I note a whole bunch of recent announcements:
Salesforce is now competing with a whole ‘nother bunch of its top partners with its new High Velocity Sales Cloud. It adds better dialer and cadence functionalities, among others, competing at least in part with a dozen or more of its top partners. While a lot of this functionality isn’t completely new, it’s about 4 years into a wave of new innovation in the sales automation space.
On a more personal note, and at the more extreme end, I note that after 11 years, DropBox plans to pilot e-signatures in their app. After many years, Zendesk just acquired Base to enter the CRM space, now competing with many key partners, at least in part. Twilio announced IVR and contact center building blocks as core capabilities, competing in part with some of its top API partners.
This is part of life in SaaS. Not only does competition grow as folks take notice of your progress — especially after about 4-5 years, once you get big enough even the top execs at BigCos can see it — but it often starts with your partners. It’s natural. The ones that see the biggest synergies are also the ones that see the easier path to directly expanding into your space. We touched on this a bit back in the early days of SaaStr here.
So what should you do?
- First, plan for it — and don’t get your dander up. If your top partner is going to compete with you in 3-4 years, well, that’s 3-4 years you have to leverage their customer base and get a huge headstart. Think of it that way. Still share your roadmap, even a lot of your confidential information. If they are going to compete, they are going to compete.
- Second, the impact often is ultimately positive. Not always, but often. A common pattern is that a partner enters your space, but with a low-end version, and/or a tightly-coupled version. Low-end versions often don’t scale. If their product is only good for simple use cases, that may well generate a whole flood of leads for you for more complex use cases. Also, if their version only works on their platform, and yours is cross-platform, again that can generate a whole flood of new leads.
- Assume market confusion upon launch. You know this already, but assume a quarter or two of market confusion. It’s OK. Things will settle down after that.
- Most importantly, it’s probably not core to them. Did Salesforce’s huge push on Desk.com kill Zendesk? No, in the end, it didn’t dent them at all. Did Salesforce pushing Pardot kill Hubspot and Marketo? No, but there, it’s a little different. It has made a big dent, although not enough to harm either company. But Pardot was closer to the core. Same with Apptus and Salesforce, most likely. Closer to the core.
- They can’t kill you. That’s up to you. Small impact or larger, I’m struggling to think of a truly successful, category-winning SaaS startup I know that was killed by a BigGuy entering their space.
- Finally, still be friends. A lot can change. A lot. Smile, congratulate them on their new offering, and do whatever you can to support your joint customers. They may fail. They may lose energy. They may want to buy you when it goes slower than planned. You just don’t know. Even if they materially dent you, you’ll still have plenty of joint customers to support. Burn absolutely zero bridges here.
Most important, the maths favor you — if you have a great, agile team.
Usually, it takes 4-5 years for the Big Guys to truly decide to compete. It’s too immaterial, too distracting before then. If you are still at $2m-$3m in ARR by then, by the time they really compete, you are vulnerable for sure. But if you’ve gotten up $20m+ in ARR by the time they compete, you’re too far ahead. Not in revenue per se, but in domain expertise, in the ability to see and plan for the future. They’re just figuring it out. You’ll already have 1,000+ customers to have learned from, over many years. And you’ll be at $40m-$50m by the time their new team really understands the space and all its nuances as deeply as you do. At that point, you’re not all the far from your IPO. Not really.