Jason Lemkin discusses his three phases of a SaaS startup:

  • Phase 1: Getting 10 unaffiliated customers
  • Phase 2: Gaining initial traction
  • Phase 3: Attaining initial scale

Video Transcript: Three Phases of a SaaS Startup

I will break it up maybe into three or four phases the first one I call getting 10 unaffiliated customers. Getting 10 folks who aren’t your old friends, your ex-boss, someone down the hallway to actually pay money, pay money for your product because then you actually have something.

Right, I’m not interested in viable products, I’m interested in sellable products as everyone who does enterprise is, so phase 1 is 10 unaffiliated customers. We call it beer money. It’s never enough money to pay your engineers or to pay income, but at least it shows that you should never quit if you have something.

The next phase, and it’s a long gap, is what I call initial traction which is usually around 1 million ARR,  a 1 million in revenues. That’s when the engine starts to come together, right you don’t have enough leads, you don’t have enough customers. But you pretty know every month you’re probably going to have more customers than last month and more revenue coming in. This is really the right time to build out a lot of your management team-- VP of sales, VP of marketing around that, initial traction. Then, there is this long slog to what I call initial scale, around 10 million plus or minus. And at 10 million in revenue that's when the brand starts to come together, and you start to have enough revenue and enough fat to have redundancy.You can have directors, and senior directors, and extra engineers. And so the real lesson is that if you get to a million then what ever you do, hold out to 10 million, because it gets easier when there’s fat in the system, and it gets easier when you have a brand.