Dan Martell - May 07, 2018


How To Build The Next Billion Dollar Startup

Hosted by
Dan Martell
Mentioned
David Sachs Mark Andreessen Yammer Genie
How To Get To Sleep When Your Mind Is Racing How To Increase Your Trial Conversions For Your SaaS

Episode Stats


Length

7 minutes

Words per minute

180.3

Word count

1,384

Sentence count

67

Harmful content

Toxicity

2

sentences flagged


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

In this episode, Dan Martell talks about the 4 characteristics required to build a $1B SaaS startup. These are the characteristics that David Sachs, founder of PayPal and founder of Yammer, discussed in a keynote he gave in 2014.

Transcript

Transcript generated with Whisper (turbo).
Toxicity classifications generated with s-nlp/roberta_toxicity_classifier .
Hosts, guests, and mentioned names generated with spaCy (en_core_web_sm), reconciled against Wikidata.
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