How To Build The Next Billion Dollar Startup


– Hi there,
my name is Dan Martell, serial entrepreneur, investor
and creator of SaaS Academy and in this video I’m gonna
share with you the four characteristics required to
build $1 billion SaaS startup and be sure to stay to the
end where I share with you my customer creation model. A video that walks you through
how to validate your startup idea and get early
customer commitments. (upbeat music) So I know building
a $1 billion startup, especially in the SaaS space
is a huge promise but I’m gonna share with you I’ve never done
it personally but I have been mentored by some
people that have and one of those
folks is David Sacks. David Sacks if you don’t know
who he is was early at PayPal, he then did Geni, Yammer. So Paypal sold for $1.5 billion
to eBay and Yammer sold for $1.2 billion to Microsoft and he’s also one
of the most thoughtful, one of the most incredible
thinkers in the world and angel investors. I mean he’s invested in multiple
billion-dollar companies like AirBnB, Eventbrite,
Slack just to name a few. These ideas actually came from
a talk I seen him give in 2014 that talked about what he
called “the startup fairyland.” The place you have to go in your
mind to even conceive that you could do this but then
talked about the specific characteristics
that need to be true. So these four areas are what I want to share with you
today from David Sacks. Step number one, market need. I know this may seem obvious to
you but I’m gonna share with you two critical areas that most
entrepreneurs make this mistake is one they build a technology
and they then go on a journey or a search for problem to solve. That’s not the way to do it. Or two, they build
something that’s interesting, it’s nice but it’s not
what’s called a must have. In the game of startup, if you
look at all the products from Dropbox to Slack to Trello, etc. all these incredible SaaS scaled billion-dollar
valuation companies, they all solved a huge
painful problem in the market. You want to create a must have. Something which
Marc Andreessen calls, the founder of Netscape,
billionaire-ish I think. I know he runs
billion dollar funds, product-market fit. That the market is
pulling your solution into it because it fits a need. Step number two, a product hook. Now, it’s not enough you
hear this in marketing talk all the time, USP. What’s your unique
selling proposition? Yes, you need to make sure
that you can explain to a target market exactly what
you do and for them to go, “Wow, that’s
unique and different. “I’ve never heard that before.” That has to be true, yes,
but the other characteristics, it’s kind of an intersection is
that you can ask them to take an action that makes total logic
sense that introduces them, exposes them to your solution. So if you think about as simple
as PayPal allowing you to email money to a friend
or would Geni.com, it’s a genealogy website allows
you right on the homepage, without sign-up to actually put
in your information and create your family tree and
then save it as the next step and action to register. Or many SaaS
products like a Slack, moving what
I call the free line. So essentially
they’re freemium is so free, so valuable that is inherently
gets more people use it and then at some point if you grow into a
plan or specific features that you need, that’s
when things convert. That’s what you want to build. You want to build something that
has a product hook that’s easy, that doesn’t create any friction
for a customer to come in, take action and understand
what it is that you do. Step number three,
a scalable distribution model. So when it comes
to getting customers, distribution, getting in
front of your potential market, you need to find
a way to do that that doesn’t cost
you an arm and leg. If it costs you five dollars to
acquire a customer that’s gonna generate one dollar
over 12 month period, you don’t have a business. It doesn’t matter
how incredible it is and how much the customer wants it. What you need to figure out
is how to build in the product ideally what I call
shareable moments. Where you leverage the
customer’s activity to introduce your product to other people. I mean if you think about
it products like FreshBooks, invoicing, inherently has it in
the email invoice that you send to other customers
because their customer’s a small business owners. So if I’m an owner and I send
an invoice to another business, they see FreshBooks
and they potentially could sign up and use it. One of my coaching clients
David at Proof or UseProof.com, they have it by the powered by in their little
notification pop-up. So their product allows any
website to show proof on the website that people are
signing or using the product or registering for their
newsletter and in there, has the powered by that allows
people that see that to say, “Wow, that’s really neat.
How’d they do that?” Click that and use the product. Project management software,
scalable distribution model. Trello, Basecamp,
etc. Slack same thing. You invite your
team to use the product. If you think
about those companies, they have either shareable
moments or shareable networks so other people’s networks,
they leverage OPN, other people’s networks, the way AirBnB did with
Craigslist and many others. Dropbox with their
referral invite flow. You need to create a scalable
distribution model in your business to get to a billion. You can build an incredible
business without that but it is the amplifier to
make the whole thing work. Step number four,
a non-copyable moat. You need to build something that
can’t be as easy as somebody posting on UpWork or E-Lance or
whatever and asking somebody to build a copy your
website for $3,000. I’ve seen it all the time,
every one of my startups, I get some notification ’cause
I monitor what people are saying online that people are willing
to pay to just copy our website. What you want to create is some
level of defensibility and it can look one way
from a network effect, if you think of Dropbox, they’ve
created a network effect around people that know
how to use the product, the features it uses,
the share feature. Tools like Slack,
the way they did it is by building an
incredible directory. I think they have over
1200 integration partners. Same thing with Zapier. I mean if you just think
about what’s the hard stuff that people aren’t willing to
do and can we do this as a differentiator and a value add
to our customer and implement that so that we create a moat
around the business that even if somebody were to
attack our customer base, it would take them so much more
to build that or to penetrate that moat that creates
defensibility in a business. Network effects, marketplaces
all have that but you need to figure that out for yourself. So quick recap, first,
you need a market need. Step two,
you need a product hook. Three, scalable distribution
model and four non-copyable. You have to create a moat. As I mentioned at the beginning
I want to share two things. One, David Sacks video called
“The New Sales Model” from 2014. It’s incredible. That link will be
below in the description. Also, I want to share with you a
training I did on the customer creation model to allow you to
validate your startup idea and get early customer commitments. Click the link below in the
description to get a copy of that and if you
liked this video be sure to
click the like button. Subscribe to my channel and if
you know somebody you care about that would benefit, please
share this video with them. Thanks for watching.
I’ll see you in the next video. (bleep) man,
it’s warm in here, dude. You don’t feel how warm it is? – [Jared] Not really.

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