Unbundling the Founder Journey
After my last article, Efficient Growth in India, I planned on re-purposing an email that I usually write to founders & product leaders on helping them start thinking about growth in India and sending it out to this list. I dropped the ball on that and I'm sorry. That re-purposed email is still sitting in the "Drafts" section of this newsletter, I'll probably polish it up and get to it over the holidays in a few weeks.
Today, I'm going to write about something that I think is relevant to anyone who is in the early days of their careers - especially those that think that they may start or lead a SaaS company someday.
I believe that we are witnessing an unbundling of something I didn't think could be unbundled - the journey that tech company founders undertake when they start a company.
Starting a company, especially a technology company, is often viewed as a 5-10 year journey, for good reason: a marathon, not a sprint. Leadership teams need to hyper-grow with their companies, but humans grow linearly, but companies grow exponentially:
The founder, it turns out, is the one exception to the law of startup physics. “The CEO often says, ‘Why does everyone else lose their job and I don’t? I’m biological.’ It’s a really important question,” says Halim. “The answer gets back to the one thing humans can do that is exponential: thought, which extended turns into story or vision. You can think of a toothpick. Then you can think of 1 million toothpicks. And then you can think of the forest from whence they came. You can make those leaps in an instant, but only those mental leaps.”
We've been trained, as founders, to think about starting our companies as 5-10 year journeys where we need to defy gravity. This is great to aspire to, but in practice means that the number of people who start companies significantly reduces: the only people who are willing to start companies do this are the ones who are willing to commit 5-10 years to the journey at the outset.
I believe that the explosion in the number of founders, through programs like On Deck is generally good for the startup ecosystem and the world at large, but will result in the normalization of the unbundling of the founder journey from:
Ideation → MVP → Product Market Fit (or 0 to 1 as it is colloquially called)
Product Market Fit → Building a growth engine (1 to 10)
Scale, Growth, and Beyond (10 - 100+)
Not everyone is cut out for each stage of this journey, and I believe that we will move to a world where:
"Founders" begin to identify with and specialize in each stage of the journey (I put "Founders" in quotes because I'm referring to people with a "Founder mindset")
Mainstream platforms will emerge to enable these “0-1 Founders” to unlock the value they have created
These platforms will create value by taking a large collection of these sub-venture scale businesses from 1-10 and will make them profitable (if they aren't already)
Long term tailwinds, great execution, and inflections will enable a small % of these businesses to generate venture scale returns
The most notable example of this appears to be Tiny Capital, but I believe that this is about to become much more mainstream and accessible, becoming a viable career path for founders and operators.
Decalab
I want to dive into a case study of a good friend of mine, Raj Sheth - he's building the platform that I believe enables this unbundling.
He runs Decalab, a company that buys B2B SaaS companies that are more than $1M in revenue. Earlier this year, they bought their first company, Flydata, a company that had raised $10M in venture capital. If you are the founder of a SaaS company that's looking to sell, you should get in touch with them. I also wrote a Twitter thread explaining how he went from cold outreach to acquisition in less than 30 days.
Back to the Decalab model, how Raj arrived at it, and why I think it will work.
After successfully co-founding, bootstrapping, building, and engineering an all-cash exit for Recruiterbox, Raj knew he wanted to start a new B2B SaaS company. He brought some of his old teammates together, had a problem statement in mind, and started working on customer discovery. But he realized that he didn't care deeply about the product, industry, and problem: and as a result, going from 0 to 1 was exhausting. So he sold the MVP that they created in 90 days to a larger SaaS company, and instead of starting again, he decided to take an alternate approach. He bought FlyData, short-circuiting the 1.5-3 year journey of finding product-market fit and going from 0-1 (in SaaS terms that is being on track to book $1M in revenue). That was the beginning of Decalab. He's written a much more detailed version of this story on the Decalab blog.
I was skeptical at first - I'm now a believer - so much so that I have committed some of my time to him in advising Decalab to help build this platform. Why do I think the Decalab model will succeed?
Focus: They are focusing on buying companies that are squarely in their core product and sales competence: self-serve B2B SaaS with free trials for small & mid-market customers. Their core competency is not enterprise sales, but rather designing and hacking inbound funnels for self-serve products. It helps that these are traditionally customer groups that are highly fragmented, and there are many $1-10M businesses built or waiting to be built.
Profitability: Decalab made a key decision to do everything from revenue. They will only use their capital to acquire the company, after that, the company will grow only out of EBITDA. This means either buying profitable companies, or having a crystal clear path to profitability at the time of acquisition. While this may not result in rocket-ship growth, it ensures that the holding company's investible capital is used to build a portfolio of sustainable businesses.
Platform Approach: Decalab's core team gets involved in the acquired business for 2-4 quarters, gets a sustainable engine going, and the moves onto the next company. Companies that are able to (within those 2-4 quarters) get on a growth trajectory will get a mini-CEO in the form of a growth or product lead, financed out of the incremental revenue generated - the ultimate training ground for ambitious practitioners. The core Decalab team stays purely focused on putting a company on a path from "1-10", and then moves on from there.
At an ecosystem level, I believe that platforms like Decalab play a key role in unbundling the journey for founders, and they do so by unlocking opportunities for 3 connected sets of practitioners in the tech ecosystem:
founders who may feel stuck in their existing businesses by providing them with a smooth exit opportunity
aspiring founders, who can rest easy in the confidence that even if they start up and don't get to $10M ARR, there is a friendly partner for an exit, regardless of profitability
aspiring growth practitioners who may want to lead a business someday, but want to learn the ropes by single-handedly taking a business from 1M to $10M in ARR (they're hiring)
I’m looking forward to being close to the journey of building Decalab - a viable option for founders that lies between bootstrapping and attempting to build a venture-scale business.