How to Validate Your SaaS Idea (with Daniel Priestly)

Summary

In this engaging discussion, Daniel Priestly shares his unique approach to validating SaaS ideas. He emphasizes the importance of launching a waiting list to gauge interest and obtain valuable feedback from potential users. By doing so, Priestly was able to successfully launch a company, raise funds, and build a customer base before even developing the product. His method involves collecting data on user expectations, price points, and key features, allowing for strategic decision-making in the initial stages of development. Priestly also highlights the distinction between creating a product that is a 'bread knife' - doing one thing well - versus a 'Swiss army knife' - offering many features more superficially.

Highlights

• Daniel Priestly uses waiting lists as a key strategy to validate SaaS ideas before product development 🚀.
• His waiting list approach gathered immense interest, leading to significant early-stage funding 💰.
• Insights from potential users guide feature prioritization and pricing strategy for new SaaS products 🔍.
• Priestly distinguishes between a focused 'bread knife' product and a multifaceted 'Swiss army knife' approach 🔪.
• Early user data collection assists in forming a clear, strategic development plan for SaaS initiatives 📈.
• Daniel involves angel investors early in the process, leveraging initial data to secure funding 🤝.

Key Takeaways

• Launch a waiting list to validate your SaaS idea and attract potential users 🎉.
• Gather insightful user feedback by asking about their needs, frustrations, and price expectations 🤔.
• Focus on building a 'bread knife' product – excel at a narrow set of features before expanding 🥖.
• Use waiting list data to strategize your product development and pricing effectively 📊.
• Engage angel investors early with solid preliminary data to raise funds ⚡.
• Differentiate your SaaS by being exceptional in select functionalities rather than offering too much 🌟.

Overview

Daniel Priestly introduces a refreshing methodology to validate SaaS ideas, focusing heavily on the power of a waiting list. By gathering interested users early on, he can gauge real market interest and refine the product concept before investing time and resources into development. This proactive approach not only mitigates risk but also positions his ventures for early success.

In his latest venture, Priestly successfully raised $250,000 without writing a single line of code, thanks to the insights and demand gathered from his waiting list strategy. This proof-of-concept not only attracted angel investors but also laid a strong foundation for building a product that genuinely meets user needs. The waiting list, used creatively, acts as both a barometer for interest and a source of valuable user insights.

Priestly offers a compelling argument for why focusing on a few standout features is crucial. He compares software development to choosing between a 'bread knife' and a 'Swiss army knife,' advocating for depth over breadth. By honing in on what users truly need and want, instead of overwhelming them with unnecessary features, he crafts SaaS products that stand out for their efficacy and user satisfaction.

Chapters

• 00:00 - 00:30: Intro to SaaS Idea Validation: Daniel Priestly's Methodology Daniel Priestly shares a methodology for finding and validating SaaS ideas. He emphasizes launching a waiting list as a practical first step. As an example, he recounts launching a company called Bookm Magic, where they successfully achieved $100,000 in Annual Recurring Revenue (ARR) or approximately $8,500 in Monthly Recurring Revenue (MRR) on the first day. Interestingly, Priestly mentions that this was a business idea he initially didn't want to pursue.
• 00:30 - 01:00: Genesis of Bookmagic: From Reluctance to Realization The chapter titled 'Genesis of Bookmagic: From Reluctance to Realization' describes the initial hesitation of an individual towards the idea of using AI in book publishing. The team, part of a publishing company, approaches this individual with a proposal to utilize AI as a tool to assist authors by providing structure and organization for their books, rather than writing the book itself. After discussing the potential benefits and addressing concerns, a plan is laid out to gauge interest through a waiting list and to provide preliminary information about the software's capabilities.
• 01:00 - 01:30: Launching the Waiting List: An Initial Test The chapter discusses the initiation of a waiting list for a software designed to help authors write books. The process begins by setting up a waiting list through score app.com, followed by a promotional post on LinkedIn. The objective is to reach 150 sign-ups to consider forming a team. However, the initiative gains unexpected traction with 750 people joining the waiting list, generating viral interest and questions among potential users.
• 01:30 - 02:00: Waiting List Goes Viral: Engaging with Potential Users In this chapter, the focus is on the rapid growth of the waiting list for a product, which has reached 1,000 people. The chapter discusses the process of engaging with potential users by asking them about their goals, frustrations, and previous failed attempts to solve their problems. It also covers the excitement about product features and perceptions of fair pricing, despite admitting that some questions could be improved. The overall theme is about understanding potential users and improving engagement strategies.
• 02:00 - 02:30: Gathering Insights: Understanding User Expectations The chapter titled 'Gathering Insights: Understanding User Expectations' discusses the process of gathering user expectations for a product designed to help write a book. The narrator notes that they initially expected users to be willing to pay around $19 to $29 a month for the product. However, they were surprised to find that 50% of the participants expected the price point to be between $40 and $100 a month, which was contrary to the initial lowball price expectations of $40 to $100. This revelation underscored the importance of understanding user expectations in product pricing.
• 02:30 - 03:00: Pricing Strategy: User Expectations vs. Reality In this chapter titled 'Pricing Strategy: User Expectations vs. Reality,' the discussion revolves around financial calculations and strategic pricing for a product. The speaker explains the process of crunching numbers with the CFO using spreadsheets to forecast costs and potential user base. They arrive at a proposed pricing strategy of £39 per month (approximately $45). The analysis concludes that reaching 1,600 subscribers at this pricing point would cover development costs, including both front-end and back-end teams, effectively making the project financially viable.
• 03:00 - 03:30: Crunching Numbers: Ensuring Feasibility This chapter discusses the feasibility of a new business project. The speaker mentions a mixed strategy involving advertising, public relations, and search engine optimization as viable means to make the project successful. They highlight the enthusiasm and potential, given that there are already 1,100 people on the waiting list without having reached out to major databases or mailing lists. The chapter also touches upon involving angel investors and influencers to further amplify the project's reach and credibility.
• 03:30 - 04:00: Building Support: Involving Angel Investors The chapter discusses the initial steps of raising funds for a business venture by engaging high-net-worth individuals using the Seed Enterprise Investment Scheme (SEIS) in the UK. The focus is on involving angel investors by offering 10% of the company for £250,000, valuing the venture at £2.5 million, despite not having any code written yet.
• 04:00 - 04:30: From Concept to Prototype: Initial Success The chapter recounts the journey of turning an idea into a prototype and achieving initial success. A development team was assembled to create the first version, which received positive feedback from 30 initial users. Following some improvements, a soft launch was conducted, resulting in 250 client sign-ups at a rate of $45 per month. The chapter highlights the author's extensive experience with startups, indicating that this was not their first entrepreneurial venture.
• 04:30 - 05:00: Daniel's Entrepreneurial Background In this chapter titled 'Daniel's Entrepreneurial Background,' Daniel discusses his extensive experience in the business world. He has a history of buying and selling companies, involving himself in acquisitions, and turning around businesses. Notably, he once owned a social media network with 600,000 members, which he successfully bought, improved, and sold within ten months. Additionally, Daniel managed an IT Services Agency, which he bought, sold, and repurchased, and he is considering selling it again.
• 05:00 - 05:30: Current Enterprises: Diverse Business Portfolio The chapter titled 'Current Enterprises: Diverse Business Portfolio' discusses a group of eight companies managed by the speaker.
• 05:30 - 06:00: Waiting Lists: A Data-Driven Approach The chapter explores the concept of waiting lists in a business context, particularly for clients and listeners who run SAS companies. It highlights the innovative use of quizzes as a method to enhance customer engagement, as opposed to traditional waiting lists that merely collect emails via a landing page. The approach is described as being 'data-driven', suggesting that it utilizes analytics to improve the efficiency and effectiveness of managing waiting lists. It mentions that by asking more detailed questions as part of the waiting list process, companies can gain valuable insights into their potential customers.
• 06:00 - 06:30: Focusing Features: Bread Knife vs. Swiss Army Knife The chapter discusses the importance of focusing on key features in SaaS products, likening software to either a Swiss Army knife or a bread knife. A Swiss Army knife performs multiple functions but not very well, while a bread knife excels at one. The chapter emphasizes understanding what features are crucial for the user and the issues they aim to resolve, as it's essential for early-stage product success.
• 06:30 - 07:00: Determining the Right Price: User Perception This chapter focuses on the importance of pricing in relation to user perception, especially when developing software products. It emphasizes the need to concentrate on a specific set of features and excel in them, rather than overloading the product with functionalities. The goal is to avoid confusing customers by providing a clear and excellent experience with a few things that the product does exceptionally well. By strategically narrowing feature sets and focusing on quality, the aim is to attract a large number of users who are engaged with and supportive of the product.

How to Validate Your SaaS Idea (with Daniel Priestly) Transcription

• 00:00 - 00:30 you've got this unique methodology for finding and validating ideas that you've built software Products off of you want to just kind of walk us through that that method one of the things that works for me is is just launching a waiting list right so um let me take you back I've just launched a new company actually called bookm magic. which we launched a week ago um on day one we got $100,000 worth of AR um so what about eight 8 and a half thousand Mr on day one it was one of these business ideas that I didn't even want to do like I
• 00:30 - 01:00 wasn't even totally into the idea of doing this but my team came to me we own a Publishing Company my team came to me and they're like hey we can use AI to like assist authors to write books they can tell it their idea it structures the chapters does all this cool stuff and I'm like okay like do you think the AI is going to write the book for them no no no won't do that it's going to do this okay blah blah blah so we we kind of like have a conversation I say look I'm really stretched a bit at the moment um here's what we'll do we'll we'll launch a waiting list what we'll do is we'll just tell people a few things about what we think the software
• 01:00 - 01:30 can do and if we get 150 people on the waiting list then we'll have some more meetings about we'll like talk about putting together a team or something like that all we do is set up a waiting list using score app.com and then what we do is uh I go on to LinkedIn and I say we're thinking of running this software and it's going to be helping authors to write books anyone who wants to write a book can tell it an idea blah blah blah anyway 750 people join the waiting list goes a little bit viral people are asking questions in the comments and I I go oh okay wow okay
• 01:30 - 02:00 we're going to have to have a serious conversation about this by the time we have the meeting it's 1,00 people are on the waiting list now when they join the waiting list we ask them what are you trying to achieve what frustrations have you got what have you tried that hasn't worked um what features you most excited about and what price point do you think this will be priced at that would be a fair price point which is not a great question there's better questions than that but we asked just a simple question anyway for the product yeah for the for the product if you were to subscrib to a
• 02:00 - 02:30 product that helps you to write a book what would you expect to pay basically so we tell them a little bit about it and um anyway what blew me away is that I'm expecting this to be about a $19 a month product maybe 29 a month 50% of people said that they were expecting 39 to aund like between the scales that we had between $40 and $100 a month that was first thing that kind of blew me away that people really were come now everyone's going to lowball you anyway they're going to give you a lowball price so they Global price was 40 to 100
• 02:30 - 03:00 bucks depending on you know the breakdown so we crunch some numbers like at my CFO we do a spreadsheet we you know do a forecast we look at you know sort of how much is it going to cost to build this thing and how many users do we think we can extrapolate and we figure out pretty quickly that once we hit if we go with £39 a month about $45 a month if we go with something like that uh I think it came out at like 1,600 people would 1,600 subscribers it would be washing its face with a development team it would you know would have front end back end it would have a
• 03:00 - 03:30 little bit of ads budget little bit of PR a little bit of SEO and we could wash our face with this project I'm thinking we we got 1 11100 people on the waiting list and we haven't even hit the main databases we haven't emailed our main lists anything like we can totally do this so I'm like ah damn it I'm launching another business so um oh actually it gets even better than that I took the data and I took it to some friends of mine who are Angel Investors and who are also influencers they got big databases and
• 03:30 - 04:00 big social media followings and I said do you guys want to come join me on this I'm going to I'm going to raise quarter of a million dollars uh from Angels uh here in the UK we have this thing called seis seed Enterprise investment scheme so a tax uh a tax incentive for high net worths to invest into small businesses so I said I'm going to do an seis round you know we're going to do 10% of the company for quarter of a million so at this point we haven't written any code we haven't um done anything other than the waiting list and we raised 250 Grand at a 2.5 million just basic little um
• 04:00 - 04:30 yeah like just for the idea so that was probably a few months ago and then we put together a little Dev team created version one got 30 people using it they loved it made some tweaks made some changes and then did a soft launch last week uh and signed up our first 250 clients at uh 45 bucks a month no I was GNA ask how many times have you done this like this isn't your first rodeo right it's not my first rodeo how many business how many businesses you run and how many of them came off the list like this just how many reps do you have uh I I I've done a lot of startups um and
• 04:30 - 05:00 actually I would genu I know this sounds like such a wanky thing to say but I would genuinely have to go through and like work out um I've bought and sold companies I've done a lot of acquisition um so I used to own a social media a social network with 600,000 members and I bought that and sold that um so I bought it turned it around and sold it in 10 months um I I had an IT Services Agency which I uh bought sold bought back and uh looking at selling that again
• 05:00 - 05:30 um at the moment I've got a group of eight companies um that I run so I've got um a training and development company book publishing uh PR search engine optimization agency uh an ads agency a um fundraising investor relationships agency um so we got a group of agencies and um and then the big one is score app which is essentially a technology platform for generating uh quizzes scorecards and assessments that just one scale up of the year in the UK yeah Daniel you know
• 05:30 - 06:00 a lot of our clients are and listeners of the podcast run established SAS companies so I love this you know I'd imagine they're sitting there you know some of them kicking themselves they didn't use the the quiz as a way to or and and you're your approach is half weightless but I think when I think weight list it's like landing page drop your email in but you actually had more questions and to give you some Data Insights on how you got to do that you have to if the point of the waiting list
• 06:00 - 06:30 is to get the data so you need to know what is the Fe what are the features that they're interested in you know what are the key frustrations they're trying to solve what are their hopes dreams and expectations for the product so you've got to get really clear about that because in the early days of any SAS product you've got to be really good at just a few things I always talk about software tends to either be a bread knife or a Swiss army knife so Swiss army knife does 25 things badly and a bread knife does one thing really really well and it's interesting because we all love buying Swiss Army knives but how
• 06:30 - 07:00 often do we use them maybe once a month but we use our bread knife every day right because the you know so the key thing I'm looking for when I'm creating a software product especially initially it's like I've got a I got a zero in on that very narrow little feature set that we're going to be absolutely world class at that and we're not going to confuse our customers we're going to take them on a journey they're going to you know we're going to get thousands of them signed up to one or two things that it does well and then we're going to slowly
• 07:00 - 07:30 add some features so that it doesn't overwhelm them right they understand the product they go on a journey with this given the fact that any piece of software could focus on let's say a dozen things I I need to know what are the two or three things that we should focus on the other thing is price I've got to figure out the price um now if I if I really have time with customers I ask them several questions about price so I ask them here's the here's a couple of questions at what price is this so cheap that you would doubt that it's any good that's a great question and then at
• 07:30 - 08:00 what price does this become uh prohibitively expensive and that you just wouldn't consider it so I want to kind of get a range somewhere in that in that range [Music] [Music]