was able to get the necessary funding to support day-to-day operations and product development.
Stage #4: Exit via Selling or Merging—or Continued Growth
Stable growth can mean quite a few things for SaaS Solutions. It’s now considering a few options:
1. Should it sell the company?
2. Is merging with another SaaS provider a better option?
3. Should it just focus on acquiring more users and adding more features to its software?
It’s a tough decision, but each of the choices above has its own sets of pros and cons. It may be a while before the company decides on the next step.
SaaS Company Financing Can Be Challenging, But It’s Needed for Growth
A SaaS company’s month-to-month subscription model doesn’t look appealing for many investors, which is why these organizations are often bootstrapped at the start of the growth cycle. Needless to say, it’s difficult to get funded at the beginning, but there are more financing options for SaaS companies now than before. Don’t give up on your search!
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