Dear SaaStr: How Does a SaaS Startup Break Out in a Crowded Market?
Find one segment of the market to win in. Where you can build a 10x feature, and then a 10x solution, that solves a niche problem that customers will pay for.
Most SaaS markets are crowded today. But the thing is:
- As Bigger SaaS companies cross $100m in ARR, and then $1B in ARR, they stop focusing on smaller niches. They might give up on SMBs, or freemium, or higher churn segments. But you might be able to do well there.
- Many Bigger Cos aren’t vertical-specific. There can be room for a vendor focused just on e-commerce, or healthcare, or contact centers, or other large markets. For example, Mailchimp is very strong in general email but Klaviyo is worth $10B doing email for e-commerce. Gorgias did the same for contact center in e-commerce. Veeva built a pharma-specific CRM on top of Salesforce and that product took them all the way to IPO.
- Many Bigger Cos aren’t invested deeply in a particular platform. E.g., their Shopify or HubSpot integration might be weak. Or not even exist.
- Most Bigger Cos are 10+ years old. Do something important they don’t do well. Maybe they don’t integrate with newer vendors. Maybe they don’t do mobile as well, or social as well, or whatever. 10+ year old platforms are powerful. But they were architected for a different age.
Another way to look at it is any vendor sort of has to ignore any market segment that is < 10% of their revenues. It’s just immaterial.
And as so many SaaS leaders now have crossed $1B+ in ARR, from Zendesk to Hubspot to Shopify to Twilio and more … that leaves a $100m+ of customers each of them … just aren’t that focused on.
A bit more here:
Published on February 16, 2023