Property Management Systems – Pick your niche and grow

Property Management Systems – Pick your niche and grow 

There are thousands of Property management systems (PMS) aka real estate management systems/software/solutions. And the reason there are so many is simply because the property market is incredibly rich and diverse. 

There are different geographic areas, different types of property, different types of tenants, different types of property owners, different types of property managers and property management businesses. 

It is an industry of niches. And there are providers out there struggling to supply a one-size-fits-all solution to property management, but you can’t do everything well and you can’t do everything simply and you can’t do everything while supplying an enticing (and true) value proposition to everyone.

This means there are always numerous under-served, unsatisfied market segments looking for a property management system that gets them. That fits their needs.

You’re probably part of one of those segments, part of a niche that available solutions fall short or completely miss to create some value for or at the very least offer some efficiencies to ease the workload.

That deep knowledge of a property management niche is a huge advantage and is the foundation for building a successful PMS that might begin with a theoretically small market, but in practice has no upper bound on growth. 

Let’s start with some background on PMSs.

What Are Property Management Systems?

Property Management Systems are software solutions that automate the various tasks associated with the management of real estate properties.

Depending on their focus (or lack of focus), they can cover areas like property listings, tenant management, rent collection, financial tracking, maintenance scheduling, reporting, and more.

The obvious benefits of Property Management Systems:

The primary purpose of PMSs is to make executing on the often complex processes of property management easier, thus lowering barriers to success and also lowering the level of expertise needed, which provides a secondary benefit of making the filling of property management roles easier. 

Ease of use goes hand-in-hand with efficiency. A good PMS makes the difficult simple and the tiresome painless. A good PMS doesn’t just do this for the back office processes. A good PMS makes all interactions easier and provides a better experience for everyone that has to interact with the PMS, including property owners, tenants, service providers (plumbers, locksmiths, etc), while enhancing the overall experience for property owners and tenants. 

On top of process improvement, a PMS gives stakeholders access to detailed analytics covering every aspect of the processes and transactions it implements. These are the essential numbers for running a property management business and another key reason for adopting a PMS. 

For the PMS platform owner, which could be you, access to anonymised and/or aggregated data provides opportunities for targeting development towards the features analytics reveal your users rely on the most in order to increase market appeal, but it can also provide market insights that are unavailable elsewhere and present a true advantage. 

How Property Management Systems are aggregating new technologies

The first PMS was a ledger – a physical book with pages of properties and related transactions filled out by hand. There were probably some ledger hold-outs up into the 90s, everyone else having moved to PC-based options in the 80s.

The real driver for uptake (and building) of PMSs was the development of payment service integrations, allowing even the smallest player to use a PMS to set up direct debits for tenants. This in turn has driven the development of countless PMSs because venture capital loves nothing better than business models that place themselves in the middle of a high number of financial transactions that they can take a 3%-5% fee from.

Today PMSs are SaaS – Software as a Service – running in the cloud, with a website designed to be mobile-first, with market leaders also offering native IOS and Android apps.

But a PMS can also extend beyond the browser, the desktop and the phone, depending on the niche. The proliferation of cheap microcontrollers with sensors plus connectivity via WiFi or 4/5G has created a revolution. It’s the Internet of Things (IoT) and it makes detailed property monitoring for maintenance and security cheap and accessible. For PMSs with feature sets that lean towards maintaining properties, integration with IoT networks, providing automated monitoring as well as analytics to generate predictive maintenance schedules and live feeds of property condition is a must-have.   

And we can’t talk about technology without mentioning AI and its use in PMSs. This can be generative AI (think ChatGPT) for helping with the production of property listings and other written communication, and customer service in the form of chatbots. It can also be Predictive AI that ingests the data collected by your PMS and generates maintenance schedules, flags tenant issues early, etc. You can read more about Generative and Predictive AI in this article.  

Picking the niche for your Property Management System

Ideally you should already have the niche for your PMS picked out. The best niche is the one that you have experience in and understand the challenges and pain points that participants (like yourself) need to be addressed firsthand.

If you’re not sure about a niche, below is a list to get you thinking. We’ll leave it up to you to decide if you want to target a market of mice, rabbits, deer or elephants (there are no flies in real estate). 

What features your PMS will need depends on your niche. What features the MVP version of your PMS will launch with depends on how well you understand your chosen market.

Build your own Property Management System or tailor an existing one?

PMSs have been around long enough that there are not only software development houses with deep expertise in building them, but there are also software houses that offer white label solutions – prebuilt software you can check off the features you want and slap your branding on and launch. 

This makes one of your first and biggest decisions on launching a PMS a choice between build or buy. 

Build gives you control. That control gives you a straightforward path towards growth.

Buy gives you speed, but very little control. There are a multitude of options for how you purchase and run a white label PMS. They all have trade-offs and we don’t have the space to go through them. If you take this path, do your homework to ensure you have clear lines for growth, preferably via access to the PMS’s source code (which you hope is high quality) and accessible expertise to keep it running and build upon it.

Build vs buy is a chicken and egg gamble. 

Does buying and launching quickly let you confirm the market is there or will the market be uninterested in your copycat PMS?     

Does building let you launch with a product tailored to your market months later or do you burn cash and time to release a new PMS the market is uninterested in? (Hint: you can reduce the chances of the second option by checking out the LEAN canvas methodology and how to find product-market fit.)

But business is always a gamble, but it’s one of the few gambles where working hard and working smart can vastly improve your odds.

Property Management Systems are software and software is malleable

That sounds deep. But what it means is that once your PMS is successfully servicing its niche you are now the proud owner of a machine that makes money and that machine takes very little (comparative) effort to retarget or to expand.

The hard part is finding and landing that first niche. Once you grind out success in a niche you have in place 80+% of what you need to take over the next niche. Or to grow up out of your niche into the broader market – from regional unit rentals to regional residential rentals to nationwide residential rentals. Why not go global from there?  

Pick your Property Management System developer and grow

This is the pitch. SoftwareSeni gets proptech. We build proptech. We’ve been building software based businesses in the real estate market for nearly 15 years. We build businesses from the ground up and for many of them we also manage the backend, keeping them running and secure and profitable.  

We’ve been helping businesses start and grow for long enough that we don’t just have the technical knowledge you need, we’ve got the business experience to help you gain the maximum leverage from our technical knowledge.

If you have a niche you want to build a PMS for, or just want to talk proptech, get in touch with us. 

How to spot opportunities in your business to use AI

Before we go over the 5 main interfaces where AI might help your business, let’s talk about the two kinds of AI.

The two kinds of AI – Generative and Predictive

Generative AI is the AI like ChatGPT, Claude and Gemini that everyone has been excited about for the last year/18 months. They are Large Language Models (LLMs). They’ve been trained on a vast amount of text (web pages, books, video and podcast transcripts, etc) and they work by being fed text in, like a question, and they output text in response. They are specialised for working with text and so human languages. They are bad at working with numerical data.

Predictive AI is what we used to think of as AI – neural networks, crunching lots of numbers, and making predictions like which customer is going to miss a credit card payment. 

Both Generative AI and Predictive AI are built using the same principles and same key software components, but they have different purposes.

For this article we are going to only look at Generative AI.

Now back to business and where to implement Generative AI, which we’re going to call Gen AI for the rest of the article to save on typing.

Where your customers reach out to your people

Where your customers reach out to your people

This is already one of the most popular points to use Gen AI. This is where chatbots live. The reason to implement Gen AI is because you want to either reduce resources or increase opportunities to provide information to current and potential customers.

It’s also where you can use Gen AI to implement smart filtering or triage of customers looking to buy or looking for support.

And it’s where you can use Gen AI to streamline information gathering on customers through conversational style interfaces that can better handle the trickiness of talking to people while providing a better experience than a lengthy form.

Here are 3 solutions you can try today:

Where your people reach out to your customers

Where your people reach out to your customers

This interface is predominantly sales and marketing related:

Imagine never again sending an auto-response email that says “Do not respond to this email”, but instead turning email into a new “chat interface” for your customers to interact with your business.

Try these 3 targeted products for outbound customer engagement:

Where your customers interface with your business systems

Where your customers interface with your business systems

We hinted at this above in the “email as chatbot interface” line. But this interface covers opportunities for using Gen AI for:

Here are 3 AI tools to enhance system interfaces:

Inhouse – Between your people

Inhouse - Between your people

This interface is full of opportunities and possibilities for growth, flexibility and efficiency. Doing a deep-dive on how your business functions and where expertise sits in your processes will uncover lots of places where you can:

Check out these 3 internal support tools:

Inhouse – Between your people and your systems

Inhouse - Between your people and your systems

Here is where your people are working with existing inhouse and third party systems. Gen AI can be used to boost quality of execution and, depending on the process, also reduce the time spent. 

The kind of processes that Gen AI can be applied to at this interface include:

Check out these solutions designed to bridge the chasm between complex systems and processes and your team:

The 3 major Gen AI approaches

Across the 5 major interfaces we covered, all the options to apply Gen AI are covered by only 3 approaches:

  1. Automate/Augment an interaction
  2. Automate/Augment the process of an interaction 
  3. Automate the artefacts an interaction produces (meeting notes, contracts, sales orders, product configurations, etc.)

When you’re looking at implementing Gen AI to support or automate an interaction or process, these are the three opportunities you should be looking for at each step.

Getting started implementing Gen AI

Implementing Gen AI in your business can start small. Process support is a great place. After chatbots, the key tool in Gen AI is called RAG – Retrieval Augmented Generation. This is often marketed as “Chat with your documents”. 

You can use RAG to give access to knowledge that might be in your SOPs (presuming these are in Word docs, Google Drive or similar) or in your product manuals or in years of client emails.

NotebookLM is Google’s version of this if you want to try it with a test case. Both OpenAI and Anthropic let you upload documents in their chat interfaces and ask questions about them.

A step beyond “Chat with your documents” is creating workflows that incorporate Gen AI. Dify.ai is a good place to start with this. It has a simple visual interface and it lets you easily build RAG-based chatbots that you can embed in your website if you want to try that approach. It has lots of other features and applications worth investigating.

For more advanced workflows there is n8n, and the incumbent workflow automation services – Make and Zapier – also offer Gen AI features.  

Don’t wait to start using AI

We hope this short guide has given you the necessary guidance on how to look at your business and how to look at your processes to find where you can take advantage of Generative AI. 

Doing is understanding. So start small – add Gen AI to a single step in a single process – and grow out from there. We find the more you use Gen AI, the more you find ways to use Gen AI.

If you’ve got any questions about AI or how you can implement it in your business, or just want to talk through strategies and opportunities, get in contact.

Why we all should want Junior Devs working smarter more than Senior Devs working faster

AI is having a huge impact on software development. Even a year ago McKinsey did empirical research that showed AI coding tools were giving a 30-50% speed up for developers. Now, with Github Copilot being joined by tools like Cursor, aider and Zed, which push developer support from fancy auto-complete to hands-free multi-file edits, it feels like software development is about to undergo another leap in speed of execution.

As Charity Major discusses in an article on StackOverflow, this increase in developer efficiency is leading industry executives and thought leaders to believe that “generative AI is on the verge of replacing all the work done by junior engineers”. 

She has about 5000 very smart words on why that’s wrong. We’re going to cover the same ground in a few hundred words and tell you what we’re doing about the situation.

The coding is the easy part

Businesses run on software. Most businesses are software. Writing that software is not the hard part about being a business made of software. The problem is complexity.

Yes, software is complex. But the real complexity is in the system that the software needs to exist in. This system isn’t limited to the boundaries of your organisation. It includes the infrastructure your software runs on, the other software it interacts with, and the pieces, the libraries, of software it is built from. The recent Crowdstrike related outage is an example of the complexity of the current system all software operates within.

Managing that complexity, and managing complexity in general, is the real skill and the real value that software developers deliver. And it takes time to learn it. Programming can be taught in a school or learned from a book. But mastering the details of the huge number of systems that are at play in the modern tech stack, where idiosyncrasies abound (because reality is imperfect and unpredictable), and unknown unknowns are numerous, takes years and requires mentorship. 

As Charity Major says, this means we have to recognise that software development is an apprenticeship. Junior developers don’t become senior developers on their own. There is too much craft, too much knowledge learned through experience, too many mistakes to make, for a junior developer to master it all in a reasonable amount of time without guidance.

AI should empower junior developers, not replace them

The argument for not hiring junior developers is centred on the idea that why add to your headcount with a junior developer when you can just give a senior developer some AI coding tools.

As we wrote in our article on harnessing AI to save your business from the future:

“if your revenue per employee keeps going up as they complete work faster and do more using AI, why would you fire anyone?”

This situation is more of a “if your employees do more using AI why would you not let them do more?” situation.

If AI can help your senior developers do more senior developing – architecture, strategy, planning – why would you make your senior developers use AI to do junior developer work?

Junior developer work does involve writing code, under the direction of and with reviews by senior developers. But junior developers are also the go-to for writing test cases and refactoring code. This helps them build familiarity with your codebase and engages them with reading and understanding code written by experienced developers.

And if it is an AI coding tool that is writing the tests and refactoring the code, it should still be a junior developer driving it. The benefits are the same for the developer but the cost to you, which is accompanied by an opportunity cost, is lower. Having a senior developer generating tests instead of working on your overall system design, architecture or key features is not just throwing away money, it’s throwing away time.

Without junior developers there will be no senior developers

Every senior developer started as a junior developer. They spent the 5-7 years learning the craft of software development under more experienced programmers. 

No-one has suggested that the world needs fewer senior developers. They are what every business wants to hire. 

But the execs and “thought leaders” who think junior developers are moments away from being automated out of existence haven’t explained where new senior developers are going to spring from.

They are not going to be created by AI coding tools.

This image is currently making the rounds in the tech-sphere:

If you know, you know. If you don’t know, consider it a taste of the complexities of software. We like to think that Blue Bubble next took the time to explain to Grey Bubble what they were misunderstanding and gave them some paths towards being able to share their creation. A little bit of mentoring, if you will.

We’ll keep growing junior developers into senior developers

In an earlier article we wrote about Core+ teams. A Core+ team is your core in-house team at the heart of an on-demand team that changes in size and structure to meet the latest challenge. 

It’s the future for lean, flexible business. And it relies on companies like SoftwareSeni cultivating and supporting a large pool of talented software developers. We’re a company of software developers focused on developing software. It’s no surprise developers like working here.

We build our pool by hiring experienced developers who want to work with us and by hiring graduates straight out of university. We invest substantial training in all of our developers because their skill and their well being is the foundation for our success.

It’s what we’ve been doing for over a decade now. We’re practised at growing junior developers into senior developers. And we’re experts at helping businesses build the optimal mix of skills in their Core+ team to suit their product, their budget, and their velocity.

And a team of all senior developers doesn’t make operational or budgetary sense. No matter how many AI-powered tools you give them.

There will always be a place for junior developers

You don’t have to be a genius to see that the idea that the days of junior developers are numbered doesn’t make sense. Not in a world that continues to grow more complicated and the skills to deal with it are quicker to teach than to discover.

And there will always be a place for junior developers at SoftwareSeni. They’re an essential part of our team and our future. They’re also an essential part of our clients’ teams and what they are able to achieve given the tough constraints everyone is working under at the moment.

Creating opportunities with AI to transform service industries

Creating opportunities with AI to transform service industries

There is a large chunk of the economy composed of businesses that will benefit from the introduction of AI into their operations. These businesses are all low margin service businesses.

They could really use AI, but convincing them to use your AI solution will be a challenge.

Let’s look at the problem and a novel solution.

Here is why service businesses need AI

What they have in common is they have a lot of repetitive, non-strategic but necessary work. This includes things like data entry, triaging customers enquiries or responses by leads, reviewing submissions, double-checking applications, comparing Form A to Form B, etc. 

The roles in this type of work involve high volume, low- to medium-difficulty decision making with strict performance requirements. It is dull work and often stressful due to the sheer volume of it. And so these roles experience a high turnover rate. 

These businesses are also operating under labour market shortages. The high turnover rate is amplified by difficulty in recruiting for these roles. This is due to the unattractiveness of the role, but also there may be fewer people entering a field or industry. For example, many of these roles are finance related and accountancy graduates in Australia have halved over the last 10 years. 

Finally, these businesses also have margin pressure. Some of this is local and related to interest rate changes, and some is from global competition.

These three challenges –  margin pressure, labour shortages and staff turnover – means there are a lot of businesses out there who would benefit from AI based solutions that could give their margins some breathing room.

Don’t sell to them, become them

However, as Brian Murray from the VC firm Craft Ventures writes, these businesses are hard to sell to. 

They tend to have been around for a while, their operations are deeply ingrained in the culture of the individual business and in the culture of the industry. Convincing them to adopt your product is hard, especially in the early days when you don’t have a track record.

Murray suggests pursuing a different path. Become the target market. 

These businesses, despite the challenges, are essential and profitable. And being established businesses, many of them have owners who are ready to retire or move on. 

Instead of selling your solution, buy a potential client. Use your new business to test and hone your product. 

As the business owner you have the ability to make the fundamental operational changes needed to adopt new practices built upon your product. You will gain firsthand experience in implementing those changes, and if your product does everything you were promising, you now have a major advantage over the competition.

At this point you have three directions you can go. You can use the business as a base to grow in the market through M&As, or as proof-of-concept to license your technology to the rest of the market, or simply grow it through direct sales of your competitive services.

Each of these strategies has its own merits. M&As can provide rapid growth and market share expansion. Licensing can offer a scalable revenue stream with lower operational overhead. Direct sales allow for greater control over the customer experience and potentially higher margins.

You can also do some mix of all three options.

Go transform an industry

This is an era of transformation. With generally available AI that can offer decision support on the text and document-based forms, applications, invoices, reports and policies that have until now required a trained person to process, new opportunities are appearing. 

Spotting the opportunities and finding ways to take advantage of them requires a new way of looking at what is possible. 

Hopefully this article has given you some pointers on what to look for. And a new direction to consider when you decide how you’re going to build out your AI powered business.

SEO Strategy in The Age of AI

Generative AIs like OpenAI’s GPT-4, Anthropic Claude and Google Gemini have already changed how SEO is being carried out. If you follow the SEO industry you may already be aware of the dozens of tools and thousands of Youtube videos on using AI to generate content at massive scale to appeal to the Google algorithm to rank a site. For an industry that loves a quick and easy win, AI has been better than Christmas for them.

With the release of OpenAI’s new model, GPT-4o mini, which is powerful enough to generate readable content, its pricing at 60 cents per million output tokens has pushed us across a new threshold. And it is scary. 

Content is cheaper than dirt

You can now produce content dynamically for less than the advertising revenue you would receive for a single page visit. In this article, the author shows that generating an article with GPT-4o mini can cost as little as $0.00051525, 5 hundredths of a cent. Google’s Adsense calculator shows that for a site that gets 50,000 visits a month, a single page impression with advertising generates about $0.0026 in revenue per page visit. 

This is what they call an arbitrage opportunity. 

Whatever approach you take with SEO for your business, this is the competitive environment we will all be operating in.

Fighting back against infinite SEO content

The current standard practice in SEO is based mainly on winning through volume of content. That content has gone through “on page optimisation” to make sure that it is long enough and that not only does it have all the proper keywords, it has more than the competitors. The pages have been interlinked into “topic clusters” and linked also to “pillar pages” to make them more enticing for the Google Algorithm.

SEO practitioners used to do this by hand. Sometimes with “spinners” that would generate semi-sophisticated mad-lib style articles in bulk. But now it can all be automated. 

What is also being automated is the low quality of this content. Content produced to maximise ranking in Google Search results has always been low quality, whether it has been written by hand or generated by AI.

And this is where not just quality, but looking beyond the page, can give you an edge in SEO.

Search Result Ranking is not just about keywords

A leak of Google Search related documented earlier this year has given some potential insights into what factors Google uses to rank search results. 

One of the most important factors is user experience – how people are interacting with your site when they visit it. Clicks on a page, scrolling through your articles, and how much time they spend on your page, are all major signals. 

This is simply engagement and it is so simple it makes sense. High quality, interesting content that visitors engage with results in higher rankings in Google Search results. 

Freshness of content is also another factor. This can be a bit of an unfair bias against evergreen content. And forcing sites onto a treadmill of content refreshes of such content feels unfair, but has anyone ever felt the Google Algorithm was fair?

Links from other websites to your own content is also still worth pursuing and has value – depending on the site linking to you. 

Finally, Google is not just tracking visits from its own search results pages. It is also tracking visits that arrive from other places, like social media. This is another clue it uses to calculate a site’s ranking. 

Good SEO can no longer be just SEO

What does that mean? SEO – Search Engine Optimisation – can’t only be about optimising your content for search engines. Search engine. It’s really all Google, right?

The signals that Google is relying on are richer than just keyword counts on the page. And this is pushing SEO out into the broader spheres of marketing and branding.

And this is a good thing. Because it makes it possible to compete against AI generated content and sites full of keyword heavy content that no human would willingly read.

“Keywords” were never “magic words”

Choosing the right keywords is still part of SEO, but “keywords” doesn’t mean “magic words”. “Keywords” means clear titles that tell visitors what a page is about. And it means that the content on the page is going to cover the information they are looking for. Without repeating them dozens of times.

It means you need to communicate clearly, and to understand your audience well enough to know what they are looking for, how they are looking for it, and how they themselves talk about it. 

Clear communication and understanding your audience. See, SEO is just marketing once you start focusing on quality over quantity.

SEO extends into social media

If visits from social media are a signal to the Algorithm, then of course social media needs to be looked at through the SEO lens. 

And it is simply the same formula – clear communication and understanding your audience. Provide them what you know they value and they will interact with your posts, they will follow your links, they will visit your site and they will do business with you. 

Learn to think in formats beyond the article. Think short, think concise, think nuggets of wisdom novel insights, and clever “soundbites”. And consider how those same valuable communications, short as they are, can be incorporated into the content on your website and how an insight shared on social media can lead your audience to deeper engagement on your website. 

At this level, interacting with your audience, your potential customers, on social media and providing them value – be it knowledge, insight, amusement – you are no longer doing SEO, you’re building your brand. 

SEO in the age of AI is quality beating quantity

SEO has been a volume game for years. If you’ve ever used on page optimisation tools you’ve seen it in action. You want to compete for a keyword? Simple, analyse competitor pages that are ranking for those keywords and write a longer article than theirs with more keywords than theirs. You will pop up in the rankings. Until they do the same back to you.

The best thing about this kind of stupid cold war game is that the results are terrible. Adding AI to the mix is making it all happen faster, but the results are not any better. There is a reason that the term online for AI generated content is “slop”. It’s the new spam.

Spending time to understand your audience, providing value and crafting content that they engage with, isn’t simple, but with thought and patience it’s doable. 

It won’t be a quick win, but that’s what will allow you to compete against an industry that won’t stop believing in the easy win while they fill the internet with words no human will ever read.

A VC’s Product-Market Fit Framework

Product-Market Fit is one of those business goals that is easy to understand but that doesn’t come with any clear guidance on how to reach it. Everyone has a playbook for achieving Product-Market Fit and a lot of it is survivorship bias with a pinch of commonsense.

In this article we’re going to give you a quick rundown of a VCs take on Product-Market Fit. The VC is First Round Capital and they’re basing their approach to Product-Market Fit on the experiences of the 500 startups they’ve funded, including several unicorns. 

The structure and advice is aimed primarily at sales-led B2B startups. You’ll see that they talk about length of sales cycles and integration times. These aren’t concerns B2C startups need to worry about. Even if your business isn’t B2B there are still some useful insights to gain from their model.

The FRC Product-Market Fit Model

First Round Capital, FRC for short, calls their PMF “extreme Product-Market Fit”. That’s some tasty positioning.

FRC splits their PMF model into 4 levels composed of 3 “dimensions” of fit with 4 “levers” you can tweak to fix your fit.

The levels:

  1. Nascent: Early days. You have a handful of customers and you’re still getting a handle on your product.
  2. Developing: You’ve sold to more customers, and they’re paying you, even renewing 
  3. Strong: Customers are finding you instead of you finding them, scaling is your new concern
  4. Extreme: You’re growing, you’re a household name and you can deliver your product repeatably and efficiently to each customer.  

The dimensions:

Satisfaction – How much do your customers like your product? How badly do they need it?

Demand – How long does it take to close a sale? How many of your sales are outbound vs inbound?

Efficiency – This is all those numbers that startups should obsess over: 

The levers:

The Persona – This is just Ideal Customer Profile with the numbers filed off. You can tweak this by making it broader or narrower – HR Managers vs HR Managers in Fortune 10,000 Financial services?- or changing it all together.

The Problem – Ideally a pain point that your Persona will do anything to be rid of. You want to look for urgency and huge upside for the client from your solution. If you’ve picked the wrong problem you may need to pivot

The Promise – Your Unique Value Proposition. It’s not your product, it’s how you communicate the benefit your product will deliver. Be prepared to fiddle with this as you learn more about your customers and as your product matures.

The Product – What you’re building. Will it deliver on your promise and are people willing to pay for it?

A deeper look at the levels in FRC’s PMF

FRC have used their experience across their stable of startups to establish clear criteria on what level a startup is at. This is a very VC-focused model, but if you ignore mention of funding rounds and look at the other criteria you’ll be able to see where you fit in.

For each level they provide their take on which of the 3 Dimensions of Satisfaction, Demand and Efficiency you need to be spending your time on, and they are sensible. Though how you shift those dimensions using the 4 Levers or Person, Problem, Promise and Product they leave out. 

They like to cover that in person, and, really, the 4 levers are the heart of your business model and aren’t amenable to advice given in a document as broadly applicable as a framework is. There is no generic advice that will help you fix your Product or anybody’s Product. That’s why startups are hard.

Let’s look at their levels.

Level 1 – Nascent

At Level 1 you’re a nobody making promises. You’re relying on your personal network to find customers and your conversion rate is terrible. 

Here’s the basic criteria according to FRC Level 1:

To make it to the next level they suggest you focus on Satisfaction. Getting to 5 customers who really need your product because it solves a problem puts you on the path to doing the same for 50.

Level 2 – Developing

At this stage you should start to feel like you’re on the path to PMF. You’re landing customers from outside your network. Organic growth is kicking in.

Here’s FRC’s criteria for Level 2. Note the low customer count. FRC’s PMF model is very much targeted at products with a 5 to 6 figure+ Annual Contract Value (ACV):

To make it to the next level you really need to work on Demand and how to generate it. You can grind your way to 20 customers, but you can’t 5-10x that effort and simply keep grinding your way to 100 or 20 customers. 

You need something generating Demand on your behalf.

The most helpful Levers for pushing on Demand are typically fine-tuning your product positioning and finding scalable channels, whether that’s outbound sales, SEO, paid marketing, referral or a combination of these.

Level 3 – Strong

When you’re at Level 3 you’ve basically made it. Demand is inbound and growing. Customers know your name. You’re able to onboard customers with minimal or no customisation while still delivering value they are happy to pay your contract for.

Here’s the criteria for Level 3:

The business is working. To reach the next level you need to focus on Efficiency. Some numbers need to go up – work on getting your LTV:CAC ratio over 3. Other numbers need to go down – reduce your CAC payback time below 18 months. You’re a mature business with processes that work. Optimise them to get to the next level.

Level 4 – Extreme

Everyone knows who you are. Your efforts are spent scaling and streamlining. You’ve found PMF and you’re getting close to addressing your Total Addressable Market (TAM). 

Guess what? That thing you did – create a product and drive it to PMF? Now you need to do that again. And again.

Here are the criteria for Level 4:

There’s no moving beyond Level 4 of PMF. To keep growing you simply need to repeat the process. There are four ways to do this that leverage everything you’ve learned and built:

  1. New features: Add functionality to create fresh use cases.
  2. New product: Sell something different to the same market and buyer.
  3. New market: Take your product to a different sector or market segment.
  4. New buyer: Same product, same market, different decision-maker.

Where to find more

This was a condensed version of First Round Capital’s approach to PMF. You can read the full 13,000 word version here. You probably should. It goes into greater detail, has great examples and interesting interviews with founders on their journey to Product-Market Fit.

As we said, it is tailored to B2B startups with $$$ Annual Contracts, but there’s a lot of quality experience and insight packed into it that everyone looking to found a startup can learn from.

The tools your team needs to work async

A step beyond simply remote workers, an async team isn’t hampered by time zone differences. By working within the constraint of non-overlapping working hours an async team can unlock productivity gains.

What is asynchronous working?

Asynchronous working is a model where team members operate independently, setting their own schedules without the need to be online simultaneously.

Most asynchronous teams are remote teams, where different members are in different time zones. But they don’t have to be. A team could share an office and work asynchronously.

Async relies heavily on clear documentation, intentionality, and trust.

With intentionality, everyone needs to be thinking ahead, on their day, on their week, and on the current project cycle. This intentionality leads to better decision making, greater accountability, and increased productivity.

That intentionality, at all levels, is reflected in documentation. This encompasses “check-ins” where team members record their plans and results for the day/week in a shared document and the reasoning and results behind decisions as the occur.

This increased level of process documentation provides trust in the progress being made and trust in the performance of the team.

For this article, we’re going to give quick overview of the tools that can be used for documenting an async team’s progress.

The Single Source of Truth (SST)

When you’re working async you want a single place where everyone on the team (or in the organisation) can look to for documentation. 

It needs to be shared, extendable, and, if possible, easily integrated with the other tools you use.

At the lowest level this is a folder on Google Drive that everyone can access. You can make it work, but the UX will cause a lot of friction.

Products like Coda, Notion, Confluence, and Basecamp are collaboration platforms that provide a single place for all documentation. 

They’re customisable, team members can collaborate in real time on single documents or asynchronously.

They provide commenting features so feedback and discussions can be shared to progress group decision making asynchronously. These are paired with notifications so feedback isn’t missed and can be addressed in a timely manner.

Project Management

Depending on your choice for your single source of truth, your platform might also cover your project management needs. 

This includes breaking projects down into tasks of the right granularity, scheduling, assigning team members, and then tracking their progression from start to finish.

Coda, Notion and Basecamp have kanban board-style task management built in, while Confluence can be integrated with Jira and Trello, products also provided by Atlassian, Confluence’s developer.

Basecamp is at heart a project management system with additional collaboration features. Coda and Notion are general collaboration tools that you can use to build more complex project management processes on top of their kanban features.

Confluence is a collaborative knowledgebase, but Atlassian’s Jira is a powerful, dedicated project management tool that integrates tightly with it.

If you have sophisticated project management requirements, you should investigate Confluence + Jira first. 

If you don’t mind a very opinionated but straightforward project management tool, then Basecamp is a strong option. 

If you have the time and the inhouse skills to roll your own project management system, then Coda and Notion are the perfect tools for developing just the features that you need.

Messaging – async and sync

Email is great, but it’s best as a one-to-one medium, and even then the information contained in an email thread ends up hidden in a couple of inboxes. No-one else in the team can do anything with it.

This is where a messaging service like Slack comes in. Using it does take discipline. One of the core tenets of async work is not requiring an immediate response from other team members. This is contrary to the idea of an instant messaging platform like Slack.

An async team needs to use Slack as a public message board rather than as a live chat. With this there is some overlap with your Single Source of Truth (and most offer integrations with Slack).

However, there will always be times when live, synchronous communication is the best solution for resolving an issue. Slack can be one of the tools for this situation.

Video – async and sync

As effective as hopping into a Slack chat to resolve an issue can be, nothing beats a video call. But they need to be used sparingly and respectfully. With a global team it is possible to have team members with no time zone overlap. That’s when you need clear and fair ways to decide who is taking calls in the middle of the night.  

For those synchronous discussions, Zoom and Google Meet are the most popular, though many corporate teams also use Microsoft Teams. 

For async video – perhaps as process documentation or providing background for a request or as material to review before a meeting – Loom is the popular choice. The simplicity it provides in recording screens along with voiceover, and the ease of sharing videos, makes it the goto tool for these kinds of videos.

Time to put the tools to work

Your team covers a variety of roles, each with their own specialised tools. The ones we’ve covered in this article are the basics you need to look at when you want to start working asynchronously: 

Using these tools as a starting point for your own experiments in async working, you can start building a more flexible and effective remote team.

Vanta’s Path to Product-Market Fit

In 2007 Marc Andreessen, co-founder of Netscape as well as the VC firm Andreessen Horowitz, published a blog article titled “The only thing that matters”. You can still read it today. It is considered to be the driver that pushed the concept of Product-Market Fit into the spotlight for tech startups. 

The idea of Product-Market Fit was originally coined by Andy Rachleff, a VC and startup CEO, who Andreessen quotes in his article:

Rachleff’s Corollary of Startup Success:

The only thing that matters is getting to product/market fit.

Rachleff started out in VC when tech startups were hardware focused – making a disk that was 10x faster or a router with 1/10 the latency. The challenge for hardware startups was always could they actually build the hardware that delivered the numbers they were promising. If they did, customers would throw money at them. These hardware startups had a high technical risk, but a very low market risk. A 10x improvement in anything would sell itself.

With the rise of the internet, software companies began to dominate the startup scene, but they had the opposite problems of hardware startups – very low technical risk and very high market risk. A software startup, and their investors, could have high confidence that they would be able to deliver the product – it was just coding, not wrestling with physics or manufacturing – but no way to be sure if anyone would buy it.

This had an interesting effect on startup investment, splitting the market into seed investors who were willing to shoulder the risk to help startups launch and, once their market was proven, traditional venture capital who would pay a premium to buy-in at later rounds.

So, product/market fit is important, it’s valuable, and it’s essential if a startup wants to grow into a unicorn. 

So what is Product-Market Fit? Isn’t it obvious?

Product/Market Fit sounds a lot like making sure a product is right for a market. That it “fits”. And it seems obvious. This gives too much emphasis on the market and misses that Product-Market Fit is a two piece puzzle for the startup. It needs both pieces.

The market needs to also fit the product. It needs to want the product. It needs to want the product badly enough to pay a good price for the product. And it needs to be big enough to buy lots of the product. You can’t build a business on a great product that everyone in the market wants and loves if the market has only a handful of customers.

Perhaps it should really be Product & Market Fit. 

Exploring Product-Market Fit with Vanta

To explore Product-Market Fit we’re going to look at the example of Vanta, a certification compliance tool provider, and their journey to product-market fit and how, in creating their product, they created a market everyone else had overlooked or underestimated.

Vanta helps businesses achieve and maintain certification for a variety of standards. Initially they focused on SOC 2, a US-centric standard but often held by non-US companies who want to do business with US organisations. They have since expanded into ISO27001, HIPAA, GDPR and other certifications. 

They use a subscription-based model, and given the importance of certification and the huge amount of time it takes to obtain, monitor and maintain it, they can charge 4,5, and even 6 figure annual subscription fees depending on the size of the client and the certifications they require. And the clients are happy to pay them because they understand how much money Vanta is saving them.

So Vanta is in a nice spot (ignoring competition for the moment). But it took a while to get there. The founder and CEO, Christina Cacioppo, persisted through 4 major stages of product experience over the 5 years it took for her to go from starting to create products to finding and developing the idea that would lead to Vanta.

The first steps on the road to Vanta

Cacioppo got her start working as an analyst for Union Square Ventures in New York, where she spent her time evaluating companies seeking investment and meeting with their founders. 

Regular meetings with founders through her role gave her the confidence to start her own company:

“I got to the point where I said, ‘I do want to go start a company.’ But I wanted it to be a software company, and I didn’t know how to code. And I knew a lot of non-programmers started companies, but I didn’t want to go that route. So I resigned, took my bonus and taught myself to code and build products,” she says.

The products she built were not successful. They included a book tracking website, a video messaging app for Android and a startup job board. While none of her ideas grew into sustainable businesses, they did teach her that she needed product development experience. So for the next stage in the Vanta product path she joined Dropbox in 2014 and worked for two years as a product manager on their Paper product. 

First glimpses of the future market

It was here that she got her first exposure to security and compliance. As a product manager on Paper, she wanted Dropbox to push it to new accounts when they signed up for Dropbox’s file sharing service. Dropbox’s legal department shut that down, telling her that Dropbox was SOC 2 compliant and Paper wasn’t, bundling Paper would invalidate contracts requiring compliance, and that it would take 18 months to make Paper SOC 2 compliant. For Cacioppo that was the end of bundling Paper with Dropbox.

In 2016, after two years at Dropbox, Cacioppo left to try again at starting her own company. Following trends at the time – speech was big, Amazon Alexa was exciting – she pursued several product ideas.

Finding a Product without a Market

First was an AWS drop shipping solution for e-commerce merchants. Next was an AI tool for transcribing meetings. Another was a microphone that transcribed notes into Slack. Part of the problem was that speech-to-text AI wasn’t really there yet, and the other was that these products were generic “business tools” that no-one really wanted..

She then took a step back and tried to find a use case for the speech tech they had spent so much time with. She found that use case in biologists doing lab work. 

“They’re doing things with their hands, they have gloves, they’re working with chemicals. Imagine trying to type out notes while you’re cooking a complicated meal,” Cacioppo explains.

The biologists loved the microphone and iPad app Cacioppo and her team built for them. She had product fit. But there was a problem – “…the market for this was the size of my thumb…,” Cacioppo explains. 

There was no market fit. She had a great product, but not one that a sustainable business could be built around.

Trying again – Lean Startup style

At this point Cacioppa and her team stopped relying on brainstorming product ideas and took a leaf from the Lean Startup playbook and began a process of customer discovery.

“We decided we weren’t allowed to build anything at all. We had to just talk to people—and talk to them until we had a lot of confidence and a mental model of customers, their jobs, the problems they might have and how we might solve them.”

This is where Caciopppo’s time at Union Square Ventures and Dropbox paid dividends. She had a network of potential customers she could talk to, including coworkers who themselves had moved onto to found their own startups.

But when you talk to your potential customers, who can have widely different experiences, how do you know when you understand their common problem well enough to start building?

Her team had a nice heuristic for making this call – “…we decided we had to keep having these conversations until three-quarters of it was stuff we already knew”.

By sitting down with people and doing basic things like talking through their calendar with them – the highlights and the challenges – it did not take long to stumble onto security as an area of interest, and compliance as a challenge within that area. 

Finding a Market and deciding on a Product

It did help that Cacioppo was aware of how many large security businesses there were. It wasn’t just a large market, it was enormous.

Drawing on her own difficulties with compliance working on Paper at Dropbox, Cacioppo and her co-founder at the time decided to focus on SOC 2 compliance. 

SOC 2 ensures service providers handle their clients’ data securely and responsibly. It is detailed and covers security, integrity, availability, privacy and confidentiality of data. Which also covers just about every process in a business. They all touch data to deliver their services.

Doing things that don’t scale

An established strategy for founders early in their product ideation is to do things that don’t scale. One day their SaaS will be a software driven unicorn, but today, at the beginning, they need to do things manually, in person, to validate their product with their first customers. It’s hard work and people are reluctant to try it. Cacioppo wasn’t.

The first version of Vanta wasn’t even software. It was a consultation and a spreadsheet. Caciooppo interviewed the team at a startup called Segment and produced a gap assessment in spreadsheet form that they could use to guide Segment’s SOC 2 compliance. 

Their next step was to ask the question, “Would this spreadsheet work as-is for anyone else?”. That is, was SOC 2 compliance standardisable? Could they productise it? And the answer, after the same spreadsheet was well-received by a second startup, was “Yes”.

Productising SOC 2 compliance

So, like many startups of the era, Vanta took a spreadsheet and built an SaaS around it. But initially there wasn’t much Software in their Service. There were forms where customers could enter AWS credentials, but behind the scenes Vanta employees, often Cacioppo in the early days, would pull the data by hand and enter it manually before returning the report to the customer. They told these early customers that their software “was slow”.

From that manual start they continued to build out the software to automate and integrate the compliance process with customers’ operations. 

At this time Vanta was accepted into the Y Combinator startup accelerator program. This gave them access to hundreds of other startups who became a source of customers.

Creating the market

SOC 2 compliance is all about proving that you have all the necessary security controls and procedures in place to protect client data. Achieving compliance is time consuming and expensive. More so if you need to pay a consultant to guide you through the process. 

By productising the SOC 2 compliance process – creating a user-friendly interface to the numerous checklists, developing integrations to third party service providers, providing progress tracking and team features like collaboration and task assignment – Vanta took a time-consuming process that required expertise and a huge amount of domain knowledge and reduced it to the point where it was almost a data entry task. And that task could be shared across an organisation instead of having one person, or a small team, devoted full time to carrying it out.

The outcome of this was an increase in the number of businesses achieving SOC 2 certification. And as a startup, why wouldn’t you? It was required for some industries, like financial services and healthcare, and it was required by enterprise clients who saw it as part of securing their supply chain. It made your business look good and at the same time increased your own security by forcing the adoption of best practices across all of your processes.

Those businesses achieving SOC 2 compliance were doing it through Vanta. Between their initial seed round with Y Combinator in 2018 for $3,000,000, when they had a handful of clients, and their series A round in May 2021, Vanta had grown to 1000+ customers and ARR of $10,000,000.

These numbers, along with their $50,000,000 Series A round at a pre-money valuation of $500,000,000, raised a lot of eyebrows and inspired competitors to jump into the market, including:

Despite the competition, the market continues to grow and Vanta grows with it. Vanta now has over 5,000 customers and their current valuation stands at $1.6 billion, a true unicorn in a market they helped create.

Lessons to learn from Vanta

A story like Vanta is great because we get to see the missteps and the delays, allowing us to skip straight to what works. 

What works is customer discovery, validation, and having a network. 

Customer discovery works. Talking to potential customers, as many as you can. Listening to them and understanding their problems and finding the commonalities that can point towards a product. 

But customer discovery may not be straightforward. Cacioppo had distinct advantages when she started the process. Her time at Union Square Ventures gave her an insider’s knowledge of how venture capital and startups worked. Not just the process, but as an analyst she would have had access to information on business structures and budgets, etc. And she came away with the beginnings of a success-focused network.

Her time at Dropbox helped expand her network and gave her not just practical product experience, but also firsthand experience at the challenges businesses face as they execute. For her, it was the challenge of compliance.

Finally, validating your product works. Validating your product idea in the quickest and most immediate way possible, even if it is manual and hard to do. Better a week of long hours over the keyboard rather than months of coding to discover no-one cares.

Shorten that path

There is no predictable path from idea to unicorn, but hopefully this article pointed the way to shortening your path.

The lessons might save you a few years of development on your next product. Or you might now be thinking it’s time to get a job and build up experience and contacts in the industry you’re interested in. That could also save you a few years in the long run as you search for the perfect product.

 

 

Unlocking Growth: Smart Resource Allocation For Digital Products

Your business is built on software and software is expensive to build because it is hard to build. You’re an SME so allocating your limited resources strategically is essential. This article will cover how to assess your current resources and capabilities, identify the best areas for innovation and ROI, and allocate resources to support your strategic growth initiatives.

It’s a complex process, so we’re going to give a quick overview of the strategies and decision-making involved so you know where to start and what you should be looking for.

Conferensity: Our example for resource allocation

To illustrate resource allocation we’re going to use the same imaginary company we use in all the articles in this series – Conferensity. They’re a B2B event management platform with aspirations to become a comprehensive conference solution.

Their strategy involves expanding their web-based software’s capabilities and developing two apps – one for conference admins and another for attendees.

While these are three digital products, 1 website and 2 apps, there is actually a fourth project – the updated backend that will implement the features the website and apps will provide interfaces for. This backend will also require extensive work to provide all the necessary admin features to manage the new frontend features. By dedicating their resources to these four digital projects Conferensity is actively working towards achieving their primary business objective.

Here is some of what they want their products to do:

  1. manage venue communication and arrangements (such as contracts, venue layout, and extra services like conference Wi-Fi, local tours, etc)
  2. handle communication with speakers, panel members, and guests (including contracts, accommodation, presentation reservations, and travel), and
  3. provide opportunities to make purchases through the app for everything from refreshments to accommodation and perhaps one day flights.

Their first app will be for conference admins, duplicating the client-accessible website’s functionality. The second app, designed for attendees, will allow attendees to reserve seats, purchase tickets to the conference, and pay for any related services, purchase refreshments and merchandise. It will also have features like schedules and venue maps, presentation start reminders, live questions via chat rooms, presentation feedback, and special features for speakers.

Their strategy encompasses a website overhaul and the launch of two apps supported by a robust back-end system. The success of these digital projects is critical to achieving their goal of increased market share and revenue.

Assessing Your Current Resources and Capabilities

A comprehensive evaluation of your resources is essential for effective strategic planning. This assessment provides a clear understanding of your strengths, weaknesses, and areas for improvement, enabling you to make informed decisions about resource allocation and project prioritisation.

There are a lot of resource areas you can look at. But we think the five below are the ones that are going to really make or break your plans. By carefully examining the following five key resource areas, you can ensure that your project goals are in line with your capabilities:

Identifying Areas with the Highest Potential for Growth and ROI

To identify areas for growth, you need to conduct an analysis of market trends, customer needs, the competitive landscape, and your own internal capabilities. This assessment provides insights to pinpoint opportunities that can drive growth.

The process begins with market research to understand emerging industry trends and identify customer needs. By engaging with customers through surveys, feedback mechanisms, and user testing, you can gain insights into their experiences and expectations.

This customer-centric approach is essential for uncovering opportunities to enhance the product or service offering in meaningful ways. Equally important is benchmarking against competitors to identify areas where your business can differentiate and capture a larger share of the market.

Analysing the competitive landscape reveals gaps in the current solutions, allowing you to strategically position your innovations to stand out and appeal to target customers.

In parallel, you must assess your own internal capabilities, evaluating the technological feasibility of potential innovations. This involves conducting technical studies to ensure the planned developments can be realistically achieved with the available resources and expertise.

Financial projections are then used to estimate the potential return on investment, considering the costs of development, marketing, and sales efforts.

By taking this comprehensive approach, you can identify the most promising areas for innovation – those that are not only desirable from a market perspective, but also viable and financially sound for you to pursue.

This strategic alignment between market needs, competitive positioning, and internal capabilities is crucial for maximising the impact and return on innovation investments.

How Conferensity Identified Directions for Growth

Conferensity, a B2B event management platform, provides a good example of how to identify areas for innovation that can deliver ROI. Let’s break down their process:

Allocating Resources Effectively to Support Strategic Growth Initiatives

When allocating resources, you need to make strategic decisions to ensure each investment supports the company’s growth goals and maximizes ROI. Let’s look at the decisions Conferensity made and the reasoning behind them. This can serve as a guide for other SMEs allocating their resources.

Development Focus

Conferensity recognised that the attendee app was a critical touchpoint for user engagement and revenue generation. They decided to allocate their most skilled developers to this project, ensuring that the app’s user experience and functionality would be of the highest quality.

This focus on development resources was based on the understanding that a superior attendee app could significantly enhance the overall event experience, leading to increased user retention and higher transaction volumes.

Extended Software Development Team

To efficiently progress with their backend development, Conferensity opted for staff augmentation by partnering with a near-shore team extension provider. This strategy allowed them to extend their software development team with experienced professionals who could handle the standard backend features. The benefits of this approach included cost savings compared to hiring full-time staff, access to a broader skill set, and the ability to scale the team up or down as needed. This flexible staffing solution enabled Conferensity to maintain focus on their core competencies while ensuring timely and efficient progress on their backend infrastructure.

Infrastructure Investment

Investing in cloud infrastructure was a strategic move for Conferensity to support the scalability and reliability of their expanded platform. They understood that as their user base grew, the demand on their system would increase. By choosing a scalable cloud solution, they ensured that their platform could handle this growth without compromising performance, thus providing a seamless experience for their users and maintaining a high level of customer satisfaction.

Marketing and Sales Alignment

Conferensity allocated a significant portion of their resources to the marketing and sales efforts for the new apps. They targeted high-profile events to generate buzz and early adoption, understanding that these events would provide the visibility needed to attract more users. The alignment of marketing and sales efforts was crucial to ensure that the message about the new apps reached the right audience at the right time, ultimately driving adoption and revenue.

Agile Resource Management

Adopting agile practices allowed Conferensity to manage their resources with flexibility. They could swiftly reallocate resources in response to feedback and market demands, ensuring that their projects remained on track and aligned with user needs. This approach to resource management was instrumental in allowing Conferensity to adapt to changes quickly, whether in response to user feedback or shifts in the market landscape.

Summing it all up

The allocation of resources for web and app development is an important task for you when pursuing innovation and market share. By evaluating your current resources and capabilities, identifying areas with potential for growth and ROI, and making decisions about resource allocation, you can support your growth initiatives. This approach ensures that each investment is aligned with your company’s objectives, utilising resources and positioning your business for success in the digital landscape.