Unlocking Growth in the Internet Economy
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The internet economy is experiencing explosive growth, and more business models are now possible online than ever before. Join Suzanne Xie, Stripe’s Business lead for their Invoicing products and a former serial entrepreneur, as she shares her lessons for how internet businesses can use new tools to make more money for less effort.
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Unlocking Growth in the Internet Economy
- 1. Unlocking Growth in the Internet Economy: A Stripe Perspective Suzanne Xie Business Lead @suzannexie
- 2. The next 30 minutes... ● What makes it hard to build and scale a SaaS business? ● What are we seeing in the market today? ● How should you build and take a SaaS business to market?
- 3. What makes building a SaaS business so hard? SaaS challenges
- 5. Billing system not ready Enterprise customers! Manual invoicing Patchwork billing Manual reconciliation SaaS challenges
- 7. B2C payment B2B payment Hit send Instant $$$ 1 2 Create & send quote Quote accepted 1 2 Generate order 3 Fulfill 4 Generate invoice 5 Invoice verified 6 Invoice paid 7 $$$ received 8 Book revenue 9 SaaS challenges
- 8. Inflexible systems High complexity Resource-intensive or manual work SaaS challenges
- 9. 200-300 hours per month on accrual accounting
- 10. Why is it easier than ever to build an online business? Market trends
- 11. 200% growth in the internet economy, 2019 to 2023
- 12. $4.0M in 2011 99.9% reduction in cost to start an online business $0.004M today Market trends
- 13. Explosion of low and no-code solutions Market trends
- 14. Rise of subscription based business models Market trends
- 17. Ensure a rapid iterative loop with the right customers Digitize your processes from the start
- 18. Tip 1: Be incredibly specific about who your customers are. Build a killer product
- 19. Tip 2: Deeply understand your customers’ problems and needs. Build a killer product
- 20. Tip 3: Design a product that aligns you with your customers. Build a killer product
- 21. Be incredibly specific about who your customers are. Deeply understand your customers’ problems and needs. Build the right product that aligns you with your customers. Build a killer product
- 22. Tip 1: Leverage software to grow while managing cost. Scale processes and distribution
- 23. Tip 2: Experiment with pricing and packaging. Scale processes and distribution
- 24. Tip 3: Know your business’ financials and find ways to optimize your recurring revenue. Scale processes and distribution
- 25. Tip 4: Plan for the compliance implications of your growth. Scale processes and distribution
- 26. Leverage software to grow while managing cost. Experiment with pricing and packaging. Know your business’ financials and find ways to optimize your recurring revenue. Plan for the compliance implications of your growth. Scale processes and distribution
- 27. It’s easier than ever to use software to set up, scale, and run a business.
- 28. Only 5-8% of global GDP is online today
- 29. Thank you!
Editor's Notes
- So great to be at SaaStr! Who here works at a startup? Familiar with Stripe? Great! We’re talking to the right audience :) My name is Suzanne Xie, currently the Business Lead of Stripe’s Invoicing product If you’re familiar with Stripe, you may know that we have expanded our product offering quite a bit recently 100s of thousands of SaaS businesses as customers… Suite of products for SaaS: from Billing and Invoicing, to Revenue Recognition and Stripe Tax, to Card Issuing, Managing Fraud, and even verifying Identity. Before Stripe, I was a founder… most recently with a SaaS company. Excited to share more about my journey and perspective now at Stripe
- 2) After a decade of my own startup experience and from what I’ve seen at Stripe, I wanted to talk today about: Overcoming the pain points of growing a SaaS business, specifically with getting the ‘financial stack’ of your biz up and running What we’re seeing in the market Ways to unlock growth in our new internet economy
- 3) It’s 2021 and while tech magic enables us to do so many things we never would have thought possible 5 years ago ...it’s still too hard to set up and run a business online Why is that? The problem is a simple one: scale Complexity that comes with scale...particularly in your financial stack...setting up billing systems, handling enterprise sales, accounting for revenue, and managing churn Let me start by sharing a bit more about my startup experience..which may sound similar to what a lot of you are or will experience as you grow
- 4) More than ten years ago now, I started my first startup. (That’s me on the left with our startup corgi, she still likes to sit on people when they are at work) On the right, is where it all started with a purple panda...Pandora and she was the main hero and inspiration for us to build Lightwell software, which was acquired by Twitter in 2019 We started by building..interactive story apps for kids, starting with Pandora’s epic adventure Entire engineering, design, and art team building these apps from scratch, and each app took many grueling months to build We started to develop our own internal tooling to make that easier → a tool to create and ship interactive mobile apps without code Designers could create dynamic animations in a no-code visual tool, while developers could use a native iOS toolkit to turn designs into production Apps that used to take...9 months → 1 week! Trend towards no-code tooling and faster production maps really well to what we’re seeing today in setting up SaaS companies But! Even though we were building and shipping software to make creative development much easier and faster, running our business wasn’t
- 5) As a startup, you’re focused on so many things like...talking to users, building great products, selling to customers, raising $…The last thing you want to spend time on is setting up a financial stack When we started selling our Lightwell software, we ran into a ton of pain points: Hard to even set up a billing system and accept simple monthly subscriptions from our website Then, we started to get one-off enterprise customers...moving to a sales-supported model Contract terms for bigger customers Chasing down with customers manually Leading to patchwork billing solution – making reconciliation a huge pain on the backend Accounting for revenue sounds simple when you’re small, but much trickier as you grow…. accurately book revenue for different products and billing terms That squiggly line only shows the operational piece of setting up and running our financial stack… We had to worry about things like churn - for totally solvable reasons like cc expiring. I personally spent hours each day manually creating contracts, invoicing customers, following up on payments…which is frustrating as a startup When scaling our own software, setting up the commercial infrastructure was really hard piece
- 6) I thought I was crazy...but I wasn’t! We definitely weren’t alone in this. Since I’ve joined Stripe, I hear the same things from founders time and again… Complexity of running a business actually compounds as you grow Many of you are bogged down with your infrastructure, which takes away from your core product development!
- 7) Payments—yes payments!!--accepting and booking revenue—still remains a hard challenge for online businesses to solve (We see this everyday at Stripe, and it’s what we like to solve for) Making money should not be this hard! In the consumer or B2C world, payments are easy (simple web Checkout!) But in B2B...the gap between the two is increasingly stark
- 8) We’re moving to an automated world where no internet business should need to deal with highly complex, inflexible systems and lots of manual work. For SaaS businesses, self-built billing and invoicing systems tend to be incredibly hard to scale Collecting unpaid invoices from 1 customer → hundreds of customers becomes untenable What about starting with recurring billing but wanting to test usage-based pricing Hard to build payment flexibility yourself like accepting cc but switching to bank transfers for larger invoices (this can be really simple and powerful for better collections btw) Large legacy enterprise companies usually have entire teams whose sole job is to collect money! AR team -- generate and send invoices, chase their payment AP team -- match payments to invoices This can cost millions of dollars a year!
- 9) Many businesses have told us that they can spend 200-300 hours each month making their books compliant with accrual accounting rules A few founders have shared their “spreadsheet of shame” with us that shows tabs, imports, rules...to manually track their revenue
- 10) Now that I’ve depressed you with all the pain points and difficulties, let’s talk a bit about exciting recent trends that are promising for internet businesses SaaS companies, all of you!, are leading the way in making it faster and easier to build and grow a business than ever
- 11) Now, it’s no surprise that...internet economy has exploded in the past few decades. Ecommerce spending in the U.S. alone is expected to double from 2019 to 2023...$600 billion to nearly $1.2 trillion If we look at these logos, clearly there is an abundance of new tools and technology to enable businesses that didn’t even exist 5 years ago
- 12) Our research suggests that the cost of software tools needed to run the backend of an online business has completely collapsed in the past decade —from roughly $4m in 2011 to $4,000 today At Stripe, we have access to lots of data and have seen hundreds of thousands of SaaS companies scale on our platform…much cheaper and faster to build I’ve been keeping an eye on three trends that help explain what made this possible
- 13) First, my favorite! Explosion of low- and no-code tools You can now outsource pretty much every business function you have: Shopify for ecommerce operations Wix for no-code website-building Xero for automating accounting Webflow for web development Stripe for automating revenue and financial operations Things that used to take months and tons of manual work...now can be done so much more quickly This is all possible thanks to the increasing power and sophistication of no-code software, creating even more new businesses in the market Basically, things are cheap to build!
- 14) Second, we’re moving away from license-based software to subscription- and usage-based business models (good for customers and companies) Not to date myself...I remember buying Adobe licenses for software on CDs in school! It’s much easier now... In fact, we’ve seen that the number of recurring businesses on Stripe have grown over 50% since last year The Subscription Economy has grown nearly 6x over the last 9 years, and subscription businesses report growing up to 8x faster than traditional businesses
- 15) Third, many of these software businesses are evolving into platforms which enables you to access software that’s more integrated and easier to use than before. Software companies have woken up to the fact that they can provide a more valuable service, and can attract higher valuations by serving more horizontal use cases and adding vertical functionality like payments and financial services. Substack started out offering subscription management services for newsletter writers—but expanded into podcast monetization and revenue sharing Lightspeed started out offering point-of-sale—but expanded into enhanced in-store and online capabilities for their merchants This makes it easier for you, as a startup, to find an integrated, all in one solution that just works. It’s also hopefully inspiring to see SaaS take on a whole new shape.
- 16) Ultimately, business functions are being commoditized and made available as automated services… You can build on APIs to run many more specialist business and revenue operations entirely online You can deploy: subscriptions as a service billing as a service fraud prevention as a service sales tax collection as a service All this to say: it’s never been easier to build a product and business than it is today!
- 17) Let’s talk about two key principles that I’ve seen guide great SaaS companies in building their products and businesses design and deploy killer SaaS products: ensure a rapid iterative loop with the right customers second is to help run your business as it grows: digitize processes from the start This may sound counterintuitive compared to other startup advice...do things that don’t scale Do things that don’t scale for your core business...but when it comes to things that are not core, you should digitize! It’s like trying to build your own servers when you could use AWS These two principles have guided how we build and design products at Stripe – as well as my own experience of company building
- 18) First: Start with software design. You have a killer idea and want to ship an amazing product Be incredibly, incredibly specific around who your customers are At Lightwell…we were our own customers. We built for interactive story app developers (like ourselves) and solved a really hard problem for them Even though we were our own users, we still had daily conversations with our canonical app creators YC is famous for telling their startups, “It's better to make a few people really happy than to make a lot of people semi-happy.” My guidance to you would be similar: Find the most discerning customers - build to their spec. Start with a product that’s really useful for a few users Build relationships with them, so you can make a very precise mental model of what they want, and why Iterate intensively with that small number of discerning users—almost like you’re a professional services firm building for their spec If you don’t know specific people in your target audience, you need to. Go find them and talk to them Products don’t generally fail because they’re very useful for only a tiny number of users. They generally fail because they aren’t useful for *any* users.
- 9) Second: Go deep to understand your customers’ problems Ask and re-ask: what are your users really trying to do here? It’s like Henry Ford saying “If I had asked people what they wanted, they would have said faster horses.” Example from Stripe Atlas We have a form on our website that asks users what Stripe should do next And we get a lot of engagement - a lot of customers asked for help getting started in countries Stripe wasn’t in yet This sounds like...Stripe should support more payment methods, right? Wrong! (Well, they want that as well.) But, we realized what they wanted was Stripe’s infrastructure -- a way to set up their business from other countries So we launched Atlas to do this -- this let founders incorporate and start taking payments in days -- helping thousands of new businesses launching from over 140 countries By digging in with questions, we got at the real problem they were trying to solve and came up with a somewhat unexpected solution.
- 20) Third: Build a product that aligns you with your customers What does this mean? You know who your customers are, you know what they need. You want to design the best product that is good for your customer and for you. We saw this with Stripe Invoicing recently Cash flow is so important to SaaS businesses -- right? Traditionally invoices have 30 day due dates, but we wanted to help our users get paid faster & improve their cash flow The more the business collects, the better it is for them and for Stripe We added a feature where they could mark invoices “due today” It was a small, simple improvement Even we were surprised by the results - and how fast people started using it - we’ve seen tens of thousands of merchants use this feature (50,000 "due today" invoices paid so far) and we’ve reduced the average time it takes to get an invoice paid
- 21) Going back to the model for building great products We designed due today, a simple feature for SaaS businesses We knew they needed better cash flow and predictability, and offering 30 day due dates could be improved We built a simple feature on top of our invoicing product that improved their cash flow And while it’s still early, we’ve seen good adoption and most importantly user satisfaction
- 22) Let’s shift over to running your business. First, costs. I talked before about how it’s still too difficult and expensive for founders to get their financial tech stack up and running. In fact, one founder shared their old models and ran the numbers...the rough math really comes to 10 cents/dollar of overhead of manual billing, manual collections, manual revenue recognition, and manual rev analytics stitched together Had “AR Days” when the AR line grew too high and they asked everyone (sales, support, product) to pick up the phones and dial for dollars to collect on outstanding aged receivables Can you imagine? That’s a full team that is manually trying to collect money when it could be fully automated by software. Using subscription-based tools gives you costs you can reliably predict Tools also become more effective as more businesses use them At Stripe, we use ML across our network to make our products more effective with no work required from our users (Smart Retries and Radar fraud protection). Software is and should be getting better all the time. Last year at Stripe, we deployed our core production API thousands of times - that’s the API that manages payments and money movement. Without our customers having to do any work, the Stripe platform is getting better for them all the time (and at an increasing rate).
- 23) Second, revenue. Software makes it easier than ever to experiment with pricing and packaging. Last week, I spoke with a founder building software to help companies scale their support teams. It’s a new SaaS business with some pretty big customers already. He is using Stripe to send invoices manually from the dashboard and was adamant about not wiring it up until or writing code until the team figured out the right pricing model (He was such a fan of price testing that when I asked about their billing system - “I am the billing engine”) A good pricing strategy does a few things: First it aligns your product with your users’ needs. How do they derive value from what you’re building? This is where usage based pricing can be really helpful to test. Second it optimizes value capture by reflecting your users’ willingness to pay Third, it simplifies the first-time sales motion and upsell (e.g free trial, discounted annual plan) No matter which pricing model you choose, testing is key - whether you start out sending invoices by hand or build a full billing system
- 24) Third, more revenue, specifically optimizing what’s recurring Understand your key stats – these might be MRR, ARR, ARPU, churn, or LTV It's usually so expensive to acquire new customers. Once you have them you should do anything you possibly can to retain them Price testing can help this -- e.g. we’re seeing businesses increase renewals by offering discounted annual plans or the ability to pause subscriptions instead of canceling It’s also worth looking at ways you can eliminate involuntary churn. at Stripe we automatically update expired or replaced cards, and we have a smart retries feature which uses machine learning to retry cards at the time they’re most likely to succeed Twilio deployed this and increased authorization rates by a full 2% this way This is another argument for outsourcing financial operations—providers like Stripe can afford to make optimizations to improve *your* recurring revenue that it would never make sense for you to build yourself.
- 25) Fourth: plan for the regulatory implications of your growth. This is probably the gnarliest thing to consider as you scale Expanding to different markets can have huge compliance implications The internet may be borderless, but money is not The cost of compliance is increasing and many businesses are struggling to keep up Examples that come to mind: In Italy there’s new e-invoicing regulation where you need to send a copy of every B2B invoice to the Italian government in order for it to be compliant SaaS is taxed in 138 countries and you have to collect and file in each country You’ll need to make sure your payments are compliant with strong customer authentication or SCA regulations in Europe All of that sounds a little bonkers for a startup to manage. But going back to my first tip, think about ways you can use software to manage compliance for you.
- 26) So back to you, what does this mean for you as a startup? Just this - your time is valuable. Stay focused on where your competitive advantage is - your killer product. Leverage software to grow, try out new pricing models, optimize your revenue, and keep in check anything that’s not core to your business.
- 27) We’ve talked about a lot today: big trends in software building killer products by staying close to customers leveraging software is key to scaling your high-performing SaaS business The key takeaway that hopefully resonates with all of you, since you’re driving this change with your businesses: It’s never been easier to use software to help set up, scale, and run a business.
- 28) Last time we were here at SaaStr in 2019, this number was only 3%. Now 5-8% of global GDP is currently being run online... It's growing fast but there's still so much opportunity, and the infrastructure is only going to continue to improve. It’s so exciting to think that software is in its early days. Think about how many trillion-dollar businesses are still to be built taking advantage of it. Imagine what the economy will be like when that number is 50%. SaaS will get us there. Use it in your business today and help enable the companies of tomorrow.
- 29) Thank you!