Why SaaS and subscription businesses often take longer than B2C

Edited excerpt from The Low Viral Coefficient of SaaS, And Why That’s Just Fine by Jason Lemkin:

Whatever you do, make your first 10, 20, 30, 100 customers happy. But the thing is, this probably won’t help at all getting to $1m in ARR any faster.

Our friends over in B2C talk a lot about viral coefficients. How quickly one WhatsApp user gets you another. How quickly your social map explodes across some new app.

It turns out in B2B it’s there, it’s just usually a lot slower. At EchoSign, from the date of first contract send to New Signer, to how long it took for that new account to convert to paid, it took 8 months, on average.

For the first year, that was incredibly painful. Because we had so few customers in the early days, that even after 8 months, they could only beget us a handful. It really wasn’t until the end of Year 2 that viral really kicked in. That’s just the math of a low viral coefficient. And it didn’t even get good until Year 3, when we finally had a large enough installed customer base, using the product, to become our second largest source of new customers.

Now, if you’re building a free B2C app, where you need tens of millions of users to get to Initial Scale, that’s a disaster. But in SaaS, when you’re on a 7-10 year journey to $100m in ARR, it actually doesn’t matter that much if your viral coefficient is low when you get the viral customers. When it does come, it comes on materially, and strong.

2 thoughts on “Why SaaS and subscription businesses often take longer than B2C

  1. Pingback: Why capital efficiency is critical for SaaS and subscription businesses | A Founder's Notebook

  2. Pingback: If you have any paying customers, don’t quit | A Founder's Notebook

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