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Can a Solutions Startup Scale?

10 points by lucasgonze ↗ HN
Our AI startup has a complex product which usually requires us to assemble a slightly customized version for each customer. Using https://hackernoon.com/products-and-solutions-do-you-know-the-difference-4ff9169cefe3 as a definition, that makes us a solutions company. For the purposes of argument just accept that this is true.

We have gone through seed funding and then a successful bridge round. The next hurdle is the A round. At that stage, investors will be even tougher nuts than usual. I'm worried that they won't believe a solutions company can scale up.

We need to understand how investors think about solutions companies. What metrics do they apply? Are there standards that we should be looking to cover?

3 comments

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PaulHoule
It seemed to me that many of the darlings of investors in the last few years in the data space were "solutions" companies even if they claimed not to be. That is, Mongodb, Cloudera, Hortonworks, Continuum Analytics, etc.

These companies generally had an open source product and then either support contracts (e.g. solution) or proprietary extensions frequently of dubious if not negative value. (e.g. in the devops age, a web user interface slows down how fast you can make a Hadoop cluster, it doesn't speed it up)

Many of these companies have had a reckoning, others still fly high.

In A.I. or anything else that is really new you will have to give customers special help if they are going to succeed with your product, if anything I would point investors to all of the self-service A.I. products out there that are a complete joke (e.g. IBM Watson text recognition, BERT if you care if your results are useful, etc.)

Here is a buzzword I like:

https://en.wikipedia.org/wiki/Software_product_line

You can make a model of a customer engagement that includes some revenue from the product license and some from the "setup" part, probably this is also some maintenance work you need to do too.

You can ask questions like: can you get the setup effort down over time since you do similar things for different customers, build a toolbox, etc? can you or a customer hire out the setup work to a third party?

I know some people who have interesting ideas in the "low code" space that are partnering with a solutions integrator, which is a really great idea.

codegeek
Look at Salesforce. They have lite versions etc but they make real money by customizing for enterprises. So I would say why not. I am not an investor but I run a SAAS product that gets customized for clients (not always but for enterprise). Great revenue maker. Once you customize and if it really solves their problem, you also have decent recurring revenue locked in.

So use this as a strength and not weakness in front of investors. You are not an agency who builds whatever for anybody. Those don't scale as they are project oriented. What you have is a product that is customizable. I see dollars if you find the right clients.

lucasgonze
Thanks for comments on solutions companies and on Salesforce, codegeek and PaulHoule. You understand the situation perfectly.

AI is early and customers need handholding because they don't really understand it and don't have in-house competence. That we train the models for most customers is critical to their doing any AI at all.

Amazon et al are trying to mash these customers into a pure-software box, and it just won't work at this stage. So, yeah, over time we'll automate the training and setup and get it down to a minimum of human attention, but the important thing is that this is our problem, not the customer's.