Advice

Lessons learned from first year of building an enterprise SaaS startup

It has been eighteen months since my co-founder and I started our journey of building Magalix, a US-based enterprise startup that intelligently adjusts cloud infrastructure capacity of technology businesses to help them save up to 50%, realize savings 10x faster and boost their observability powers.

I was aware of some of the challenges with establishing a technology business having previously started multiple companies in Egypt. However, building an enterprise startup comes with its own set of challenges. Even though we are still in our early days but I have already learned a lot of lessons. In this piece, I try to share some of those that are applicable to almost any early-stage tech startup.

1) Sell before you build

A classic startup mistake we made when we first started working on Magalix Beta was that we built before we sold. We sought feedback from people within our network and we got some thumbs ups saying our idea was one of the best ones they had heard in the cloud infrastructure space. We took that initial feedback and spent around four months focusing on developing the product and adding features.

If this is something you are doing now, then PLEASE STOP! Get in front of as many customers as you can in your early days. Get customer feedback and NOT feedback from your network. Never stay focused in a room writing code unless you are past PMF (Product/Market Fit). Even when you’re past PMF continue to remain very close to your customer.

The result of this mistake was that we built a product that no one would pay for. It was a very cool product to try out and play with but not a product to pay money for or use for business.

2) CAPTURE THE RIGHT FEEDBACK AND AVOID FLUFF AND “HAPPY EARS”

There are a few ways by which you could fall into the trap of fluff feedback or ‘happy ears’. The following are two common pitfalls:

Loved Ones’ Feedback: Imagine a situation where you go pitch an idea you are very passionate about to your loved ones. If you tell them, “Look what I am building! I quit my job to do this”, it’s very likely they will tell you that what you’re building is amazing and that it is a great idea. You’ll walk away pumped up because of the positive signals, but these are false signals.

Early Adopters’ Feedback: If you follow the same process and pitch your product to people you consider potential early users, they will tell you that they love it and will try it when it’s launched. Please don’t consider this as validation or great feedback. Ask them if they would pay for it. Now, you will get different answers.

I remember talking to a friend at a well-known enterprise and, after 30 minutes of positive signs, I asked him, “OK, let’s assume I added all the features we discussed and launched the product, would that be great?” He said, “YES, that would be the best thing ever.” Then I asked him, “Would you adopt it and pay for it?” Now all his answers changed because of all sorts of reasons. If I had left him without asking this last question, I would have left with ‘happy ears’.

3) SURROUND YOURSELF WITH THE RIGHT ADVISORS

It’s critical for your early days to surround yourself with like-minded people. Surrounding yourself with senior executives at big corporations is nice but not super helpful for your early days. Talk to entrepreneurs and people who have been in your shoes.

I would also recommend applying for incubators and accelerators, especially if you are a first-time founder. We were lucky to have 500 Startups as an investor, and we learned a ton of lessons from their community and mentors.

4) TREAT FUNDRAISING AS A SALES CYCLE

Fundraising is a full-time job. If you try to be a product master, a sales guy, and a fundraiser at the same time then you will most probably master none.

Fundraising sucks and we all know that. I feel I can write a separate blog post dedicated to fundraising lessons learned but I’ll highlight a couple of them here:

Deal with fundraising like a sales cycle. If you are a technical founder, then please seek some guidance about the sales process and how it works. Do your research about VCs and list them down in a CRM or a spreadsheet. Try to set a time limit to the process and get meetings scheduled in chunks.

Stop wasting your time meeting with Series A investors. If you hear an investor saying, “We are an early stage investor that invests in Seed to Series B, and our sweet spot is Series A”, then WALK AWAY. Don’t waste your time with such an investor unless you have an excellent relationship with them. The chances of them funding you are close to zero.

5) LAUNCH QUICKLY AND KEEP ITERATING

When I look back at the amount of time we spent on our first version of our website, I laugh. We were trying to make it look professional and rich but a few weeks after launch we had to pivot away from the current offering. Keep an open mind, launch something quickly, test it, and continue iterating to improve it.

6) FOCUS ON USER EXPERIENCE NOT INTERFACE

Nailing the first-time user experience is essential. I recommend watching this video of Suhail from Mixpanel, just jump to 15:58. Make sure the users’ first thirty seconds on your platform are incredibly smooth and use walkthroughs if needed.

When we shipped our beta product, we realized how unfriendly the first-time user experience was. We had spent a great deal of time perfecting our user interface but the first-time user experience was challenging. We found a lot of users bouncing from our platform and not really using it at all.

7) KNOW YOUR CUSTOMERS AND HOW TO TALK TO THEM

Always try to find and conquer a niche or a vertical and then expand.

You also need to define your customer persona and be as specific as you can be. For example, CTO is not a persona; CTO at healthcare companies that have less than 500 employees and use cloud infrastructure is a much more specific persona. The more specific your customer persona is, the better you are in a position to nail your PMF or scale your business in its early days.

On a related note, if your product offers multiple value propositions then focus on one. Each value proposition probably targets a different persona and going after multiple personas at the same time is very dangerous for your early startup days.

Stay focused and keep practicing the right messaging for each persona. Don’t assume all customers will understand your “complex” message. Don’t assume investors will understand it either.

Omar Mehilba

Omar Mehilba

Co-Founder & COO at Magalix
Co-Founder and COO of Magalix, previously started Label Advertising and Vision Solutions. Father of 2 beautiful girls and a huge soccer fan. Omar loves talking startups and helping others. He can be reached on Twitter.
Omar Mehilba

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