As a startup, what are some effective ways for an underdog to take down their competition?
It depends on the gap. In SaaS, I’d argue if your competitor is larger than you, at $8m-$10m+ in ARR and growing quickly, and even reasonably happy customers … then it’s too late. It’s too late to “take them down”.
So maybe don’t make that the primary goal.
But that doesn’t mean you can’t make a real dent. And if the market is growing, you can also grow very quickly, too.
How to still win in SaaS if your competitor is bigger than you, $10m+ in ARR, and growing quickly:
- Be 10x Better At Just One Important Thing. Do you have a key Salesforce or Slack integration they don’t? Are you localized and they aren’t? Are you 100x faster to deploy? Pick one important thing that customers buy because of and be 10x better than that. Because you won’t be better at everything.
- Go More Enterprise. Be more secure. More trusted. Safer. More reliable. If your competitor is very SMB focused, there is always room at the high end. And you can charge more for this.
- Room at the Bottom. Most SaaS companies begin to de-prioritize the bottom of the market. SMBs can get you to $10m ARR, but it’s much harder for most SaaS companies to go from $10m to $100m on just $10/month deals. You naturally focus on bigger customers and getting them to pay more. And this leaves room at the bottom.
- Be Much Cheaper. My least favorite strategy, but it works. At least, it’s a good strategy to be #3 in the market. Oligopical SaaS markets often end up with a #1 Leader (60–80% market share), a #2 More Innovative player (20–30% market share), and a #3 Dirt Cheap player. The problem is this segment is high churn, low loyalty, and super price sensitive. And it may end up being the most competitive segment of the market. But there is usually room for a Dirt Cheap #3 in most $100m+ market segments.
Rather than take them down, think instead about nailing your niche, and then growing your market share.
Taking something with escape velocity down in SaaS is very, very hard — at least in the short term.
It takes decades at least, usually.