Solving core problems for your SaaS ICP and moving up market with Malte Scholz @airfocus

saas.unbound is a podcast for and about founders who are working on scaling inspiring products that people love, brought to you by https://saas.group/, a serial acquirer of B2B SaaS companies.

In episode #19, Anna Nadeina talks with Malte, CEO and co-founder of airfocus, the first modular product management software.

Transitioning from Agency to Startup

Malte Scholz, the CEO and co-founder of airfocus, didn’t start his entrepreneurial journey with the goal of building a company. Instead, he began as a side project, driven by his frustration with the lack of effective product management tools. Malte founded an agency with a friend to fund the initial development of airfocus, a decision he describes as “very messy” given the demands of running both a services business and a product startup simultaneously.

After 18 months, Malte and his co-founder realized that this dual-track approach was not sustainable, and they decided to focus solely on airfocus. This transition from agency to startup was a crucial turning point, as Malte recognized his true passion lay in building and perfecting a product, rather than being dependent on client decisions in a services business.

Balancing Product-Led Growth and Sales

airfocus initially adopted a product-led growth (PLG) approach, putting the software in the hands of users and making it as simple as possible for them to sign up. However, as the company scaled, Malte recognized the need to balance this PLG strategy with a more sales-oriented motion to address the needs of larger, more complex customers.

Malte explains that the reality is that there is a certain segment of the market that is more financially attractive and requires more hands-on support, with greater complexity that cannot be easily handled through a self-serve model. While airfocus remains product-centric, they have gradually added a sales team and sales processes to cater to this segment.

Choosing Venture Capital over Bootstrapping

Malte and his co-founder initially bootstrapped airfocus, funding the early development from the profits of their agency work. However, they soon realized that the revenue they had generated would not be enough to sustain the growth they envisioned for the business.

Malte explains that they anticipated a larger market opportunity that would require a bigger team than they could afford through bootstrapping alone. This led them to pursue venture capital funding, raising $15 million from European VCs. While Malte acknowledges the pros and cons of taking on investors, he believes it was the right decision for airfocus, as the investors have been supportive and helpful in the company’s growth.

Product Development and Enterprise Readiness

As airfocus transitioned to serving larger, more complex customers, the product roadmap had to evolve to address the specific needs of this new market segment. Malte emphasizes the importance of finding the right balance on the roadmap, allocating resources to solving core customer problems, making incremental improvements, and building the necessary enterprise-grade features, such as single sign-on and advanced permissions.

Malte notes that this shift to the enterprise market was a gradual process, not an overnight transition. It required airfocus to carefully prioritize and balance the various demands on their product development efforts, ensuring that the core user experience remained strong while also addressing the security, compliance, and integration requirements of larger customers.

Killing Features and Making Product Improvements

Malte acknowledges that airfocus, like many companies, has been too hesitant to kill features in the past. He emphasizes the importance of regularly reviewing the success of existing features and being willing to retire those that are no longer serving the needs of customers.

Malte supports the idea that for every new feature launched, another had to be retired. This approach helps keep the product focused and streamlined. Malte also stresses the value of continuous improvement, not just new feature development, and trusting your instincts when something feels off, even if it can’t be easily measured.

Adding Sales Motion to the PLG Approach

Malte emphasizes that airfocus’s transition to a more sales-oriented approach was not a complete abandonment of their PLG roots. Rather, it was a pragmatic response to market signals and the needs of their evolving customer base.

While airfocus continues to leverage the benefits of PLG, such as providing value before capturing it, they have also built out a sales team and processes to better serve the more complex needs of their upper mid-market and lower enterprise customers. Malte acknowledges the challenges and mistakes they’ve made along the way but emphasizes the importance of being adaptable and finding the right balance between product-led and sales-led growth.

Importance of Positioning and Messaging

Malte considers positioning and messaging to be a critical responsibility of the founder, describing himself as more of a “Chief Product Marketing Officer” than a traditional CEO. He emphasizes the importance of being ruthlessly clear about who you are, what you do, and the specific problems you solve for customers.

Malte advises against the temptation to be overly visionary or fluffy on the company’s website, as customers care more about solving their immediate problems than long-term plans. He recommends a structured process of customer interviews and research to uncover the core problems and buying intent, which should then inform the positioning and messaging.

Founder’s Hack: Dedicated Thinking Time

Malte’s key founder’s hack is the practice of blocking off 2-3 hours per day to focus on conceptual thinking, writing, and planning, rather than being constantly reactive to email, Slack, and day-to-day project work. He emphasizes the importance of this dedicated thinking time, as it allows him to step back, create, and shape the direction of the business, rather than just chasing tasks.

Malte admits that finding the right balance and timing for this dedicated thinking time is an ongoing process, but believes it is a crucial habit for founders to develop in order to drive the strategic vision of the company forward.