Getting started as a SaaS provider is step one. Improving your market position by expanding your business (nationally and internationally) is step two. What do SaaS companies think about their growth track and what are their considerations?
Rob Coppen, who founded Yellowtail Group, explains that his company has grown organically, from what was originally a project-based organization. In 2003, he launched Yellowtail, an IT consultancy in the Netherlands with offshore development activities, working in close collaboration with a company in Cape Town, South Africa. Yellowtail then opened their own offices in Cape Town in 2006, starting out with consultancy and software development projects for third parties. “Since we were also doing our own product development, we implemented a holding structure. The first product that Yellowtail Holding built and placed in a company called PSMS was an application for the municipality of Amsterdam to manage earthworks. This product, entitled MOOR (Meldpunt Opbrekingen Openbare Ruimte), was sold to Main Capital.”
Yellowtail Group is currently developing Ockto, an app that consumers can use to get immediate access to their personal financial information and make those details available for various purposes, providing them to banks, insurance companies and rental organisations. Amongst other sources, the funding for Yellowtail Group’s new services comes from the proceeds of selling MOOR and from the Yellowtail project activities. This offers Coppen and his team complete freedom in making choices in their current participations.
Growth through acquisitions
The same applies to Gert Kwetters, CEO of Visionplanner. His organization also autonomously funds its growth. In addition to this, Kwetters has the support of a Supervisory Board. Several captains of industry advise the company on their important decisions to keep them on track towards their 2025 objectives. “Four years ago, we grew by acquiring Infine (an Excel application); a member of the Supervisory Board suggested that acquisition to us. The product has a very solid client base and offers a great starter model for our services for a certain group of clients. In addition, it proved easier to persuade a bank to provide funding for an acquisition than for developing the Visionplanner product.” The Infine acquisition and the continuation of the product proved to be highly lucrative; and with those profits, the company managed to attain the growth track envisioned for Visionplanner.
Converting ‘acquired’ clients to your own SaaS platform can also turn out to be risky business, as Michiel Chevalier, Founder of NMBRS, can attest. “When you take over a competitor and want to convert clients of that company, then you’ll have to do even more development, which will in turn have an adverse impact on your growth. That does not apply when you take over a complementary company, because then you can start cross-selling and tap into new sources of income.”
Growing with a partner
The cloud hosting market is subject to different rules. In our market, economies of scale reign supreme. By adding new geographic regions, the costs of factors like hardware and bandwidth go down. Our expansion strategy varies per country. Often, we penetrate a new region together with a launching customer or a partner that wants to expand to another country. We did so in the UK, for instance, where the start-up phase of the business was fed from the Netherlands. In another region, an acquisition might be the best approach.”
Joris Moolenaar, CEO of Karify, has seen first-hand that finding funding for growth is not without its challenges. “Raising extra capital might make you less flexible, but it also offers many new options, and you get a great deal of support from the VCs. Karify is a company that supports people with mental health issues and behavioral change, and its growth was made possible thanks to investment capital. This enabled us to take various steps at an accelerated pace. External funding also raises its own questions. How do you assess the value of the investment? What should the returns be? Are the investors a good match for the founders? If you want to grow, you need to design a strategy for growth.”
SaaS suppliers also face crucial choices in terms of technology. What features do you focus on? What role does compliance play in development? Which cloud provider will you team up with? How do you find good developers? These topics will be discussed in the third and last installment of our SaaS Sessions series.