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Dark software: a new model for SaaS and fintech
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- AbnAsia.org
- @steven_n_t
Many founders are realizing that the last decade's model for building SaaS and fintech products just doesn't work anymore. Stagnant or declining growth, high and rising CAC, declining LTV… all are symptoms of this breakdown.
Many founders are realizing that the last decade's model for building SaaS and fintech products just doesn't work anymore. Stagnant or declining growth, high and rising CAC, declining LTV… all are symptoms of this breakdown.
These dynamics require a new model, which is called dark software. It has three key points:
✅ a hyper-specialized ICP to maximize conversion and minimize CAC. The narrower an ICP is defined, the more effective marketing and cost effective marketing dollars will be. Compensating for this narrower focus requires…
✅ a full stack product offering to maximize LTV. This both compensates for and capitalizes on the narrower ICP focus: dark startups can sell more products to a narrower customer set rather than a narrow product to a wide set of customers. This means bundling multiple software and financial products, each of which were previously offered as point solutions by independent companies. Because these products span many areas and range in complexity, it'll be difficult to build all in house, requiring dark startups to…
✅ outsource the maximum amount of product to minimize fixed costs. Dark software will require much more product much sooner in a company's life. It'll be most economical for dark startups to act as a systems integrator of sorts for various third party providers of features. Much of today's infrastructure is outsourced, but this will be extended to individual features as well. More on this below.
Here's a hypothetical comparison of the old model versus dark software. A classic SaaS business would offer a point solution, say invoicing, to a broad set of companies and use cases, like SMBs. Nearly all of the product would be built in house, with a focus on making the core invoicing use case 10x better. It would be marketed through competitive channels on Google, Facebook, etc, targeting several broad ICPs that other traditional point solutions are competing for also.
On the other hand, a dark software company would start with a hyper-specialized use case, say small law firms in the US. Rather than start with a wedge product like invoicing, a dark software company would launch with multiple products on day one, like marketing tools, project management, time tracking, invoicing, payment acceptance, payroll, etc.
Nearly all those products would be integrations offered by third party vendors rather than built in house. This would require minimal product, design, and engineering headcount and reduce time to market. The dark software model is to offload entire, complex, and even user-facing features to third party, headless, and/or infrastructure providers and build much less de novo product in house. Instead, the focus of product development would be on seamless integration and a smooth, consistent experience across these various products.
Author
AiUTOMATING PEOPLE, ABN ASIA was founded by people with deep roots in academia, with work experience in the US, Holland, Hungary, Japan, South Korea, Singapore, and Vietnam. ABN Asia is where academia and technology meet opportunity. With our cutting-edge solutions and competent software development services, we're helping businesses level up and take on the global scene. Our commitment: Faster. Better. More reliable. In most cases: Cheaper as well.
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