Startups For the Rest of Us
Episode 735 | The 8 Levels of SaaS Platform Risk (A Rob Solo Adventure)
Tue, 15 Oct 2024
In episode 735, join Rob Walling for a solo adventure where he categorizes the different levels of SaaS platform risk. He introduces a framework with three key factors: Replacement, Customer Concentration, and Lead Flow. Rob then defines eight levels of risk according to these factors and other vulnerabilities such as relying on open source – a hot topic with recent news about WordPress, WP Engine, and Automattic. Episode Sponsor: Hiring senior developers can really move the needle in your business, but if you bring on the wrong person, you can quickly burn through your runway. If you need help finding a vetted, senior, results-oriented developer, you should reach out to today’s sponsor, Lemon.io. For years, they’ve been helping our audience find high quality, global talent at competitive rates, and they can help you too. Longtime listener Chaz Yoon, hired a senior developer from Lemon.io and said his hire ”definitely knew his stuff, provided appropriate feedback and pushback, and had great communication, including very fluent English. He really exceeded my expectations.” Chaz said he’d definitely use Lemon.io again when he’s looking for a senior level engineer. To learn more and get a 15% discount on your first four weeks of working with a developer at lemon.io/startups. Topics we cover: 2:32 – Are replacements available for this platform? 4:56 – How concentrated are your customers on this platform? 5:31 – What is your lead or customer flow? 8:54 – Level 1: almost no platform risk 10:04 – Level 2: reliant on a commoditized platform 11:49 – Level 3: using large cloud providers like AWS 15:33 – Level 4: deeply tied to open source software like WordPress 18:11 – Level 5: high switching costs, but replacements exist like in no-code 20:00 – Level 6: 100% lead flow risk 21:44 – Level 7: a friendly app ecosystem 23:24 – Level 8: aggressive platforms, few replacements, customer concentration Links from the Show: Get Tickets for MicroConf US 2025, New Orleans TinySeed Rob Walling (@robwalling) | X Ask a Question on SFTROU How to find and validate business ideas from 75+ SaaS Marketplaces If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you! Subscribe & Review: iTunes | Spotify
Full Episode
Welcome back to another episode of Startups for the Rest of Us. I am your host, Rob Walling. In this episode, I'm going to talk about the eight levels of platform risk, as well as the three factors that contribute to platform risk. And I'm not just going to talk about the traditional, I have a Shopify app, or heaven forbid, you're WordPress web host this week.
But I'm going to look at platform risk from a sense of any type of reliance on an external platform. So if you use SendGrid to send email, how does that factor in? If you use AWS for your hosting or you use an open source package like WordPress. And honestly, this is a framework I came up with a few months ago and I jotted it down in a Trello board I keep for podcast episode topics.
And I was just going to pull it out at some point, probably put it in a book, I'm sure talk about it on the podcast. And then the WordPress WP Engine kerfuffle flared up. By now that's, you know, a couple weeks old. But it did remind me that I had this and had never really done a full refinement on it.
And so this podcast episode is a way for me to kind of bring that out and talk through my thoughts of platform risk as I see it. Especially it's... Probably any startup, but realistically, there's a little bit of a B2B SaaS bent to it, right? Because that's the 191 investments I've made. And so I've seen different forms of platform risk blindside companies in different ways.
And that is the basis for today's episode. Before I dive into that, tickets for MicroConf New Orleans. And of course, I will be there in New Orleans. And if you want to get together with about 250 speakers, of your favorite bootstrapped founder friends, head to microconf.com slash US. The tickets right now are the least expensive they will ever be.
And they will go up in price, I don't know, in a few weeks or a month or whatever. In addition, we are going to sell out. We sold out our Europe event. I believe we sold out Atlanta last April. So if you want to get a ticket, there is no reason to wait. microconf.com slash US. Let's dive in to platform risk. So I'm going to start with these three factors that contribute or define platform risk.
And each of these you might think of on a scale, you know, whether it's one to 10 or one to 100. there can be a small amount of risk for a specific factor or a large amount. So the first one I think of is a replacement.
So if you are on a platform, whether that is using SendGrid to send email, whether it is hosting on AWS, whether you built a no-code app in Airtable or Bubble, whether you are a Heroku app or Shopify app, is a replacement available for this platform? And how hard is it to switch? And is the pricing approximately the same? So there are more questions than that, but those are kind of the high level.
So it's replacement. So we might think of, well, what is an easy replacement where it's available, it's not that hard to switch, and it's a commodity, so the pricing is the same? Well, that is something like, I would say, SendGrid, Postmark, Mandrel, Mailgun. The switching cost is real. It is a thing. But it's connecting to a new API. And it depends on how deeply you're integrated, obviously.
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