The COVID-19 pandemic divided the software-as-a-service sector into two broad camps, each facing unique challenges, according to a Kanata industry expert. While some early stage companies saw their traditional markets evaporate virtually overnight, others had to learn how to manage explosive growth on the fly.
Leo Lax, the executive managing director at Kanata North SaaS accelerator L-SPARK, gave the example of a software firm that historically targeted hospitality clients and contrasted it against companies developing e-commerce or virtual communication tools.
“We have an entire segment of SaaS companies who are directly involved in the sectors that are being killed by this pandemic,” he says. “Alternatively, there are some experiencing unprecedented growth that a small team of 10 employees just can’t handle.”
“The Kanata North community is fortunate that our tech expertise is exactly what everybody needs right now: Telecom, communication and SaaS enterprise software.” – Leo Lex, managing director at L-SPARK
While major local players in the SaaS community such as Kinaxis and Shopify have seen the fallout from COVID-19 increase demand for their services, it can be a challenge for smaller startups to handle either a dramatic increase or decrease in demand for their services, Lax adds.
“If a company was expecting to (double) their growth in a year and (instead) reaches that in a month, how do they adapt to that?” he says.
Also fuelling the hardship in the SaaS startup community is the lack of funding for those trying to pivot or bring new products and services to market.
Angel investors play a critical role in funding startups. But faced with a murky economic outlook, many would-be investors have a reduced appetite for the risk associated with emerging companies, says Lax.
“We’re seeing our early stage entrepreneurs who are dreaming big and trying to figure out how they’re going to change the world putting those dreams on hold because there is no way for them to move forward,” he says.
Adapting for the future
Against that backdrop, however, Lax is optimistic that Kanata North’s SaaS community will continue to produce high-growth companies.
“The Kanata North community is fortunate that our tech expertise is exactly what everybody needs right now: Telecom, communication and SaaS enterprise software,” he says. “In many cases, they have the growth potential, they see the customer requirements, and are growing as fast as they can.”
While there may have been some challenges throughout the pandemic, Lax says the biggest lesson SaaS companies can take from this experience is the power of flexibility.
With no steady state in sight, it is nearly impossible for companies to plan appropriately for growth, he adds, so by focusing on the now, businesses will have a better idea of where they stand and how to adapt should things change – a critical business skill regardless of the economic outlook.
“In this environment, the companies that have that decisive approach, and are willing to implement changes in real time are going to come out of this thing much better than those who are going to wait and see,” says Lax. “In this new reality, there simply is no wait-and-see approach.”