We are all familiar with what a startup is, but what about a SaaS startup? Software as a service (SaaS) is a software distribution model in which a cloud provider hosts applications and makes them available to end users over the internet.
In this model, an independent software vendor (ISV) can contract a third-party cloud provider to host the application. Or, with larger companies, such as Microsoft, the cloud provider might also be the software vendor.
SaaS products are becoming increasingly popular. When you book an apartment on Airbnb, you are using a cloud solution. Do you use Dropbox for file exchanging? That`s SaaS for you right there. If you plan to scale your business and expect to attract a lot of users, consider building your software as a SaaS because in-house infrastructure will not be able to expand fast enough to host your success.
The latest data suggests that approximately 30,000 SaaS companies exist worldwide, with the SaaS market dominated by the United States, which hosts 9,100 of these businesses. Other major players include the United Kingdom (1,500), Canada (992), Germany (840), and India (711).
This surge in SaaS startups highlights the growing importance of cloud-based software tools over traditional infrastructure. In the last decade, many entrepreneurs and founders have turned to the SaaS industry for its flexibility, cost-effectiveness, and scalability.
By leveraging minimum viable products (MVPs), new SaaS companies can enter the market more quickly and attract new customers with tailored solutions.
The exponential demand for cloud-based platforms is one of the most significant drivers of growth in the SaaS business. Modern end users expect seamless access to services that operate globally, support multiple languages, and adapt to regional needs.
This demand has created challenges for startups and small businesses, but it also presents immense opportunities to build SaaS products that solve key problems. For example, companies that prioritize marketing automation, customer data management, and security can differentiate themselves in the crowded SaaS market. Understanding how to hire a full-stack developer is often a critical step in building these strong and secure solutions.
A major factor shaping the SaaS development industry is the role of digital transformation in adapting businesses to market demands. Teams with strong technical expertise can develop software tools that meet these evolving requirements.
Product teams in the early stages of their SaaS startup journey can focus on identifying their target market, conducting in-depth market research, and creating a business model that resonates with potential customers. By using strategies like advertising, collaborating with a co-founder, and offering new features, startups can attract investors and scale their services efficiently.
The SaaS landscape continues to evolve, with innovation and differentiation as top priorities for business success. One of the key trends is the adoption of intelligent automation and machine learning to enhance value for users.
These advancements help optimize workflows, manage customer data, and deliver personalized software solutions. Leveraging product development services can enable businesses to create tailored solutions more efficiently and align with specific market demands. Moreover, SaaS companies are moving toward industry-specific products, solving unique challenges in areas like healthcare, real estate, and logistics. These specialized SaaS products attract new customers while addressing the specific needs of underserved industries.
Flexible pricing models are also reshaping the SaaS industry, allowing startups to cater to diverse customer needs. Whether it’s a subscription model, freemium options, or a hybrid approach, businesses are tailoring their strategies to attract customers across various stages of the buyer journey.
Seamless integration within tech ecosystems has become a top priority, enabling product teams to create solutions that enhance the overall user experience. By focusing on these trends, SaaS startups can solve pressing challenges, expand their reach, and achieve sustainable growth in the competitive SaaS market.
The main challenge for startups in the SaaS industry is the process of transitioning from an in-house infrastructure to a cloud-based one. For the newly-founded startups, the biggest challenge is to build the cloud infrastructure and launch it. Let`s talk about the particulars.
For startups, there are many ways to attract money to their business, but SaaS startups have it easier because nowadays everyone wants to be a part of innovation. Among the types of funding that are available are:
High-net-worth individuals who invest their own money into early-stage startups. Angel investors often provide seed funding and mentorship, leveraging their personal experience to guide new entrepreneurs.
Firms or individuals that invest in startups with high growth potential. VCs typically provide significant capital in exchange for equity and are particularly interested in scaling businesses quickly.
Investors focusing on mature SaaS companies or startups with steady revenue streams. These firms typically invest larger amounts and may assist with strategic acquisitions or operational improvements.
Established companies that invest in startups to gain access to innovative technologies or potential synergies. These investors often focus on strategic partnerships rather than just financial returns.
Organizations that provide funding, mentorship, and resources to early-stage startups. In return, they often take a small equity stake while helping founders refine their product and go-to-market strategy.
Platforms allow startups to raise funds from a large number of individual investors, often in small amounts. This method can also help gauge market interest and build an early customer base.
Investment management firms for wealthy families, often invest in startups as part of a diversified portfolio. Family offices are known for offering long-term capital with fewer strings attached.
Financial institutions offering loans or credit lines to startups with proven revenue models. These are suitable for startups looking for funding without giving up equity.
Groups of individual investors pooling resources to back startups. Syndicates allow startups to access a broader network of expertise and capital while dealing with a single lead investor.
Public funds are available to startups in specific sectors or regions. These grants often come with minimal strings attached and can provide a financial cushion without diluting ownership.
Each type of investor brings unique strengths to the table, so SaaS startups should align their funding strategy with their stage of growth, goals, and the type of support they require beyond capital. You also need to know the tips and tricks to attract investors to your business. We gathered the most usual ways to attract funds to your startup:
Clearly articulate the problem your SaaS solution addresses and how it provides a unique, scalable, and long-term value to customers. For technical execution, many startups find it crucial to hire Node.js developers who can build efficient, scalable backend systems to support their solutions. Investors are drawn to startups that solve pressing problems in innovative ways, especially in niche or underserved markets. Use metrics like customer acquisition cost (CAC), churn rate, and lifetime value (LTV) to demonstrate traction and growth potential.
Investors want to see a clear plan for acquiring and retaining customers. Highlight your marketing channels, sales processes, and competitive positioning. Leveraging IT outstaffing services can also demonstrate your ability to scale your team efficiently and adapt to evolving technical needs. Be ready to explain how your strategy scales with funding and how it adapts to market trends. A well-thought-out roadmap with achievable milestones builds confidence in your ability to execute.
Start networking with potential investors early to build trust and credibility. Attend industry events, join accelerator programs, or connect via professional platforms like LinkedIn. Highlighting strategic initiatives, such as software development outsourcing to accelerate product creation and reduce costs, can further demonstrate your resourcefulness and readiness for growth. Keeping investors updated on your progress through periodic emails or reports demonstrates transparency and consistency, making them more likely to back you when you’re ready to raise capital.
Each type of investor brings unique strengths to the table, so SaaS startups should align their funding strategy with their stage of growth, goals, and the type of support they require beyond capital. You also need to know the tips and tricks to attract investors to your business. We gathered the most usual ways to attract funds to your startup:
Clearly articulate the problem your SaaS solution addresses and how it provides a unique, scalable, and long-term value to customers. For technical execution, many startups find it crucial to hire Node.js developers who can build efficient, scalable backend systems to support their solutions. Investors are drawn to startups that solve pressing problems in innovative ways, especially in niche or underserved markets. Use metrics like customer acquisition cost (CAC), churn rate, and lifetime value (LTV) to demonstrate traction and growth potential.
Investors want to see a clear plan for acquiring and retaining customers. Highlight your marketing channels, sales processes, and competitive positioning. Leveraging IT outstaffing services can also demonstrate your ability to scale your team efficiently and adapt to evolving technical needs. Be ready to explain how your strategy scales with funding and how it adapts to market trends. A well-thought-out roadmap with achievable milestones builds confidence in your ability to execute.
Start networking with potential investors early to build trust and credibility. Attend industry events, join accelerator programs, or connect via professional platforms like LinkedIn. Highlighting strategic initiatives, such as software development outsourcing to accelerate product creation and reduce costs, can further demonstrate your resourcefulness and readiness for growth. Keeping investors updated on your progress through periodic emails or reports demonstrates transparency and consistency, making them more likely to back you when you’re ready to raise capital.
One of the primary challenges SaaS startups face in scaling is managing the infrastructure to support a growing user base. As the customer base expands, startups must ensure their platforms can handle increased traffic, data storage, and processing demands without compromising performance.
Failure to do so can result in downtime, slower response times, or security vulnerabilities, all of which can erode customer trust and satisfaction. For many startups, understanding how to hire remote developers can be a game-changer in building a scalable infrastructure while optimizing resources. Scaling infrastructure often requires significant investment in cloud services, DevOps expertise, and system architecture optimization, which can strain resources, particularly for early-stage startups.
Another significant issue is maintaining a high level of customer support and user experience during rapid growth. With a larger user base, the volume of support tickets, feature requests, and customer inquiries grows exponentially.
For many startups, learning how to outsource software development can be a strategic way to scale efficiently while addressing these growing demands. Startups must invest in scaling their customer success teams, implementing self-service tools, and refining onboarding processes to ensure that users continue to have a seamless experience.
Without these measures, customer churn can increase, and word-of-mouth referrals — which are critical to SaaS growth — can decline, stunting the company's ability to scale effectively. Balancing growth with consistent service delivery is a delicate yet essential task for any SaaS startup aiming for long-term success.
A SaaS that faced scalability challenges was AirBnB. Mere months after the Covid-19 pandemic caused its bookings to drop over 70% and cut in half its valuation, the company has pulled off a dramatic recovery and is headed toward an IPO with an expected valuation of $30 billion.
When creating a startup you should also know what legal requirements exist for the industry you plan to work in. For instance, if you plan to build your product in healthcare, you need to align your software with HIPPAA and GDPR if you plan to work internationally. There are specifics for every industry, that`s why you need to hire a legal expert before you hire dedicated developers who will help you to orient in your field.
For all of the businesses, there are registration requirements, so you need to decide the form of organization like LLC or FLC. If you plan to work on your own, you can be self-employed, if you plan to create a business with someone, discuss your legal responsibilities together. If your project involves building dynamic user interfaces, knowing when to hire React.js developers can be a key factor in ensuring success. Also, consult a legal practitioner to navigate the challenges that may occur based on the form of organization you choose.
To ensure the security of your product, you should look into blockchain and optimized AI solutions that will dynamically update your security features to ensure that data leaks or other unpleasant security breaches will not happen.
Knowing how to find a web developer with expertise in these technologies can significantly enhance your product's security architecture. Blockchain security is a comprehensive risk management system for a blockchain network. It uses cybersecurity frameworks, assurance services, and best practices to reduce risks against attacks and fraud.
One of the most popular SaaS products that use AI is AirBnB — we already talked about it in this article. They use one of the most flexible AI solutions for businesses is AI Smart Pricing.
AI Smart Pricing is the application of artificial intelligence and machine learning technologies to set and adjust prices dynamically based on real-time data and market conditions. Partnering with an AI software development company can help businesses implement these advanced pricing systems effectively and tailor them to specific market needs. Unlike traditional pricing strategies, which rely on fixed price points or manual adjustments, AI Smart Pricing analyzes vast datasets to optimize pricing decisions.
These datasets may include customer behavior, market demand, competitor pricing, historical sales trends, and even external factors like seasonality or economic conditions. This approach helps businesses maximize revenue, enhance profitability, and stay competitive in fast-changing markets.
One key benefit of AI Smart Pricing is its ability to personalize pricing at scale. By analyzing individual customer preferences and purchasing behavior, AI systems can offer tailored prices or discounts that resonate with specific segments, increasing the likelihood of conversion.
Additionally, AI can predict demand fluctuations and identify price elasticity, enabling businesses to adjust prices proactively. To implement these sophisticated systems, many companies choose to hire Java developers who can build robust backend solutions to support AI-driven pricing mechanisms.
For instance, during periods of high demand, prices may be increased to capitalize on market conditions, while in slower periods, discounts can be strategically introduced to stimulate sales. To implement and manage these dynamic strategies effectively, many companies turn to staff augmentation services to scale their teams with specialized expertise as needed. This level of precision not only enhances profitability but also improves the overall customer experience by aligning prices with perceived value.
When creating a SaaS, you should consider implementing a subscription model. There are many SaaS products to function this way and they report a stable retention rate of the customers. To streamline development and reduce costs, many companies turn to software development outsourcing to build and refine their subscription-based platforms. Users receive a balanced solution that functions as they expect, the product proves its worth and the user makes an emotional decision to continue using it and pay for the subscription. It creates an association between paying for the service and receiving great results.
You can also implement something like a free trial period, allowing users to get used to your product and try everything they want about it. As a result, the customers become loyal due to the space for decision-making regarding paying a subscription. This way you receive a loyal user base without creating some complex promo or investing tones in marketing.
Expanding into global markets presents tremendous opportunities for SaaS companies, but it also requires a thoughtful approach to localization. For example, many companies choose to hire Angular developers to create dynamic, user-friendly interfaces that cater to diverse audiences. Localization goes beyond language translation — it involves tailoring the product, user interface, customer support, and marketing materials to meet the cultural, regulatory, and operational needs of specific regions.
For example, payment methods, compliance with local data privacy laws, and adapting to regional workflows are crucial for creating a seamless user experience. By addressing these nuances, SaaS companies can build trust with international customers and improve adoption rates in diverse markets.
When entering emerging markets, having a strategic plan is essential to navigate unique challenges and tap into growth potential. Incorporating product validation early in the process ensures that your solutions align with market demands and customer expectations. Understanding the market's infrastructure, such as internet reliability and mobile device usage, is vital for designing accessible and lightweight solutions.
Offering flexible pricing models, such as tiered or freemium plans, can attract cost-sensitive users. Building partnerships with local businesses or resellers can also ease entry by leveraging existing networks and cultural expertise. These strategies enable SaaS companies to establish a strong presence in emerging markets while addressing barriers that may otherwise hinder success.
Here are some of the products we built as a SaaS and stories about them.
Obimy is an app that unites users with their loved ones no matter how far away they are from each other. The app serves to recreate real-life interactions like kisses, hugs, and small pinches to let those who are important to you know that you remember them.
We have involved 20 specialists in the project, including mobile app developers, designers, backend developers, a project manager, a product manager, and a PM lead. We wanted to bring this app to life as our client wanted it.
The app outscored Tinder, Netflix, and Pinterest in 2022 and received recognition from Forbes. In September 2024 Obimy has 5 million users and 10 million downloads across Android and IOS.
ShredSpots is not just an app, it was created from a dream to spread the comfortable skating experience among those who practice skating sports. ShredSpots is now a community with 200k+ skaters and 100k+ skating spots.
It allows real-time data flow from users: ratings of skating spots, their difficulty, and accessibility based on your level.
We have involved 11 specialists in the project, including Flutter developers, designers, QA specialists, and a project manager to ensure the thoughtful development process.
We have been working closely with our client to identify the target audience’s needs and make the dream about this app come true.
The app is up and running, and we are happy with all the reviews and feedback from our client. We are still working on the app and provide ongoing support to deliver the best possible result.
This app automatically scans your photo library, detects faces, recognizes friends, and shares your treasured pics so you can relive experiences together.
We're passionate about connecting people through shared memories. Our journey began with a simple idea: to create a platform that makes it easy for friends and family to stay connected through the magic of photos.
First and foremost, you can check out our guide on how to start a tech startup. We discussed 10 of the necessary steps there. But overall, starting a SaaS startup differs only in the way that you need to find a great tech team who will create a cloud infrastructure for you, this means creating all documents, registering the startup, and building all of the necessary IT solutions. But let`s discuss some hints that may help you create your own startup.
You may want to start with identifying the niche you want to operate in. As we talked before, each niche has its own risks and limitations. One field has more perspective than the other and you need to decide the trajectory of your business that would haunt you for years, so make the right decision at the start.
Engaging a fractional CTO can also provide valuable technical guidance during this critical phase, helping to align your product vision with technological feasibility. Make sure to consult a business analyst who can tell you the possible gaps in the market.
This specialist may also be useful in identifying your target audience. Or you can hire a marketing manager. Understanding the people who will buy your product is crucial to ensure your long-term success in the future.
An MVP, or Minimum Viable Product, is a streamlined version of your product that includes just enough features to allow users to test its functionality and provide meaningful feedback. It’s an essential tool for validating product hypotheses and refining your offering based on real-world insights.
At Empat, we specialize in full-circle MVP development services, helping you bring your vision to life. Our team designs MVPs that serve as the foundation for your product, starting with detailed wireframes that let you test user experiences, optimize pathways, and gather critical data from your target audience.
Developing an MVP is a vital step for any tech-focused business, and Empat supports this journey with a variety of wireframe options based on your needs. As part of our comprehensive startup product development services, we help refine your concept into a functional prototype that aligns with market demands. Whether it’s app wireframes, website wireframes, or custom designs based on your unique product, our approach ensures your MVP is ready to collect feedback, conduct tests, and attract the attention of investors or sponsors
An MVP not only validates your concept but also positions you to secure grants and funding, paving the way for future success. With Empat’s expertise, your MVP becomes more than a prototype—it’s a launchpad for growth.
When choosing the right business model for your SaaS startup, it’s crucial to compare the strengths and challenges of subscription, freemium, and hybrid approaches. Subscription models, where customers pay recurring fees, offer predictable revenue and customer loyalty, making them ideal for tools used regularly, such as CRM or project management software.
Freemium models, which provide a free version with limited features, are excellent for attracting a broad user base and converting some to paid plans over time, though monetizing free users can be a challenge. For businesses navigating these complexities, leveraging startup development services can help design and implement effective monetization strategies. Hybrid models combine elements of both, offering flexibility to cater to diverse customer needs, but require careful management of pricing tiers and customer segmentation.
To select the most profitable model, start by understanding your target audience’s preferences, usage behaviors, and willingness to pay. Match your product’s complexity and frequency of use to the model; daily-use tools often succeed with subscriptions, while freemium works well for products targeting mass-market users.
Also, consider your growth stage — freemium models may drive rapid user acquisition for early-stage startups, while subscription models are better for steady, scalable revenue. A hybrid approach can balance these goals, making it suitable for startups aiming to serve a wide audience with varied needs. By aligning your model with your product and financial objectives, you can set the foundation for sustainable growth.
As we look beyond 2025, the SaaS landscape is poised for significant transformation. Advancements in technology, evolving customer expectations, and emerging market opportunities are driving innovation at an unprecedented pace. SaaS startups will have to be as agile as it get to adapt and evolve together with the users and ever-evolving market.
Generative AI and machine learning are set to play a pivotal role in the evolution of SaaS solutions. These technologies will enable startups to offer hyper-personalized experiences, predictive analytics, and autonomous decision-making capabilities, reshaping how businesses operate and interact with software.
For instance, generative AI will empower SaaS tools to create content, design workflows, or even optimize coding processes with minimal human input, enhancing productivity and reducing costs. This integration of intelligent features will become a standard expectation for users, pushing startups to innovate continuously.
At the same time, the expansion of SaaS into underserved industries will unlock new growth avenues. For startups looking to capitalize on these opportunities, understanding how to hire developers for a startup is crucial to building tailored solutions that meet industry-specific needs. Sectors like agriculture, manufacturing, and non-profits, which have traditionally lagged in adopting digital solutions, are beginning to embrace SaaS tools tailored to their unique needs.
Startups that address these markets with industry-specific offerings — such as farm management software, supply chain optimization tools, or donor management platforms — will have opportunities to establish strong footholds. By combining technological advancements with sector-focused strategies, SaaS startups can lead the way into a future of boundless innovation and impact.
The future of SaaS startups holds impressive potential, with opportunities driven by technological advancements, emerging market needs, and innovative business models. Building a successful SaaS company requires a clear understanding of your target audience, a strong product-market fit, and the agility to adapt to changing demands.
From developing a robust MVP to selecting the right business model and navigating scalability challenges, every step plays a vital role in laying the foundation for sustainable growth. SaaS startups that embrace innovation, prioritize customer-centric solutions, and focus on expanding into underserved industries are well-positioned to thrive in the competitive landscape of 2025 and beyond.
If you're ready to take the first step toward creating your SaaS startup, contact us, and let’s make it happen! With our expertise in development, adaptable strategies, and commitment to your vision, we’ll help turn your SaaS idea into a thriving business.
What is a SaaS startup?
Software as a Service or SaaS is a cloud delivery model that offers customers access to a fully-supported software application through an Internet connection. The cloud service provider is responsible for supporting all aspects of the application with the exception of user data.
What is the 3 3 2 2 2 rule of SaaS?
The rule of thumb for growth rate expectations at a successful SaaS company being managed for aggressive growth is 3, 3, 2, 2, 2: starting from a material baseline (e.g., over $1 million in annual recurring revenue [ARR]), the business needs to triple annual revenues for two consecutive years and then double them for three consecutive years. A funded SaaS business that consistently grows by 20% per year early in its life is likely a failure in the eyes of its investors.
How do I start my own SaaS?
Contact us and let`s chat about your startup future. Or, you can read our guide and decide what you want to do with your business and ideas. It`s up to you.
Does Saas make money?
As for a SaaS revenue model, it is a way in which the SaaS vendor (a development company that created a specific SaaS solution) gets profit from providing its cloud-based services to the users.
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