Building an MSP software startup is not for the faint-hearted. Victor Raessen, Founder at MSP Sales and Ops vendor SalesBuildr, has done it several times. He gives some potentially hard hitting and invaluable advice for future Founders in the space.
There are many people in this industry who are way more knowledgeable about these topics than I am. You can find them providing value in lots of different communities around the world. I found that there are plenty of people that are willing to help you if you just reach out to them.
I wanted to write down some of my experiences and lessons learned over the last couple of years. You can find a lot of resources that help you learn about starting a company, but less that contain specific information about starting a software company in the MSP space.
Happy reading!
Lessons learned
These past four years taught me that building a software company without having any previous experience is a very steep learning curve. You need to have a strong conviction in your idea and yourself before you embark on this journey. You have to learn a lot about a range of different topics in a short amount of time. This will require time and energy.
To be able to do this I need to make sure I’m getting enough sleep, make time go to the gym and be around family and friends to recharge. Another thing that is important for me is to have some connections in the space to learn from, to vent or just bounce some ideas off.
You have to be obsessed with your ideas because if you’re not, there is a high chance of you burning out or giving up. Choosing to solve a problem that you have personally experienced in a domain that you find interesting will increase your odds for success.
I cannot stress enough the importance of having experience and domain expertise in the vertical that you are diving into. That also goes for the people that will join your team in the early stages. The amount of trust, knowledge, experience, connections and visibility you have built over the years will prove to be invaluable.
There are so many intricate details that you need to be aware of and it is extremely hard to build that from the ground up in a short amount of time. So, if you can and are still having fun, stick to your domain.
Realise that you cannot do this by yourself. Everyone that says they are selfmade forgot that during their lifetime they came across an endless amount of people that helped or inspired them.
You need to be able to attract people that are willing to join you on the journey. That goes for co-founders, team members, investors and customers. Some people are willing to take a risk while others will be more risk averse. Some will only join once you have been able to deliver some proof on your hypothesis and your ability to execute on it.
Your attention will be scattered around team, product, pricing, technical stack, marketing, sales, support, finance and investor relations. Across all these domains, you will need to switch between a strategic, tactical and operational perspective, sometimes multiple times a day. You can find an endless amount of articles, books and podcasts that will do a deep dive into each of these intersections.
Luckily, the internet is an amazing place. It offers access to the best and brightest minds in the business, sharing insights, articles and resources 24/7/365, for free. It has provided me with lots of learning about how to get to a working product in a relatively short amount of time.
I can’t imagine how hard it must have been to build before having access to all these resources. So, apart from macro conditions that make it harder to raise money today as compared to two years ago I think there hasn’t been a better time to start building.
How I got here
As long as I can remember, I have been fascinated by technology. It all started when I first landed my hands on the Commodore 64. I must have been seven or eight, and from that moment I was hooked. It wasn't just about games. I was programming in basic.
I was 16 and together with a friend named Geordy we bought loose parts and assembled them to PC’s. We sold them to people that wanted a custom build but didn't know how to do it themselves. A while later I got my first internet connection. I remember the sound of the dial-up modem and the magical feeling of being able to connect and discover the world.
My first serious gig was being a unix system administrator in a call centre around 1995. We worked almost non-stop because the company was growing so fast. It was an amazing time, learning from great people and getting the opportunities to do something with it. Sometimes it felt like we had to hook up a new office in another city on a monthly basis.
In 1998, with two partners, I started an IT provider called IT Solutions. I was young and it felt fantastic. I thought I knew it all and could do everything. Long story short, I couldn’t. Mistakes were made, the whole thing grew over my head and it ended in a burn out.
After a much-needed break, I got a job as the sales manager at an IT provider called VBVB in Amsterdam. It was a fun company with a great team. During that period, I decided to get a bachelor's degree. When I was young, I didn’t find school an inspiring place to go so instead of studying, I got a job. This time around I found myself very interested, soaking up the knowledge which enabled me to connect the dots in a way that I couldn’t do before.
That upgrade gave me access to more job opportunities. After five years I decided to make a move and started working at a larger IT provider called Vancis. This company had to make a transformation towards a more commercial and customer focussed organisation and I got the opportunity to move into a role to make that happen. I was fortunate to have access to some great coaches and mentors along the way. After Vancis got acquired in 2016, I decided to pursue new opportunities.
During my search for my next step, I got a phone call from Autotask. They were looking for a regional director to run the Benelux office. After a few interviews, including two that took place in a bar, we had a match. It was super interesting to learn the operating playbook and best practices to grow a regional market. A fun and talented team made it a great experience.
How I started
Autotask got merged into Datto which was growing fast and with fast growth comes change and swap outs of management layers. I left Datto. And as they say, where one door closes, another opens. Again I felt the urge to build something.
I learned that besides sharing insights on how to build a business, one of the favourite topics of IT Managed Service Providers is talking about their technology stack. My observation was that searching for MSP specific software was a painful experience. I wanted to build a better experience. The G2 for MSPs. I also wanted to build a business that could sustain itself and wasn’t going to be dependent on me billing my time for an hourly rate.
I started to talk to people in my network to learn about how they experience the process and learn how it could be better, iterating my plan based on learnings, bouncing off ideas with Yvo, a long term friend. I manually built a catalogue of vendors, products and services and added a bunch of datapoints.
I severely underestimated the amount of work needed to get it done, but I was still fired up about the idea, fueled by conversations with connections in the space. I found a designer and moved into a new home where my neighbour Bart turned out to be a full stack developer that was open to start working on a new project.
Together, we started building MSP Navigator (more on that story here). I flew out to events to talk to vendors to try and get them interested. I managed to get some good initial traction and media attention (E-Channel News, Tech Target and Channel Pro Network) because it was a new approach. A couple of vendors bought a paid profile and I believed we were moving in the right direction.
During that period I met Benjamin. We had good chemistry and he had experience in the investor space and fundraising. I knew we would have to raise money to be able to keep going, because my own funds were running low. I did a crash course in Saas metrics that are important when raising capital. Benjamin and I did lots of calls with potential investors and got rejected dozens of times before getting to a yes.
During this period, I found a real estate consulting firm in the US that had a catalogue of software for the real estate market in the form of a PDF report. I decided to send a cold outreach through LinkedIN to see if they would be interested in turning their report into an interactive platform. The timing was perfect as they were already thinking about this. We made a deal to use our platform and that provided us with additional revenue.
While continuing to build MSP Navigator, I learned that lots of vendors were interested but did not want to move to a paid profile before we could attract a meaningful number of visitors. MSPs were interested but could not rely on the information because not all vendors were taking ownership of their company profile and product pages. I found it wasn’t
We couldn't make the business model work. The classic chicken and egg problem. Valuable lessons were learned. We might do something with MSP Navigator at a later stage. There is a bigger and better version out there now called https://channelprogram.com/ that is going after the same problem.
Pivoting to Salesbuildr
It was 2021 and we needed revenue fast. We started searching for similar opportunities in different verticals but couldn't find other companies that wanted to build software marketplaces in different segments using our platform. It felt like a dead end. I started to have conversations with my MSP network around pain points in the sales process.
We had already built a platform that provided you with an overview of the products and services that you use and sell, what else could we do with it? We found out there were quoting solutions on the market, but they still required a lot of manual tasks to fetch and update data across different distributors and platforms. They also lacked portfolio management, speed, flexibility and standardisation capabilities.
So, we started to iterate the MSP Navigator platform so that it could talk to distributors and Autotask. We added a proposal editor, a sales template library and workflow automations.
By the end of 2021 we had a working prototype. A couple of MSP friends in my network were more than willing to provide early feedback which helped us launch in January 2022. We closed our first 3 customers that month and at the end of the first quarter we had managed to close 14. Before we knew it, we had to find another developer. We found William through an online Angular forum, a great developer that allowed us to move faster.
We started getting more and more customers and we felt we were onto something. Later that year we did another funding round, expanded our development team and attracted Ryan as head of marketing to help spread the word.
In 2023 we managed to double our customers. We learned we addressed some specific pain points (standardisation, automation, flexibility) that appeal to growing MSPs. We introduced pricing tiers to be able to cater to different segments and learned that customers are happy to move up a tier as long as that provided additional value. We scaled up our team with Bram for customer success. At the end of the year, Glen joined as our first full time Sales person.
Resources
In the next section, I will cover some of the most important areas that you need to learn about and understand in order to run your startup. I tried to keep it somewhat simple by focusing on some practical insights and mental models with links to relevant resources so you can do a deep dive on these topics.
Here is the list I’m following that has a combination of 200 tech entrepreneurs and tech venture capitalists. Here is one with B2B Saas people. If you are building a start-up in tech or using tech, these lists are a great place to start. Scroll to get inspired.
I recently came across this post from Andre Chen which clearly lays out the stages you will need to navigate through while building a start-up, I felt free to add the first step:
● Before getting started - bet on yourself and your network
● Pre-seed- Bet on the team 👨💻
● Seed- Bet on the product 📱(we are here)
● Series A- Bet on the traction 🏒
● Series B- Bet on the revenue 💸
● Series C- Bet on the unit economics 💰
The Hard Thing About Hard Things by Ben Horowitz
The Lean Startup by Eric Ries
Zero to One by Peter Thiel
Good to Great by Jim Collins
The mom test by Rob Fitzpatrick
Purple Cow by Seth Godin
Capital
It’s very hard to persuade people to part with their money. Investors are looking for a healthy return and typically shy away from high risk ventures. Learn why startups fail and come up with strategies to avoid that, here are some of the top reasons:
Insufficient funds
Lack of market
Legal challenges
Weak business model
Flawed business plan
High competition
Hiring the wrong people
No market need
Senior management
Poor marketing
When pitching your idea, talk about the biggest and most ambitious vision of what the company could be, not what it is today. That means you need to be able to articulate how you are going to capture a meaningful percentage of the total addressable market with your company.
If you're not an expert on this, try and find people that can help. I was lucky enough to meet the right people. Without help, this area can take up an enormous amount of time that you can’t spend on building and selling.
Here is list of resources to get started on if you are interested on the topic:
Team
As people join the team, you have to learn how to let go and how to delegate. This can be difficult because you are at a fragile stage and for me at least that can translate into the feeling of wanting to control all the aspects. Find people that are better than you in what they do. Use your network to ask for introductions, think about former colleagues that impressed you.
Your first hires should be highly motivated, have domain expertise, self managing, flexible and proactive. If you can manage to attract experienced people from the space that bring their own networks, go for it. They can move faster as opposed to training some up from zero.
If you are building a product and can’t code (like me) you will need to find a great CTO. You could hire and outsource, but I believe you are better off finding a great technical co-founder. You can potentially find them through Antler or Y Combinator.
Product
I found that for almost any idea you can come up with, there will be someone out there that has built it. That doesn't have to prevent you from getting started. The saying “You can always spot the pioneers by the arrows in their backs.” tell you it’s not always the best thing to be first or early. You might have a unique insight or a different angle to solving the same problem.
The good thing is that The IT Channel ecosystem is huge and companies within this space have lots of challenges and pain points across lots of different horizontal processes. Because this industry is changing so fast, today's pain points might not be the same as next year's pain points.
Whatever you do, go talk to people to validate or invalidate your assumptions, because as they say assumptions are the mother of all fuck-ups. Read the mom test. Start simple with an MVP to validate, more here.
Early customers will have lots of feature requests, you will run into technical problems, scaling issues and you have to figure out how to price your product while not having a clear understanding of the value it brings to your customers.
We are very lucky to have found the customers that we have today, managed to form great partnerships and they keep providing us with invaluable feedback on what to build next. To focus on the right things, we do our best to make sure we build what our customers want.
This is tricky because what you build for one, must also work for the rest. So make sure to keep track of feature requests (we use https://www.featureupvote.com/) , let customers vote on things and try to keep a check on adding too much complexity that you will need to manage and maintain over your product's lifetime. This is not easy because when you start out you will be willing to do a lot to attract new customers.
We do a new release every two weeks that is mostly based on customer feedback. Besides working on what customers want, we are working on expanding Salesbuildrs end to end workflow automation capabilities, and adding more integration with the surrounding ecosystem of platforms and distributors.
Marketing
In order to sell you need leads, also known as marketing qualified leads, meaning you know they have expressed a certain level of interest in what you have to offer.
To get enough marketing qualified leads, You need a website that converts. This is not easy and you will need to go through endless iterations to get it right. This never stops.
To get people to your website, you will need to be present across places where your potential customers are. That means, at a minimum, you will need to be visible on the right industry events, peer groups, podcasts, magazines, LinkedIN, Google and Reddit. Don’t expect instant results with marketing. This will take time.
If you are able to close 50% of sales qualified leads, that means you need 24 sales qualified leads (SQL) to get to 12 customers as discussed here. And because not every marketing qualified lead (MQL) is a great fit, you need even more of those. More on that here. As a rule of thumb you want to aim to get 5x the amount of leads of the amount of the customers you want close during a certain period of time, because marketing needs to qualify and score them and sales will need to qualify them too.
Sales
When you start out, you will need to do the selling as a founder, even if you are not good at selling. As revenue is the fuel for your startup, you cannot skip this or simply wait for customers to find you. They will not because they are busy building their own business and are already drowning in email, ads and notifications battling for their attention.
You need to get out of your comfort zone and start selling, even before you ship your product. The good news is that because you’re the founder, you will be able to radiate an enthusiasm that will be hard to match.
At some point you will need to move from founder led sales to building a sales team. Saastr can find a simple way of looking at what that first sales person needs to do in this article here.
Adopt a sales framework like MEDDICC and design a sales cycle to enable you to keep track of opportunities across your sales pipeline.
This will help you to apply focus on a repeatable process. Use a platform like Hubspot or Pipedrive to keep track of everything. Hubspot is more costly but will enable you to do more like launching and keeping track of marketing campaigns and measure how leads flow through to your website. Also use a system like leadinfo.com that will identify visitors to your website and automatically create new leads in Hubspot if they match certain conditions (industry, company size etc). A good foundation will make it easier to scale your sales team and make them effective faster as you grow.
A common guideline in SaaS sales is that the AE's quota should be approximately 5 to 10 times their OTE, depending on the company's specific sales economics and compensation plans.
Simply put, if you have an ACV of $5K and a sales person with an OTE of $140K you will need to be able to close 12 new customers per month to grow to a total of $700K of closed contract value, to get to a healthy OTE multiple of 5x. Conversely, if you have an ACV of $ 10K you need to close 6 new customers per month. This can be more or less, depending on your specific situation and ambition level. More about scaling here.
So what if you sell a product that is below an ACV of $5K? For this motion, consider leveraging product led sales, where the idea is that your potential customer can launch, use and buy your product without any sales intervention. In order to get there, you will need a proposition that can show the potential customer your value in a very short amount of time. This could work for some, but certainly not all products.
We have had some success with our current self service trial. Customers can sign-up and provision an instance by themselves. Again this needs good tracking and continuous improvement. We are trying to provide an experience where potential customers can get to the ah! moment in less than 5 minutes.
Pricing and packaging
In my experience, you will discover that even if you serve a tight niche, you will cater to different segments (small, medium, large) that will value or need different product capabilities.
Make sure you review your tiers and pricing from time to time to make sure it caters to those different segments and your pricing supports a healthy business model to provide fuel as you move to the next stage. Larger and more mature customers will require more advanced workflows and capabilities. These are expensive and difficult to build. It’s okay to move these features into higher tiers. Your customers will understand as long as it gives them ROI. More on pricing here and here.
According to Marc Andreessen most companies are not charging enough for their product (listen to this podcast to learn more) which leads to not being able to pay for the marketing and sales required to find and sell to customers. Keep this in mind.
Here is an excellent overview of how you can get to a $100M Saas business by Christoph Janz @ Point Nine Capital.
If you are ambitious, why not think big? According to Canalys the global MSP market is 75K. How many of those could you potentially sell to in a five to ten year time horizon? And how big is the problem you solve?
You have to collect evidence that there is either a big ROI or, if you build a product that the MSP can sell, provide a clear path to show the MSP how they can make money with your product.
Let me give an example for our situation. Our customers tell us that they save around 50% of the time they spend on administrative sales tasks. According to various sources, such as Salesforce’s State of Sales Report, sales professionals spend around 30-50% of their time on these administrative tasks. These are tasks like:
● Customer Relationship Management (CRM) Updates: 15%
● Proposal and Quote Generation: 20%
● Order Processing: 5%
● Contract Management: 10%
● Document Management: 5%
● Scheduling: 10%
● Sales Reporting: 10%
● Compliance Checks: 5%
● Inventory Management Assistance: 5%
● Billing and Invoicing: 5%
● Customer Service Coordination: 5%
● Training and Development: 5%
Let’s take the conservative yearly cost of a sales representative
● Base Salary: $50,000
● Benefits (25% of base): $12,500
● Commissions (15% of base): $7,500
● Employer Taxes and Contributions (10% of base): $5,000
● Training and Development: $2,000
● Equipment and Software: $2,000
● Total Estimated Yearly Cost: $79,000
● 40% spend on administrative tasks : $ 31,600
● 50% saved with sales automation: $ 15,800
In this case it would be reasonable to charge $ 1,580 per user which translates into 10% of savings to provide our customers with a great ROI. This is just looking at cost savings and not looking at things that are less easily quantifiable like the effects of standardisation, automation and being able to provide end customers with a better buying experience. Obviously, these are important to include in your value proposition.
The more value you can add across the business workflow that is meaningful, the more you can charge. Because some customers have different needs than others, you can also offer optional add-ons. In our case, we offer an optional self service storefront module that eliminates the need for an expensive sales representative to have to manually create a quote for small orders.
Customer success
The combination of being able to prevent churn while upselling existing customers to get to a 100%+ Net revenue retention is an important factor in building a Saas product and growing it efficiently.
As you get your first customers you will need to make sure they have a great onboarding experience. This requires time and attention. You will need to build a knowledge base with playbooks and best practices that iterate over time. In app chat and guardrails with tips and tricks will help a lot.
As the capabilities of your product grows you will find it gets harder to keep all your users in the loop so think about ways to keep them informed. We use Intercom to communicate with our users.
Your product needs to be awesome and your team needs to be great to transform your customers into ambassadors. This will help them spread the word to their peers, which in turn attracts more leads. Off-course, If your product sucks or has issues, your customers will leave and tell others, rendering all of your efforts meaningless.
We onboard every customer and guide them through the setup and workflows to ensure a good experience and hand-off. We found that if we don't, our customers will not experience the full value of our product out of the gate.
Make sure you keep track of how your product is being used, where your weak spots are, which of your customers are slipping through the cracks so you can engage with them. Offer checklists, templates and best practices that are easy to find and easy to use.
Finance
You will need to build a financial model to budget, forecast and play with the numbers. There are many templates you find online, just google “saas startup financial template” here is one example.
Keep check on your cash position, monthly revenue, burn and runway. It will take time for you to be able to do forecasts, extrapolations and to get to some kind of predictability.
Think about how you will charge your customers. We use a platform called Chargebee, but there are many others. Make sure the platform you choose is flexible enough to experiment with and iterate your pricing model. Also think about support for pricing tiers and paid features and modules. Simple is better, but depending on your proposition, you can’t alway get away with simple.
Tech Stack
You have to decide on a programming framework. We use Angular and Node.JS. We store data in Google Firestore, host on Microsoft Azure and leverage Elastic for search.
Make sure that your underlying stack is secure, reliable and scalable. You can use a platform like Vanta or Drata to setup, achieve and manage SOC2 and ISO 27001 compliancy which I strongly recommend you consider, since your ICP will tend to pick you if your competitor does have this in place, all things being equal.
Apply to the Microsoft founder program to get credits. Google has the Google for Startups Cloud Program. Segment from Twilio has a great startup package too.
We use intercom as our knowledge base, support system and in app guidance for user onboardings. Slack for internal communication and Hubspot for marketing and sales.
Conclusion
If you are thinking about building a product in the vendor space I hope these notes will inspire you to get started, provide you with some insights and maybe even save you some time. You can always find the latest version of this document here. I’ll revisit it from time to time to add stuff. If you have any corrections, suggestions or other stuff, let me know.