We all know the company visits where a high boss is flown in from far away, received by the CEO and provided with a briefing, given a carefully choreographed demo and then briefly shown around the rooms, which have been tidied up nicely beforehand. Afterwards, at an aperitif with the management, the visitor declares himself deeply impressed and disappears again after 90 minutes – and everyone is satisfied.
Well, my joining the board of directors of the startup Smeetzin Renens VD pretty much coincided with the beginning of the pandemic. And so I asked myself the question: What does it really look like behind the mails, documents and zoom calls in the company for which I share responsibility? What do the almost thirty employees do all day long? CEO Alexandre Martin offered me a multi-day stage to temporarily become part of the team. This suited me perfectly, as vacations on the farm are rather out of the question for me – given the weather situation in Switzerland of this summer anyway…
This stay gave me the opportunity to review a few general insights from my work as a business angel in the field, which I would like to share with my readers. So what are the particular challenges of startups, especially SaaS providers for B2B?
Customer service as a cost and success factor
One discipline that is often underestimated is customer service (euphemistically called Customer Success Management; CSM). Theoretically, everything can be solved via algorithms, so that no supervision or support is required. In practice, however, it almost always turns out that some form of support for the customers or their employees or customers is essential, especially in the case of continuously evolving products (as is common with SaaS). This is a very demanding task, as the software is constantly evolving and thus permanently changing. But it is also about identifying bugs as early as possible and up- and cross-selling to customers. Finally, CSM should also give important hints for future product development and is essential for customer satisfaction.
Training a team to manage capacity across language and time zones is time-consuming and costly, but there is no way around it. The challenge is therefore to balance knowledge management, customer training, sufficient resources and cost control before reducing the effort per customer with measured automation in a later phase when the development steps become less large.
Outsourcing is not a no-brainer
Development for SaaS startups does not take place in Switzerland, neither in the backend nor in the frontend area; the costs are simply too high and the personnel pool too thin. Eastern Europe and North Africa have established themselves as locations because they are easier to manage in terms of culture, language and time zones than the even cheaper locations in the Far East.
However, there are definitely stumbling blocks: Switzerland is not the only country to take a close look at whether these developers are bogus self-employed and whether social security contributions are correctly accounted for. Using an intermediary agency saves you these worries, but it does cost quite a bit of money, something that is notoriously rare in startups. In Corona times, the online acquisition of developers has special pitfalls, as Clemens Schuster, CEO of Politik.ch (also in my portfolio) recently reported in the Luzerner Zeitung (Text in German).
Touchstone expansion abroad
It is part of the standard narrative of local startups that expansion abroad is not a problem because, after all, multilingual Switzerland is a kind of mini-edition of Europe and the world. Global business is in our DNA. The reality is different here, too. The step abroad is the indispensable and decisive touchstone for whether a B2B startup really makes it. And it is by no means easy to gain a foothold in another country, usually without your own network. Market entry costs are high, as is the risk of betting on the wrong people and customer segments. A company that does not make it may well continue to exist, but then as a self-sufficient SME in its own country. That doesn’t have to be a bad thing, but of course it doesn’t match the vision of a Unicorn.
When founders have to take a step back
Startups in the SaaS sector are often founded by (male) nerds from ETH, EPFL or universities of applied sciences, if things go well together with a colleague from business administration. They know each other very well and work on the same wavelength, share the same values and the same vision. This goes well until sales, marketing, operations, CSM and HR become key issues. Those who fail to expand the leadership team in time and fully integrate these disciplines into management have bad cards for the future. The founders must learn that they themselves are not omniscient, despite having a majority of shares, and must listen to the expertise of other managers on a day-to-day basis. What it also takes in management: Mental strength and good nerves. Because after the financing round is always before the financing round – and liquidity is a shy deer.
How’s the ink?
Back to Smeetz: four jam-packed days of one-on-one meetings, marketing, sales, customer service, and GL meetings, workshops, and a meeting with a venture capital firm helped me enormously not only to better understand the company itself, but to experience the startup groove firsthand. It’s just a shame that I wasn’t able to have a closer exchange with the developers abroad, although I could sense their high level of engagement in the Zoom plenary.
To conclude (anecdotally), Smeetz has implemented the paperless office seamlessly. This goes well until a qualified online signature becomes necessary for proof of identity. Then it’s time to unpack the only inkjet printer and hope that the ink cartridge hasn’t run dry. Because without a paper printout of the identity card, you still won’t get anywhere in the analog world of public authorities…
[Translated with DeepL from the original publication in German on inside-it.ch]