[Founder’s Real Talk #3] The power and challenge of integrations
When I was building my last startup — Fintech & SaaS for real estate — one of the biggest challenges is building the data pipelines with different Multiple Listing Services (MLS). There are ~600 MLS in the US — about 7 different ones in the SF Bay Area alone. The worst part is that they are all in their own data silos. Yes some of them are connected to each other via data-sharing programs, but often times their data structures are different and the pricing system for data access is a mess. It poses an operational challenge to us: how to balance the need to manage all the MLS data connections with different pricing structures and the goal to offer a consistent and frictionless customer experience?
Fast-forward to now, when I’m building my new startup and looking at the situation from the customer side, I’m seeing a different challenge: the abovementioned goal (in Italics) is a strategic one. One example is Stripe, which charges merchants a flat fee for all transactions, but the costs behind the scenes vary a lot depending on card types and payment methods. It’s widely understood that this offering has a strategic advantage for SME and early-stage startups because it’s easier and simpler. However, to large merchants who want to pick and choose and fine-tune their setups, it lacks flexibility.
However, it recently occurred to me that the strategic advantage goes beyond the small vs large client choice. Integration-based pricing prevents clients from experiencing the“ full magic” that your product has to offer. We live in the API world now (if not the web3 world) and the power is in inter-connectivity and inter-operability. If well-integrated into the rest of your client’s stack, you are in a great situation; if you are connected via API (and workflow) to the rest of your client’s data system, you are in better situation. The more connected you are, the wider and deeper the moat will be. Therefore, to limit your client on the integration is basically to limit your own moat.
What this means is that, for SaaS providers, the abovementioned operational challenge — which I experienced myself — is ever more important. It not only requires a philosophical change from the last-generation pricing model (to think from your users’ perspective), but also requires operational excellence to be able to manage the differences and variations in the underlying cost structure.