Ask HN: I'm a solo founder and a billion dollar company wants to use my SaaS
Hey folks!
TLDR; I am bootstrapped solo founder, started my SaaS a couple months ago, ~10 customers are using my product for ~50$/month and today I had a call with a multi-billion dollar company who wants to use my product. I have somewhat of a blue ocean niche product and they expressed their deepest interest in using my SaaS.
As you might have already thought, they require some customization (most of it is on the roadmap anyway) but then also a couple of extra security measurements such as SSO and that the data can't be shared on a database with other customers.
The are very well aware of the fact that I am probably not able to handle this alone and let me know that they know the value of what would need to be done. The also acknowledged that the current pricing plan won't work for them and essentially they are willing to pay $$$$$$
Sounds a bit like a shift to a service company rather than a product company to you? Well, to me it does. I have read the entirety of this great HN thread (https://news.ycombinator.com/item?id=14071025) as well as this https://m.signalvnoise.com/dont-let-anyone-overpay-you/ and I ended up with very mixed feelings:
One the one hand this could potentially skyrocket the reputation of my SaaS, let alone allow me to work full time on my own dream company. There's even another large-sized company that basically couldn't sign up due the exact same security concerns.
On the other, it comes with a seemingly high responsibility, would mean I have to contract some developers, change my sole prop to a limited and in the end they could decide to churn anyway. Moreover, I have by no means the funds to pay for the development upfront. I think that the company is aware of that and it seems like they would sort of support me through it but I have no idea how this would legally work and is just guesswork.
What would you do in my position? Appreciate every piece of advice!
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I was in a similar position a decade ago. I took the money and it worked out for my ambitions (a nice living running a small company). It is up to you to decide which path to pursue.
In my case, there was an intermediary company and they loaned me the money needed to build the product and took it out of the future revenue. But a large company can advance you money or help you get a loan. Your job is to come up with a plan to do what they want and a price that makes it worth your time and ensures that you are around to support them in the future.
Some things come to mind: 1. It is hard to keep the product generic if you are serving a large client. I couldn't do it. It might be easier for you if the product lends itself to selling 'seats'.
``` 2. Find out how established your sponsor is at the company before investing too much effort in this deal. Have they made purchasing decisions like this? Who would have to sign off on this deal? Does it help them with one of their top 3 goals for the year? Just because you are talking to someone from a big company that doesn't mean they can actually write you a check.
3. Get a copy of their MSA (master services agreement) and make sure they not expecting ownership for derived work.
4. Everything costs x3 and takes x2 as long as you think it will. Always does. Plan accordingly.
5. Don't hire a business guy to run the business. It's your baby -- change the diapers yourself. It really isn't that hard and you can hire consultants to do finance and legal. If you need sales, think lead-gen. You personally will close every sale at this scale.
6. Hire someone who's entire job is to do client management. Get someone good and pay them a lot. Build that into your price.
``` I personally love the small businesses that the startup community looks down on as 'lifestyle' businesses. Most startups are like rock bands. They toil in obscurity and fail. And then you and your baby get sold for pennies to pay back the investors.
...
Assuming you want to go the small business route, figure out what you think you need to run the business if they were your only client. Convert the roadmap into full-time heads and estimate what it would take for them to hire about a generic consulting shop to recreate what you are doing from scratch. Make sure each head is $20K/mo. Add 50% as a buffer. Your biggest risk is underpricing.
Then tell that you'd love to focus on them and it would cost you that amount to do it. Walk them through it. Talk about how it is less risky and faster to partner with you. See if it lines up with what they are willing to pay.
They may ask for ownership. If they do, ask why they want it? Being the largest client gives them more control than a 10% stake. If they insist, offer a 10% stake for the price you quoted to build it and reduce the ongoing price by 30% because the investment replaces the 'buffer'.
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And a few more business/practical things that you might not know:
``` 1. You need a C corp if you want to raise money. C corps are controlled by a board. An LLC is controlled by a managing partner. You want one or the other and you don't have to spend a bunch of money to set it up.
On one business, I used generic paperwork from Techstars, Carta to manage the ownership, and a registered agent to keep my government filings up-to-date. Took maybe 2 days and costs < $1K/year.
2. Once you get any scale, you have to pay yourself as an employee and report that as income. I think you can get away with not claiming income at first but the IRS wants its share. Use a payroll service -- do not write a check for labor directly, even your own.
3. If you have discrete chunks you can hand you, consultants can work. Finding good consultants is hard. I personally favor direct hires because you get their full attention.
4. Make sure to have all employees/contractors sign an agreement that gives you clear ownership of the IP. ```
The are very well aware of the fact that I am probably not able to handle this alone and let me know that they know the value of what would need to be done. The also acknowledged that the current pricing plan won't work for them and essentially they are willing to pay $$$$$$
IMO, if they want your product this much, they should have no problem paying you up front, at least enough to hire help. I'd only hire help on a contract / temporary basis, because this whole deal could blow up in your face at any time, and because they are much larger than you, you can't do anything about it, even if you have a contract.
I wouldn't release source; too easy to steal and you have no leverage.
What I have often done with large customers (Ford, IBM, others) is to charge an hourly rate to help develop a project plan, including milestones with dates and payments you both agree on as well as acceptance criteria for each milestone. As you meet milestones, they pay you. That way if they decide to back out, you have at least been paid for the work that's been done.
Also make it clear in the contract that any work you do remains yours and they don't own anything.
Good luck!
A short PS: I have had billion dollar companies try to screw me over more than once, so plan for that possibility. Sometimes you can take a hard line - "Yes, you will honor our contract through blah, blah, blah. You can cancel it after that but not before." - and sometimes that works (it did for me once) and sometimes they just ignore you. Going after them legally is almost never practical, so don't think just because you have a contract, you are protected. Make your milestones short, like a month or two - no longer.
No, Ford and IBM never screwed me over. They were both great to work with.
I worked at a company that had similar situations, so here are some thoughts.
Make sure you really understand what it is they want and how they will use your product. Our company would speak with companies and it turned out that our service wasn't exactly what they wanted, it just sounded like what they wanted. Basically the value prop wasn't understood. Or they liked our features, but really wanted a competitor feature we didn't have. In these cases we spent time across multiple teams trying to close these deals and it led to nothing.
Also, make sure you really understand all of their requirements. We spent a bunch of time speaking with one company, spent time during a trial to impress them, then at the end it didn't close because they wanted us to have a specific industry certification that we didn't have and weren't planning on obtaining. They went with a competitor.
Another problem we would run into is that we would trial with a company, then whoever our contact was would quit. Then whoever replaced them either didn't think our service was needed, or just couldn't continue speaking with us because they had to get settled into their new role.
Pricing was also an issue sometimes. Make sure you speak about it upfront. Again, we had companies not close because pricing came up at the end and they didn't want to pay.
Personally I felt like we spent too much time chasing big companies because the business side always thought closing one would open many doors. We did close some big companies and the revenue was good, but it never really led to more business.
For one, you should probably have an LLC if you want to be serious about business in the first place. If it's just a hobby, then I guess don't charge money for it. But the moment you're charging people money, you practically need an LLC for so many little reasons. One you want to have separate finances established for the LLC and for yourself.
If I were you I'd go ahead and establish the LLC, and then just see if the client wants to move forward. If they do, there's no shame of hiring a few contractors on to help you get to where you want to get to. If they don't, then you still want an LLC
I have an LLC, and I'm well aware that I'll probably never make a dime on my side project. I just have no interest in commingling my personal and business finances.
Overall I'd definitely go for it
If you take extra funding and hire people just to meet their needs, you no longer have a SaaS. You are writing a custom product for this large customer, with explicit permission to try to sell it to other people too. But this big player will be driving everything, as if you do not do what they say, they can walk and your business collapses.
That does not necessarily mean it is the wrong choice - if you are not growing otherwise, and this is a path to keep it alive, it makes a ton of sense. But if you are growing and these guys are just a jumpstart to bigger ARR, it might be a mistake.
As for what I would do - I'd simply tell them that they are more than welcome to become a customer, and that you certainly will take their needs into consideration when prioritizing your roadmap.
Hey @all since I have seen this kind of comment a couple of times I would like to address it in more detail:
"If you take extra funding and hire people just to meet their needs, you no longer have a SaaS. You are writing a custom product for this large customer, with explicit permission to try to sell it to other people too. But this big player will be driving everything, as if you do not do what they say, they can walk and your business collapses. That does not necessarily mean it is the wrong choice - if you are not growing otherwise, and this is a path to keep it alive, it makes a ton of sense. But if you are growing and these guys are just a jumpstart to bigger ARR, it might be a mistake."
=> I realized that I can easily build the features myself and don't need to hire extra staff. I might need one contractor that could do some last-step safety checks but that's it. In terms of building extra features just for them: Besides the enterprise standards such as SSO and the apparent need for data isolation all the other requested features are on the roadmap.
My business right now is not really growing anywhere and this customer could essentially spark the engine. The reason for this is that there's actually another almost equally as large company that wanted to use my app but had to decline for the exact same lack of enterprise features (mainly the security part)
What I am concerned about is that they want some sort of support plan and an SLA which all seem intimidating at first glance as I have no idea how to properly price it so that I am not a slave just to their needs, you know?