Startup of the Week – Small Improvements, the SaaS that’s taking Silicon Valley by storm

Michelle Kuepper 2013-12-18 0

When we met Per Fragemann, founder of startup Small Improvements, at the Berlin Tech Meetup, it was hard to get a word in between all the entrepreneurs, VCs and journalists clamouring for his attention. The interest makes sense – the company is one of Berlin’s lesser-known success stories, managing to attract over 200 high-profile clients including Pinterest, Disqus, Opera and Coursera.  And that’s all without receiving a cent of financing.

Founded in 2011, Small Improvements offers companies a feedback system to review their employees, standing out from a crowd of similar services with its emphasis on design and ease of use. We caught up with Fragemann to find out how he feels about all the VCs knocking on his door, why the startup has more money in the bank than it can spend and how he got big-name companies on board without advertising…

Hi Per, can you tell us more about Small Improvements?

Small Improvements is a web-based performance review system aimed at SMEs. It simplifies 360-degree feedback, performance reviews and goal setting.

I came up with the idea when I was working at Atlassian in Australia for three years and managing a team there. I realised the feedback system we were doing there was great – we did feedback sessions every quarter – but the software we were using to do it was terrible. So when I got back to Germany, I decided to do something about it.

I wanted to make a really user friendly tool that nails one use case – providing feedback inside a company. You can get feedback from your coworkers, from your managers, from your team members, even clients if you like, and find out how your work is and how to improve. Small Improvements now consists of 12 people – eight in Berlin and one in Toronto, New York, San Francisco and Sydney.

What makes you different from everyone else?

We’re passionate about usability, and we spend a lot of energy on getting the UI right. We’re also very focused on providing great customer service. This has helped us tremendously attracting high profile clients, who then in turn recommend us to their networks. I mean, we have huge discussions in the company on how to improve buttons or screens. That’s very time consuming, but in the end it pays off for our clients.

You haven’t taken any funding yet – why is that?

We’ve been bootstrapping the whole time so far, we’ve been doing it for three years now. The first year was really terrible, just me coding and a couple of students helping me – the bank account went very close to zero before we managed to get the first clients that paid us a little money here and there. Even the second year was quite bad – we made maybe thirty or €25,000. But the third year is going really well and we have around 200 clients. Some are quite well known – like Pinterest, Opera, Quiksilver and Disqus.

We didn’t take financing because in the beginning we didn’t have much more than a vision – to build this crazy tool and make our clients happy. But we didn’t have any clients – we did get some traction in the beginning, but adoption was so slow. We talked to some investors and were like, “Yeah, we have five clients and there’s a sixth one in the pipeline”. And they were like, “Yeah, let’s talk next year”. Now we’re getting lots of calls. Really, we’ve been talking to all the big players in Europe and quite a few of the big ones in America, at least those who do early-stage. Now we’re interesting! But now we’re a bit hesitant. Well, they didn’t want to talk last year.

Are you considering seeking financing now?

We’re considering Series A. We’re already profitable, we have more money in the bank than we can spend at the moment. That’s because we’re very selective with our hires. That’s why we make more money than we can spend – because we can’t find the developers we need right now. We only hire developers with a passion for product development. We encourage our developers to have side projects and to think beyond SI. Want to work four days per week only, and prepare your new startup in parallel? No problem!

What’s your business model?

It’s a SaaS model, so companies pay per user per month – on average $5 per user per month. They can quit anytime. They can pay upfront for the year and get a discount, but even then they can get their money back if they don’t like us. That’s only happened once so far. Our competitors usually try to lock their clients into heavy contracts.

Any advice you’d give fellow startups?

Don’t be stealthy. Tell everyone you meet about your idea, and listen to feedback and objections. Address the problems so you’re prepared when meeting potential customers. And until you find real customers, make all your friends and family members beta-test your prototype. If your parents don’t understand it, the UI is probably not good enough yet.

The first idea I had was completely different to what I have now. We were really lucky to get some clients in, we had the first user after six months. Of course, the product wasn’t so good back then but the feedback we got was so valuable. If we’d been in stealth for another year we would have died.

Where will you be in a year’s time?

The plan is to double customer numbers and grow the team to maybe 20 – that’s if we don’t take funding. If we took an investment things would of course accelerate a lot.

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