The Race to $100M ARR
SaaS and cloud providers have enjoyed epic levels of venture capital investment over the past few years. Almost every business plan imaginable has been funded resulting in tens of thousands of new startups entering the market. Some aim to disrupt existing markets while others hope to create new billion dollar categories out of thin air. Some are using traditional sales-led growth strategies while others are letting the product sell itself with PLG.
In the race to reach $100M ARR, go-to-market, monetization, and business model design will decide the winners from the losers.
Some offer subscription pricing with fixed monthly fees while others are monetizing consumption to scale revenue faster. Some are focused on building great software, while others have expanded their business model to include advertising, financial services, and supply chain capabilities.
SaaS Business Model Design – Key Considerations
SaaS and cloud providers aren’t just disrupting traditional industries they are reinventing their own business models. To remain competitive, both startups and established companies, need more challenge themselves more than ever to answer the big picture strategy questions related to:
New Category Creation
Platforms & product suites
Mergers & acquisitions
New Category Creation
New category creators need a fundamentally different strategy than SaaS and cloud providers disrupting an existing market. Category leaders need to get their customers to do things like reimagine how they do business and how they measure success. The effort to build a new market from scratch is substantial, but the payback is huge as many category creators are able to establish a dominant market position.
Category Leaders Redefine How their Customers View Success
Category Leaders Re-Invent the Technology Platform in their Markets
Category Leaders Get Customers to Redesign their Org Charts
Business Model Innovation
Every Product as-a-Service
In the next ten years every major product will become available in a subscription or “as-a-service” model. Innovators in every category of product are shifting away from the traditional transactional product sale of the 20th century towards service-centric models.
These new “as-a-service” paradigms are designed to provide higher levels of value to the customer with a goal of building longer-term relationships.
Pricing and Monetization
More and more SaaS companies are beginning to challenging the “per user per month” subscription pricing strategy that has been dominant throughout the first two decades of SaaS. Go-to-market teams are increasingly using variable pricing linked to the customer’s consumption or a percentage of the dollar value processed. These alternative monetization strategies create the potential for faster revenue growth and shorter time to reaching centaur status with $100M in ARR.