This can be one of the most intimidating scenarios for a founder with a little bit of revenue, a little bit of momentum – but not a ton. Your #1 competitor raises $5m, $20m, $50m, $100m. How can you ever compete? Do they have a strong brand? If not, it may not matter. There is no “winner” yet. The #1 brand trumps capital.
But if they have a strong brand and you aren’t even at scale yet … yes, it can be tough.
But you have three related choices. All three can work well:
- Be cheaper. As a space evolves, the leader generally gets more expensive. This almost always leaves room at the bottom. Salesforce is $200/month now for the edition you’ll likely use. That leaves a lot of money for a $20/month product.
- Be more expensive (really, More Enterprise). The leader sometimes isn’t the most upmarket. That also leaves room at the top. If your competitor is $500/month. Can you build a $5000/mo version that is more “enterprise-grade?” This can work well if you have the right enterprise DNA — and your bigger competitor doesn’t. If you don’t have this DNA though, it’s really, really hard to pull off.
- Be 2–10x better — at just one important thing. (The rest stuff you can be merely OK at). You don’t have to achieve parity with your Ultrafunded Competitor in everything. But if you have one important thing they don’t — Slack integration, localization, an important mobile app, a special dashboard, who knows — that the customers will pay for … you can still win those deals.
Fighting parity, with a hyper-funded start-up, is frustrating.