Dan Martell - How To Build The Next Billion Dollar Startup

00:00:00.000 Hi there, my name is Dan Martell,

00:00:01.160 serial entrepreneur, investor, and creator of SaaS Academy.

00:00:04.000 And in this video, I'm gonna share with you

00:00:05.360 the four characteristics required

00:00:07.600 to build a billion dollar SaaS startup.

00:00:10.760 And be sure to stay to the end where I share with you

00:00:12.280 my customer creation model, a video that walks you through

00:00:15.080 how to validate your startup idea

00:00:17.440 and get early customer commitments.

00:00:30.000 So I know, building a billion dollar start-up especially in

00:00:35.500 the SaaS space is a huge promise but I'm gonna share with you,

00:00:39.960 I've never done it personally but I have been mentored by some

00:00:43.100 people that have and one of those folks is David Sachs.

00:00:47.100 David Sachs, if you don't know who he is, was early at PayPal.

00:00:49.960 He then did Genie, Yammer.

00:00:52.100 So PayPal sold for $1.5 billion to eBay and Yammer sold for

00:00:57.300 $1.2 billion to Microsoft and he's also one of the most

00:01:02.300 thoughtful, one of the most incredible thinkers in the

00:01:06.780 world and angel investors.

00:01:08.680 I mean, he's invested in multiple billion dollar companies

00:01:10.940 like Airbnb, Eventbrite, Slack, just to name a few.

00:01:15.220 So these ideas actually came from a talk I seen him give in

00:01:19.660 2014 that talked about what he called the startup fairyland,

00:01:25.300 the place you have to go in your mind to even conceive

00:01:29.200 that you could do this, but then talked about

00:01:31.200 the specific characteristics that need to be true.

00:01:33.480 So these four areas are what I wanna share with you today

00:01:37.080 from David Sachs.

00:01:38.280 Step number one, market need.

00:01:40.820 I know this may seem obvious to you,

00:01:42.480 but I'm gonna share with you two critical areas

00:01:45.320 that most entrepreneurs make this mistake.

00:01:47.220 Is one, they build a technology and they then go on a journey

00:01:51.300 or a search for a problem to solve.

00:01:53.260 That's not the way to do it.

00:01:55.000 Or two, they build something that's interesting,

00:01:57.440 it's nice, but it's not what's called a must have.

00:02:00.540 In the game of startup, if you look at all the products

00:02:03.540 from Dropbox to Slack to Trello, et cetera,

00:02:07.220 all these incredible SaaS scaled

00:02:09.940 billion dollar valuation companies,

00:02:12.520 they all solved a huge painful problem in the market.

00:02:17.680 You wanna create a must have,

00:02:19.500 something which Marc Andreessen calls

00:02:21.700 the founder of Netscape, billionaire-ish, I think.

00:02:24.520 I know he runs Billion Dollar Funds,

00:02:26.900 product market fit, that the market is pulling

00:02:30.180 your solution into it because it fits a need.

00:02:33.400 Step number two, a product hook.

00:02:35.880 Now, it's not enough.

00:02:37.180 You hear this in marketing talk all the time,

00:02:38.760 USP, what's your unique selling proposition?

00:02:41.600 Yes, you need to make sure that you can explain

00:02:44.060 to a target market exactly what you do

00:02:45.960 and for them to go, wow, that's unique and different,

00:02:47.880 I've never heard that before.

00:02:48.880 That has to be true, yes, but the other characteristics,

00:02:51.280 it's kind of an intersection,

00:02:52.960 is that you can ask them to take an action

00:02:56.100 that makes total logic sense that introduces them,

00:02:58.900 exposes them to your solution.

00:03:01.240 So if you think about as simple as PayPal

00:03:03.940 allowing you to email money to a friend

00:03:06.980 or with genie.com, it's a genealogy website,

00:03:10.980 allows you right on the homepage without sign up

00:03:12.980 to actually put in your information

00:03:15.620 and create your family tree and then save it

00:03:17.760 as the next step in action to register

00:03:20.260 or many SaaS products like a Slack

00:03:22.520 moving what I call the free line,

00:03:24.180 so essentially their freemium is so free, so valuable,

00:03:27.860 that it inherently gets more people to use it

00:03:31.000 and then at some point if you grow into a plan

00:03:34.240 or specific features that you need,

00:03:35.760 that's when things convert.

00:03:38.040 That's what you want to build.

00:03:39.240 You want to build something that has a product hook

00:03:40.980 that's easy, that doesn't create any friction

00:03:43.380 for a customer to come in, take action,

00:03:45.840 and understand what it is that you do.

00:03:49.280 Step number three, a scalable distribution model.

00:03:52.620 So when it comes to getting customers, distribution,

00:03:56.020 getting in front of your potential market,

00:03:58.460 you need to find a way to do that

00:04:00.160 that doesn't cost you an arm and a leg.

00:04:01.660 If it costs you $5 to acquire customers

00:04:03.660 that's gonna generate $1 over a 12 month period,

00:04:06.400 you don't have a business that doesn't matter

00:04:08.240 how incredible it is and how much the customer wants it.

00:04:10.900 What you need to figure out is how to build

00:04:12.940 in the product ideally what I call shareable moments

00:04:16.840 where you leverage the customer's activity

00:04:18.700 to introduce your product to other people.

00:04:20.660 I mean, if you think about it, products like FreshBooks,

00:04:22.960 invoicing, inherently has it in the email invoice

00:04:26.360 that you send to other customers

00:04:27.440 because their customer's a small business owner.

00:04:29.480 So if I'm an owner and I send an invoice

00:04:31.240 to another business, they see FreshBooks

00:04:33.540 and they potentially could sign up and use it.

00:04:36.080 One of my coaching clients, David at Proof,

00:04:39.060 or useproof.com, they have it by the Powered By

00:04:43.160 in their little notification pop-up.

00:04:45.120 So their product allows any website

00:04:48.340 to show proof on the website that people are signing up

00:04:51.240 or using the product or registering for their newsletter

00:04:54.740 and in there it has the power to buy

00:04:56.640 that allows people to see that and say,

00:04:58.140 wow, that's really neat, how'd they do that?

00:04:59.500 Click that and use the product.

00:05:00.900 Project management software, scalable distribution model,

00:05:03.600 Trello, Basecamp, et cetera, Slack, same thing.

00:05:06.780 You invite your team to use the product.

00:05:08.700 If you think about those companies,

00:05:11.240 they have either shareable moments or shareable networks,

00:05:16.600 so other people's networks, they leverage OPN,

00:05:18.660 other people's networks, the way Airbnb did

00:05:21.600 with Craigslist and many others.

00:05:23.600 Dropbox with their referral invite flow.

00:05:26.340 You need to create a scalable distribution model

00:05:29.340 in your business to get to a billion.

00:05:30.920 You can build an incredible business without that,

00:05:32.980 but it is the amplifier to make the whole thing work.

00:05:35.760 Step number four, a non-copyable moat.

00:05:39.180 You need to build something that can't be as easy

00:05:42.160 as somebody posting on Upwork or Elance or whatever

00:05:44.620 and asking somebody to copy your website for $3,000.

00:05:48.460 I've seen it all the time, every one of my startups.

00:05:50.920 I get some notification because I monitor what people are saying

00:05:53.140 online that people are willing to pay to just copy our website.

00:05:57.380 What you want to create is some level of defensibility.

00:06:01.000 And it can look in one way from a network effect.

00:06:03.860 If you think of Dropbox, they've created a network effect

00:06:06.520 around people that know how to use the product,

00:06:08.680 the features it uses, the share feature.

00:06:11.720 Tools like Slack, the way they did it is by building

00:06:14.840 an incredible directory.

00:06:16.940 I think they have over 1,200 integration partners.

00:06:20.260 Same thing with Zapier.

00:06:21.480 I mean, if you just think about what's the hard stuff

00:06:25.220 that people aren't willing to do and can we do this

00:06:27.500 as a differentiator and a value add to our customer

00:06:30.540 and implement that so that we create a moat

00:06:33.060 around the business that even if somebody were to attack

00:06:35.740 our customer base, it would take them so much more

00:06:39.420 to build that, or to penetrate that moat,

00:06:43.460 that creates defensibility to business.

00:06:44.960 Network effects, marketplaces all have that,

00:06:47.100 but you need to figure that out for yourself.

00:06:48.960 So quick recap, first, you need a market need.

00:06:52.300 Step two, you need a product hook.

00:06:54.200 Three, scalable distribution model.

00:06:56.500 And four, non-copyable, you have to create a moat.

00:07:00.840 As I mentioned at the beginning, I wanna share two things.

00:07:02.920 One, David Sachs' video called

00:07:04.640 The New Sales Models from 2014, it's incredible.

00:07:07.880 That link will be below in the description.

00:07:09.680 Also, I want to share with you a training I did on the customer

00:07:13.520 creation model to allow you to validate your startup idea and

00:07:17.560 get early customer commitments.

00:07:19.160 Click the link below in the description to get a copy of that

00:07:22.500 and if you like this video, be sure to click the like button,

00:07:25.240 subscribe to my channel and if you know somebody you care about

00:07:28.160 that would benefit, please share this video with them.

00:07:31.100 Thanks for watching.

00:07:31.940 I'll see you in the next video. 0.98

00:07:33.440 fuck man it's warm in here dude you don't feel how warm it is not really 0.99

Dan Martell - May 07, 2018

How To Build The Next Billion Dollar Startup

Episode Stats

Summary

Transcript