Dear SaaStr: How much should an entrepreneur worry about competition in an early-stage startup?
You are going to obsess about competition. You won’t be able to help it. And mostly it’s healthy.
But one thing we’ve all learned is we worry just a bit too much — and the wrong way. It’s so easy to obsess about competition. They are all over Twitter, in every deal, every discussion with the sales team.
A few meta-learnings:
- First, markets get redefined by new entrants that change the paradigm. Who saw that Zoom would rocket to $4B+ ARR in a crowded space that seemed to be a commodity going to free? Or that Slack would remake chat apps? No one, really. Both spaces seemed highly mature, “plenty good enough”, and basically free or cheap. We’re seeing this again right now with AI.
- Second, it’s often ok to just be 10x better at something that matters a lot to paying customers. You don’t have to be better than Salesforce at everything. You can be Pipedrive, and simply be the best SMB CRM of its time that’s super easy to use and get acquired for $1.5 Billion. In a billion+ market, just owning a piece the #1 doesn’t want to invest in can be enough to get you to $100m ARR right there. See also, Notion and Canva. Hardly feature complete, but 10x better at something that mattered vs. established “pretty darn good” competition.
- Third, super happy customers win. Yes, winner-takes-most is true in SaaS and frustrating. But if you are growing at a healthy clip and have super happy customers, you will probably still do fine. It’s almost impossible to kill a SaaS company at $10m in ARR with super happy customers. Those happy customers buy more and beget more customers. Even if your competitor is 3x larger.
- Fourth, everybody lies. Be wary of your competitor’s press releases and fancy venture rounds. They matter. But everyone exaggerates a bit, and hides the tough stuff.
- Fifth, if you’re faster than the competition, they are just giving you a roadmap. If you can’t keep up, that’s stressful. But if your 4, 5, 10+ year old competitor is slower than you, well then, they’ve just give you a roadmap to catch them — and then you can pass them.
- Finally, get good at it. Competition is part of life. Very few spaces in B2B and SaaS, in particular, lend themselves to true monopolies. Instead of sweating competition — get good at it.
Learning how to win in a competitive market is a superpower. Most of us aren’t actually that good at it. Most of us wilt in the face of aggressive competition. If you turn that into a strength, you can truly excel where others cannot.
