Software as a service companies go through multiple different stages as the idea of them formulates into a product. With these phases of growth comes differing levels of maturity, organization and risk across the company. SaaS contracts and legal ops are no exception to this. As you develop your SaaS contracts at different growth stages will evolve to meet the needs of the business. Early on this is just closing a deal, later the focus shifts to risk reduction and ease of reporting at scale. It’s important to not let your legal ops processes lapse as contract management influences customer satisfaction. Let’s have a look at the differences in your contracting approach as you scale.
MVP and Pre-Seed SaaS Contracting
It’s the wild west out there. You’re building a product and trying to get someone, anyone to notice. Contracting is most probably the last thing on your mind until you are at the finish line for your first few sales and you attempt to throw a SaaS contract template into the negotiation mix.
This isn’t the worst approach, god know’s you have more things to worry about so that fact that you’ve pulled something together is impressive to say the least. The likely situation, if you’re selling to an enterprise customer, is that the customer will pressure you to use their terms and conditions. Is this the worst case scenario? No, but you should keep note of it as something to renegotiate.
Seed to Series A Contracting
As far as SaaS contracts at different growth stages goes, this stage is the foggiest. Seed to Series A stages of startups are tricky. On one hand you’ve taken on some serious money. You have investors that you need to report with reliable data. On the other hand you are still scrambling to define what your products are. You might still have some managed services sold. You have two gun sales people with perhaps a third on the boil. They treat the idea of ‘line items’ on a statement of work as suggested formatting and often paint outside the lines to close deals.
The difficultly is that you’re starting to get stuck with a lot of manual tracking work for contract data. You haven’t put parameters and guidelines down for the sale of your product and you’re having difficultly training new sales people. This is the stage that contract management software such as Contract Sent is designed for, to cut out the manual back and forth and give pipeline clarity.
It is also the stage that you need to start fighting the standarization fight. You need to start pushing back against customers on every change that they request. It’s time to start saying no to termination for convenience and starting to protect your IP.
You will likely have a legal resource, whether it be in house counsel or external counsel who can help you with contract negotiations and contract tracking.
Series B Contracting
Things are starting to get serious and so is the clean up for past sins. After a Series B you’re starting to look closely at areas you can not just scale but de-risk. From a scaling point of view contracting takes a new turn. You need to look at how you can change your processes to move from one or two hand fulls of contracts a month to fifty or a hundred. While on a de-risking point of view it’s about renegotiating those earlier customers onto more standard terms and conditions and putting guardrails on future contracts.
By this time you’ve likely worked out what your core product lines are. You’ve reduced the number of pricing experiments that you’re conducting and refined them to an art form. With this comes the ability to scale your legal operations. Integrating your CRM to push line items into contract templates with the ability to raise changes for approvals and strong reporting should be in place.
Series C and Above
At this stage your contracting should be a fairly well oiled machine. You’re likely to have strong processes in place and a well trained sales team. One of the likely things to happen when you get to this size is looking at acquiring smaller businesses to continue your growth. When this happens your business has the resources in place to track and negotiate contracts in an effective manner. You’re finally moving away from lack of resources and actually building a serious business.
Tools to Put in Place For SaaS Contracts at Different Growth Stages
As you grow, managing contracts becomes an increasingly complex task. Contracts are the foundation of all of your customer relationships. As such, it’s essential to have a robust contract tracking system in place.
In the early stages, a simple spreadsheet might suffice, but as the number of contracts increases, more sophisticated tools become necessary. Here’s a guide to some essential tools and strategies to track contract data as your startup grows.
1. MVP: Spreadsheet Software (Initial Stage)
In the beginning, tools like Excel or Google Sheets can be useful. While not highly scalable, they offer basic functionalities for tracking essential contract data.
- Pros: Easy to set up, cost-effective.
- Cons: Limited capabilities, can become unwieldy as the business grows.
2. Pre-Seed: Document Management Systems (Intermediate Stage)
As your startup scales, a Document Management System (DMS) can be a more robust solution. Tools like SharePoint provide a centralized location for all contracts, allowing for better organization.
- Pros: Improved document control, collaboration features.
- Cons: May require customization, can become complex.
3. Seed and Series A: Contract Management Software (Advanced Stage)
For growing startups that manage a large volume of contracts, specialized Contract Management Software like Contract Sent becomes very important.
- Pros: Automation of contract lifecycle, compliance tracking, analytics, integration with other business tools.
- Cons: Cost can be a barrier for some startups.
4. Series B: Customer Relationship Management (CRM) Integration
Utilizing a CRM system like Salesforce or HubSpot, and integrating it with contract management, can provide a unified view of customer relationships and associated contracts.
- Pros: Streamlines sales processes, enhances customer relationship tracking.
- Cons: Can be complex to integrate, might require specialized training.
5. Legal Compliance Tools
Ensuring compliance with various legal requirements is critical. Tools like Everlaw can assist in maintaining alignment with legal norms and industry regulations.
- Pros: Reduces legal risks, ensures adherence to regulations.
- Cons: Might require collaboration with legal professionals.
6. Artificial Intelligence (AI) and Machine Learning (ML) Tools
Innovative startups may explore AI and ML tools to gain insights and automate contract processes, from drafting to negotiation and execution.
- Pros: Enhances efficiency, provides advanced analytics.
- Cons: High cost, requires specialized expertise.
Tracking contract data as a startup grows is no small feat. The right tools and strategies depend on the stage of growth, the nature of the contracts, and the specific needs of the business.