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The idea that a concept on paper is worth investing in is a Bay Area dream.
By the nature of their business models, SaaS companies struggle to get off the ground without capital. Silicon Valley has developed a typical roadmap for entrepreneurs to build a product with angel investments and then turn to venture capitalists for the funds needed to sell it. Yet in Miami, where tech investors are few and far between, there is an emerging alternative path to becoming a scalable SaaS company- and it is not always premeditated.
While many companies have been able to build successful SaaS businesses from the get-go, other entrepreneurs start tech-enabled consultancies that are less capital intensive. After seeing similar problems among their client base, they end up developing consumer-tested platforms that can spin-off and scale into a SaaS business. This path provides an opportunity for angel investors to source and fund companies that have already developed a revenue-generating, consumer-tested product. However, the pivot from professional service to SaaS creates a variety of new challenges for founders.
There are a number of companies in Endeavor Miami’s portfolio that have made the SaaS pivot, or are in the process of doing so. The main questions they bring to the Endeavor mentor network revolve around how to shift away from their core business model without enduring a financial hit. EveryMundo, founded by Anton Diego in 2006, is one company that has leveraged Endeavor’s services to successfully transition to a software model.
Diego started the company as a one-man marketing consultant, providing customized search engine optimization, paid search management and analytics implementation services for multinational companies in the U.S. and Latin America. As a native Russian and Spanish speaker, Diego was aware of an opportunity for MNCs to increase their addressable market through multilingual search results. After gaining traction with a few large clients, Seth Cassel joined EveryMundo as president and took over business development.
By 2011, the two led successful consulting engagements with Aerolineas Argentinas and Etihad Airways, which snowballed into success. From 2010 to 2013, the team expanded to 22 people and revenue grew by 1,495%. While their services gained a reputation among airlines, they saw a greater opportunity to scale away from their tech-enabled consulting business.
“We knew a services business wasn’t our ultimate end-game,” Cassel said. We first thought we might develop web properties of our own, but serendipitously realized a SaaS model for the technology we had developed.”
After a meeting with Endeavor Miami mentor, Daniel Heise, founder of Scup, Cassel and Diego decided to take his advice and focus exclusively on their airline customer base. With steady income from the airlines, EveryMundo’s engineers launched airTRFX, a software that allows airlines to drive their own direct customer acquisition without having to work through online travel agencies or meta-search engines, such as Expedia and Kayak.
Heise illuminated a fundamental problem in the company’s transition: services and software businesses have diametrically opposed attitudes towards the customer. A service business is about striving for 100% customer satisfaction at all times. On the other hand, the software business is about achieving scale by offering a solution that solves many problems for lots of customers, without doing everything any one customer wants. Inevitably, this leads to moments of customer dissatisfaction.
“The meeting with Dani was incredibly transformational,” said Cassel. “In just two meetings, he completely changed our business’ vision and culture.”
Maintaining a highly specialized service business allowed EveryMundo to fuel its growth as a software company. However, the greatest challenge the new line of business has brought about is its change to corporate culture. To start, many of the team members working at the core of the service business had to completely change their approach to their customers as software started to take priority.
“We had to figure out how to evolve our legacy service busy into SaaS as well, at least partially, to better connect the two facets of the company,” said Cassel. To do so, he and Diego invested in their technology to make it flexible enough that it could be used in both lines of business. While both revenue streams exist, most of the growth has come from the software licensing.
From EveryMundo’s conception, its co-founders understood its potential, but knew they had to start small and build. “The idea that a concept on paper is worth investing in is a Bay Area dream,” said Cassel. Building the business in Miami, the two founders had to bootstrap it to arrive at its current success. Cassel calls this “the Miami hustle.”
This piece is the first in a series focused on the challenges that come with pivoting to a SaaS model. It was written by Zach Fredericks, an associate at Endeavor Miami.
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