True SaaS

I was recently on a call with founder who reached out about me potentially investing in the company. As we started to dig into the product it became apparent to me that the product was not truly a SaaS product and I said as much to the founder. I was surprised to hear I was the first person to tell her that her product wasn’t a SaaS product.

I told her that my definition of a SaaS product was that a customer can find, begin using, and pay for the product seamlessly, without any intervention required. I believe any product that falls short of meeting this definition, isn’t truly a SaaS product.

There are countless web products that aren’t true SaaS products. Does this make them bad products? No, but are they true SaaS? No.

To fit the definition of SaaS, this product would need to function on its own without human intervention. When discussing this product with the Founder I learned that most of the company’s time with customers was spent on onboarding and setup. I asked her if she ever considered making the onboarding process self-serve for customers to use the product without needing support. She said no. She said the nature of the industry and the way the data and logic work is such that every customer needed some upfront help to setup their account and make use of the product. At this point it was clear to me that her product wasn’t true SaaS, it was an application running in a browser, but not SaaS.

I shared with her the story of a founder I met a few years that had a web product that she also believed was a SaaS product that wasn’t. This product was in the healthcare benefits space and the founder said that customers sent her paper files of the company’s employee’s pay rate and hours worked. The software managed and tracked who worked enough hours and who was pay rate eligible for federal health insurance coverage. I asked her how many paper files she would receive from one customer and she said oh, “Boxes and boxes.” She pointed to some in her office, and she had even more at her home. Not only did she have a major customer onboarding problem, but she also took on a huge liability by having these employment files in her possession in a very insecure manner…