Twitter is typically filled with all sorts of controversy. It’s the nature of the app.
The other day, a tweet popped up discussing how someone could sell a SaaS company for $50M+… The average is about 5.1x your ARR, meaning you’d need to rake in $10M/yr.
The whole basis of this SaaS controversy was rooted in cloning SaaS companies — which was the first line of the tweet.
Additionally, the author, “Entropy Chaser” has been known to throw up ridiculously controversial tweets in the past. And this was no exception.
Let’s break down this SaaS cloning strategy so you can decide whether or not this is how the market should work, or if it’s just plain imitation and forgery.
Table of Contents
How You Can Allegedly Create a SaaS Company Selling for $50M
Entropy Chaser’s philosophy behind business is profit-first. He suggests you validate your concept first before investing in any development or back-end optimization. That way, your all-in costs are around $400 for software, including marketing and a no-code tool.
He also repeatedly emphasizes that he’s never done this — implying that there might be legal implications for SaaS cloning. So, take this strategy with a grain of salt.
Validate Your Concept
The whole idea of finding a concept is based on doing competitor research. Entropy Chaser suggests that you find existing SaaS companies on websites such as acquire.com that have geographical limitations. For instance, finding a SaaS operating in the USA market and transferring their model into the German market.
Using Webflow and Bubble, you can build a tool replicating the features of the SaaS concept you aim for. Again, the goal here is to see if people want to use your product in your market. Following best practices such as a sleek design and working features (for demos) is what you should aim for.
Marketing
Once you’ve built the back end, Entropy Chaser suggests you begin your cold outreach campaign to your desired market. These are the tools he suggests:
- Apollo – Lead finder
- Instantly – Cold email automation
- Domains – Your website and the domains you send emails from
- Email cleaning tool – A tool that allows you to send mass emails without landing in spam
For pricing, he suggests using your competitors as models. Because you don’t have any data, you don’t know how your customer lifetime value and cost per acquisition will look. But your competitors might.
Then, he suggests using a three-part email sequence. While there aren’t specifics in this tweet, you can find information about cold emailing strategy all over the internet.
Once you’ve validated your concept, you can invest around $10k in custom development, and begin to scale. And if you’re wondering where he gets the $50M valuation number, here’s the math:
Is This SaaS Controversy Worth It?
While the strategy of cloning an existing SaaS product and targeting a different geographical market may seem financially lucrative, there are some important ethical considerations.
- This business method could be viewed as stealing or closely imitating another company’s intellectual property — also known as infringement. Even if done in a different market, it raises questions about properly crediting and compensating the creators of the original product and concept.
- SaaS cloning focused on short-term profits over innovation and problem-solving. Instead of coming up with an original idea to solve a problem, it replicates an existing solution. This could be seen as freeriding off the innovation of others without contributing new value.
- There are several risks associated with using intellectual property, such as reaching a certain amount of scale and getting hit with lawsuits. What if the original SaaS company decides to expand internationally and views cloning as copyright or trademark infringement? The legalities would need to be researched carefully before pursuing this type of business strategy.
The counterargument is that this type of business brings more solutions to more businesses looking to solve their problems or streamline processes. In any healthy capitalistic market, capitalism and competition lead to growth, innovation, and iteration. So…
The Final Verdict: You Decide About This SaaS Controversy
While the business strategy of cloning SaaS companies itself certainly lends itself to the grey or blackhat communities, there are some objective lessons to be learned. Running a profitable business from the get-go is the goal for many startups, yet it doesn’t always happen.
Part of that starts with keeping your operations lean and versatile, focusing the majority of your budget on marketing to obtain a positive ROI. Profit-first should be any company’s goal that’s not backed by venture capital.
This SaaS controversy itself stirred up quite the conversation in the indie development communities. So what do you think?
Are you for it, or against it?
Let us know in the comments below!
And, if you want to learn how to become a SaaS developer (the non-controversial way), use the steps we have outlined to get started.