A founder spends six months building a product. The interface is clean. The onboarding feels intuitive. The feature set is carefully considered. Every edge case has been anticipated. Every pixel is aligned. When launch day finally arrives, there is a quiet sense of pride. This time, it feels different. This time, it should work.
The product goes live. A few signups trickle in. Friends leave supportive comments. There is polite encouragement on social media. And then the activity slows. Days pass. The dashboard stays mostly unchanged. No surge of paying customers. No steady climb in recurring revenue. Just silence.
The product isn’t broken. It works exactly as intended. But the market does not respond with the enthusiasm the founder imagined. And in that quiet gap between effort and traction, confusion sets in.
This story feels personal. But it is not rare.
The 90% Reality
Over the years, we’ve covered the sobering statistics behind startup failure — from structural missteps to the harsh economics of premature scaling. But understanding why startups collapse is only half the conversation. The more important question is what founders should do differently.
The data itself is not ambiguous.
In 2011, the Startup Genome Report analyzed data from more than 3,200 high-growth technology startups and published its findings in a 67-page report coauthored by researchers affiliated with UC Berkeley and Stanford. The conclusion was sobering: over 90% of startups fail, often not because of competition, but because of premature scaling.
“More than 90% of startups fail, due primarily to self-destruction rather than competition. For the less than 10% of startups that do succeed, most encounter several near death experiences along the way.”
Eight years later, updated findings from the Startup Genome Project reinforced the same pattern. The 2019 report again showed that nine out of ten startups fail, with some analyses suggesting failure rates as high as 11 out of 12.
Government data reflects similar fragility. According to the U.S. Bureau of Labor Statistics, roughly 20% of new businesses fail within their first year, and the percentage rises significantly over time.
SaaS companies operate within this same ecosystem. The majority never reach a meaningful scale. Many never achieve sustained product–market fit. Many quietly shut down after months or years of effort.
The statistic is not meant to discourage founders.
It is meant to clarify something deeper.
The issue is rarely talent.
The issue is sequencing.
The Real Problem Isn’t SaaS
SaaS as a model is powerful. Recurring revenue compounds. Software scales elegantly. Margins can be extraordinary. But scale is an amplifier. It multiplies whatever already exists — clarity or confusion, demand or indifference.
Many founders attempt to scale insight they do not yet possess.
They optimize for leverage before they have earned understanding. They build products in isolation, guided by intuition or personal frustration, and only later attempt to discover whether a real, paying market exists. Building feels productive. It is tangible. It aligns with their strengths. But building is only one of the factors that make a business succeed.
The harder work is less visible. It requires conversations. It requires hearing objections. It requires watching how buyers make decisions and what they truly value enough to pay for. It requires understanding distribution — how attention is earned and sustained. It requires proximity to real problems.
Software does not create that understanding. It assumes it.
The Sequencing Error
This is where many founders stall. They add features instead of conducting conversations. They refine interfaces rather than positioning. When traction fails to appear, they assume the idea was wrong and begin again, repeating the cycle. Build, launch, silence. Build, launch, silence.
The pattern is not a failure of ambition. It is a failure of order.
There is another path, one that sounds less glamorous at first but often produces stronger foundations.
Instead of beginning with scale, begin with proximity. Instead of building for a market you hope exists, work directly with a small number of customers who clearly experience the problem. Solve it manually. Observe what they are willing to pay for. Listen to how they describe their pain. Notice which requests repeat.
Services First. Product Second.
“Services First, Product Second” is a sequencing strategy. Instead of starting with software, founders begin by solving real client problems directly. They earn proximity to the pain before attempting to automate it.
By working closely with customers, founders build trust, uncover patterns, and validate demand in real time. Revenue arrives early. Feedback is immediate. Insight compounds. Only after the problem is deeply understood does the product take shape.
The product is no longer speculative. It is informed.
Core Principles of the Model
Validation Through Service
Working hands-on with customers exposes real pain points — not imagined ones. This reduces the risk of building a product the market does not value.
Audience Before Automation
Serving clients or building an engaged audience creates built-in distribution. When the product launches, it launches into trust — not silence.
Monetize Expertise First
Services generate early cash flow while strengthening credibility. Founders get paid to learn.
Productize What Repeats
Once patterns emerge and delivery becomes standardized, the solution can be structured into a scalable product.
This approach is not anti-SaaS. It is anti-premature SaaS. It prioritizes understanding before amplification — and dramatically increases the odds that when a product is finally launched, it lands.
Services as an Intelligence Engine
This stage is often dismissed because it resembles service work. It does not promise immediate leverage. It does not produce impressive screenshots. But it compresses the feedback loop. It replaces speculation with evidence. It reveals where real budgets exist and where interest is merely polite.
In that environment, insight compounds quickly. Patterns emerge. Certain requests surface again and again. A small internal tool built to streamline delivery becomes valuable beyond its original purpose. Clients begin asking whether they can access it themselves. What began as a service starts to resemble a product — not because the founder brainstormed features in isolation, but because repeated demand pointed clearly in one direction.
Services and products are not opposites. They are stages.
When SaaS Actually Makes Sense
SaaS built after this stage is different. It is not a guess. It is the natural extension of validated pain. The founder understands the buyer deeply, not abstractly. They have seen budgets approved. They have heard objections voiced in real time. They know which features matter and which do not.
SaaS makes sense when insight precedes scale. When the distribution is understood. When the founder has proximity to real demand. When the timeline and runway are realistic. Without that foundation, scale simply magnifies uncertainty.
Software has never been easier to build. With AI coding assistants accelerating development and lowering technical barriers, more founders can ship products faster than ever before. But when building becomes easier, building stops being the advantage.
Distribution becomes the moat.
In fact, we’ve previously explored this shift in detail, arguing that founders should stop building SaaS without first securing an audience or distribution channel. The principle remains the same: software amplifies reach, but it does not create it.
“But Services Don’t Scale”
At this point, many founders hesitate. They’ve been told for years that trading time for money is a trap. That leverage is everything. That SaaS represents scale, while services represent limitation.
That framing sounds sophisticated. It is also incomplete.
A business model with extreme theoretical leverage and a very low probability of success is not necessarily superior to one with moderate leverage and a much higher probability of success. Expected value matters. Probability matters. Time matters.
Services do scale — just differently. They scale insight. They scale relationships. They scale positioning. They generate cash flow early. They teach founders how buyers think. They surface patterns that can later be automated.
Most importantly, they increase the likelihood that when the scale finally arrives, it rests on something real.
Founders often optimize for leverage before they have anything worth leveraging.
In reality, leverage should be earned.
The Goal Was Never SaaS
The goal was never SaaS. The goal was freedom — financial freedom, time freedom, creative freedom. Software can be a powerful vehicle for that freedom, but only when built on earned insight. Without that foundation, scale simply amplifies confusion.
Over 90% of SaaS projects fail not because founders cannot build, but because they attempt to scale understanding they have not yet developed. Reverse the order, and the probability shifts. Start with proximity. Earn clarity. Then build what the market has already proven it wants.
A Better Order of Operations
If most SaaS projects fail because founders try to scale insight too early, then the solution is not more hustle. It is better sequencing.
A simple framework looks like this:
1. Proximity
Start close to real problems. Talk to people. Observe workflows. Understand pain in context.
2. Service
Solve the problem manually for a small number of customers. Charge for it. Learn what they truly value.
3. Pattern Recognition
Notice what repeats. Identify which requests surface consistently. Pay attention to what customers prioritize with money.
4. Productization
Turn repeated solutions into structured systems. Automate what is proven. Remove what is unnecessary.
5. Scale
Only after demand is validated and positioning is clear does SaaS become an amplifier instead of a gamble.
Most founders start at Step 5.
Very few begin at Step 1.
The difference in outcomes is rarely talent. It is timing.
A Founder Who Reversed the Order
Consider a founder working in logistics technology. Instead of immediately building a SaaS platform to “optimize fleet management,” she begins by consulting for three mid-sized regional shipping companies. She audits their dispatch processes, attends planning meetings, and identifies where time is lost.
Within weeks, she notices something consistent: each company struggles with a narrow but expensive coordination problem between warehouse intake and route planning. It isn’t flashy. It doesn’t sound like a startup pitch. But it costs them money every day.
She builds a small internal tool to solve that one bottleneck. At first, it’s just for her consulting clients. They pay for her expertise, not the software. But the tool saves them measurable time. They ask for access. They ask if their operations managers can log in directly.
Only then does the product begin to take shape.
When she eventually launches it as SaaS, she already knows:
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Who the buyer is
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What metric matters
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What feature is non-negotiable
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What objections will surface
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What price range is acceptable
She is not guessing. She is formalizing something the market already validated.
The SaaS is no longer speculative.
It is inevitable.
Before You Build Your Next SaaS
The goal was never SaaS. The goal was freedom — financial freedom, time freedom, creative freedom. Software can be a powerful vehicle for that freedom, but only when built on earned insight. Without that foundation, scale amplifies confusion rather than clarity.
Over 90% of SaaS projects fail not because founders cannot build, but because they attempt to scale understanding they have not yet developed. Reverse the order, and the probability shifts. Start with proximity. Earn clarity. Then build what the market has already proven it wants.
Before you open your laptop to begin your next SaaS project, pause and ask yourself a few hard questions:
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Have I spoken directly to the people who would pay for this?
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Have I watched how they solve this problem today?
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Have I seen real budgets committed to solving it?
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Have I gained insight—or am I hoping to discover it after launch?
If the answers are unclear, the problem may not be your idea. It may be your sequence.
Start closer to the pain. Work with it directly. Let patterns emerge. When the same solution surfaces repeatedly, software will no longer feel like a gamble.
It will feel like the obvious next step.
The “Services First, Product Second” approach has been discussed by several experienced operators and founders in recent years. One thoughtful perspective comes from Bgo, a former NASA and Fortune 500 developer who later built a successful services-based firm. Readers interested in exploring his full argument can watch his video for additional context.
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