In SaaS, usually one of four things enable a new vendor to break-out:
- 10x better at One Important Thing. In the early days, you will be buggy and feature-poor. But if you are 10x better at (x) One Important Thing that (y) customers value and will pay for, that’s enough. Many founders get this wrong however, and build a key feature that is indeed 10x better — but not one important enough to pick a raw new vendor to get. It’s only a subset of critical functionality that customers will pay to have implemented 10x better than an existing, trusted vendor. Usually, the part that is close to the money they make, manage, process, or collect.
- Dramatically Cheaper. This one’s tough to play. Because businesses trust and value brands they can rely on. But often, the way to become #3 in a space is to be cheapest. #1 often has the strongest brand, #2 is the most innovative, and #3 is often simply Still Pretty Good but Cheapest of the Top 3.
- Developer’s Choice. Twilio, Stripe, New Relic, etc. exploded as the developer’s choice. Developers want trusted products that are very easy to deploy and that also scale. Many products that focus on end-users don’t put a top priority on their APIs. Vendors that do can win.
- Most Enterprise, Biggest Problem Solver. While harder to do in practice than in concept, this almost always works. Global 2000 and larger SME customers pick the vendor that solves their problems. Not just a tool that has a certain set of functionality. They will pay $250,000 to solve a Big Problem (including services, implementation, customer success) … where they won’t pay $2,500 for a seemingly similar widget that has similar features but doesn’t solve their business workflow and process problems. But it’s a big commitment to deliver true enterprise solutions.
It’s not easy, but one of these 4 vectors tends to work.