
Ask HN: What to do when your once potential competitor becomes a real competitor - xoail
I&#x27;ve had this idea for a SaaS based product and started working on it not too long ago (about 2 months in as solo founder&#x2F;dev moonlighting). Since it is for enterprise I figured getting a solid product that does one thing really well is more important than building MVPs of product features. I still have at lest 2 or 3 more months into development before I start selling version 1 of the product.<p>But now I see my potential competitor also rolling out the same product I am making. They have a $1b market cap, have a large customer base and I can imagine they would find it easy to sell it than I do. I was sure that this would happen some day but not so soon. Their offering seems good enough to entice customers. The only thing I can compete with them right now is Price. They charge a lot for their product and I can beat it by being a fraction of what they charge.<p>I am currently confused wether to continue building or give up and start-over on something else?
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jonnathanson
Don't compete on price, per se. Compete on value. Value is related to price,
but it's not the same thing. Identify the customer segment(s) you believe
you're building for, and that your competitors might not be -- either because
they have to go broad, or because they're focused on a segment or two
themselves. Then really nail the value prop and solution for the segments
you're targeting. You'll probably want to price cheaper than the big guys, but
it's not to position yourself as "basically the same thing, but less
expensive." Instead, it's to position yourself as the simpler, easier, _case-
specifically better_ solution for a certain type of customer.

Patio11 puts it well, as usual. Especially this paragraph:

 _" Is their product generic? Make yours hyper-specific. Is their product
hyper-customized? Make yours the 'It only does 10% of what the other guy does,
but it is the right 10%, and it actually works out of the box.'"_

The good news is that $1B+ companies usually can't afford to target niches.
Their divisions are expected to move the needle for, well, a $1B+ business.
This puts enormous pressure on them to develop big, broad solutions that are
maybe 75% adequate for as close to 100% of the market as they can reach. This
is a strategic vulnerability that strongly favors the smaller player. It's one
of the very few advantages a smaller player has in competition with a big
player, particularly in the SaaS space.

~~~
gbrits
"The good news is that $1B+ companies usually can't afford to target niches.
Their divisions are expected to move the needle for, well, a $1B+ business. "

100% agreed. May I suggest OP to pick up "The Innovator's Dilemma / The
Innovator's Solution", which really brings the point home on why targeting
niches and/or 'lower' marketing segments can be a good strategy.

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antaviana
1\. Open the hosts file on your computer 2\. Add the website of your
competitor with some random IP address 3\. Go back to work with your product
and talk to your potential customers

~~~
xoail
lol. well said.

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patio11
Can you walk me through the thought process of why a competitor existing means
you abandon this idea? Are they so central to your industry that they can
immediately lock up 100% of the market? Are they going to be cross-selling
from something which is more widely distributed in your niche than say
Quickbooks or Microsoft Office?

Don't compete on price. Enterprise customers care about it a lot less than you
do, and enterprise customers are not motivated to purchase by "We saved a few
thousand bucks and I lost my job because the deployment blew up in our face."
I'd be far more worried about that sales objection than the existence of a
competitor.

You can probably compete on many other axes. One of my competitors has 400
employees, at least 20 of whom answer phones with customer questions. I have 0
employees, intentionally don't have a routable phone number, and self-assess
at mediocre in terms of responsiveness to email. And I win sales dogfights
with that company, occasionally, because prospects believe I'll offer them
better CS. (The winning argument, which I've stolen fragrantly from Jason
Cohen, is "You can call them up at any hour, day or night, and instantly speak
to someone who can't solve your problem. Or you can drop me an email, and it
may take me two days to get to it, but your email will always be answered by
the guy who built the system with his own hands. Your call who you want in
charge of your questions when it is your business on the line.")

There are other options, such as competing on market segmentation. Your
competitor, for example, might serve primarily a healthcare market. If the
same need exists outside of healthcare, you can target your
marketing/development over there, and make a product which really sings for
those other audiences. Is their product generic? Make yours hyper-specific. Is
their product hyper-customized? Make yours the "It only does 10% of what the
other guy does, but it is the right 10%, _and_ it actually works out of the
box."

How do they market/sell it? Is it one of those "Ask for a quote and we'll let
you speak to a sales rep?" type of deals. Consider selling via a lower-touch
sales model. Worse comes to worse, you learn why high-touch sales is so darn
popular.

Also, to impart on you as early as possible the Voice of Pained SaaS Founder
Experience: pause building for a moment and verify that you can successfully
sell this. If necessary, you can have mockups or a minimally functional
prototype to support the sales conversation. There are many worthwhile SaaS
products which cannot be sold by a single founder into particular enterprises,
so knowing whether your product is saleable or not given your constraints is a
useful sanity check on whether to spend the rest of the schedule building it
out.

Selling SaaS which doesn't exist is fairly straightforward. Find a customer.
Ask them to buy it. Note why they tell you "No." Adjust until you have gotten
a "Yes." Now, repeat at least 5 times. Then, finish building it.

If you cannot find a customer, or you can find the customer but can't get the
right decisionmaker internally to get the time of day, or your customer
doesn't consider this a hair-on-fire priority, or your current conception of
the product doesn't match things they budget for, or any of a thousand other
things systematically happen to block sales, then building the software does
not in itself cure those sales problems.

Incidentally, the number of enterprise deals which you have to close to have a
very good living as a solo founder is somewhere between one and twenty. Their
billion dollar valuation might be sustained by a team of stab-their-own-
mother-for-a-commission-check reps being fed the Glengarry leads from the best
marketing operation in enterprise software, but even they don't win _every_
deal. Table scraps are delicious if the table is very big relative to the dog.

~~~
xoail
I do not necessarily want to fight on the Price but that is the only variable
I can think of and start attracting smaller customers (who cannot afford my
competitors pricing structure). This competitor seems to have brought in all
the bells and whistles alongside the core of the product. My plan was to only
focus on core pieces and get to side features as I start getting customer
interest. Besides that, the customers buying their flag-ship product will find
it useful to buy this product alongside. They both will complement well. I do
think their vision seems to be different from mine where they are focused on
various categories and I am on one niche.

Thanks for all the various options you've highlighted. I do feel compelled to
try building out the core services to see if I can compete in certain markets.
My biggest concern being unable to dedicate myself full-time unless it starts
bringing in revenue I need to pay up for my bills. If you do not mind, I would
like to send you a PM with info of my product site.

~~~
patio11
_I do not necessarily want to fight on the Price but that is the only variable
I can think of and start attracting smaller customers (who cannot afford my
competitors pricing structure)_

Going after people who are systematically excluded by a competitor is not
necessarily "competing on price" even if you happen to have lower average
account sizes as a result. That can work fairly well. My largest competitor
basically tosses you from their sales process if your account is worth less
than $1k a month. Most of my customers are worth <= $200. It isn't just a
pricing decision, though -- it informs how I do sales (high-touch vs. low-
touch), what markets they go after vs ones I go after (healthcare vs. a bit
more eclectic for me), feature decisions, etc.

Feel free to send me an email. If I don't get back to you, it wasn't anything
you said, it was just my newborn daughter keeping me busy.

~~~
mailshanx
Ohhh, hey Patrick, congratulations on a new addition to your family! :)

I've been following your writing for quite a while now, and i love it :)

Heartiest congratulations again :D

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pinaceae
Never compete on price in enterprise. You compete on value prop and ROI - it's
the profit and/or savings using your product will bring that are relevant, not
the pure license costs. Price also signals worth, you get what you pay for,
etc.

As for the competition - compete. Don't assume just because a large corp
announces something their product will be good, useful, successful. Might just
be programmed in Powerpoint for all you know.

~~~
GFischer
"Never compete on price in enterprise"

That's a pretty blanket statement. I work for a relatively large service
company, and we're looking to make a big purchase (a replacement of the core
system), and one of the main decision points is price, especially because
there are orders of magnitude in difference between several competitors.

In the market we're evaluating there are:

\- a dominant, best of breed solution, which is priced out of the budget

\- several good systems that can't compete with the dominant one and thus
either compete on niches or price

\- several decent systems by companies that serve a geographic region

\- several small systems for niche companies.

The price differences range from a 22.000 dollar quote to a seven million
dollar quote (and both were tossed out).

Between similarly-priced products, yes, price is not a factor.

One point which might be of interest is that we're valuing the user experience
a lot - our previous software "ticked all the boxes" feature-wise but is an
unusable mess, and the best-rated product among the mid-sized ones also has
the same problem (maybe designed to win feature-checkbox government or bigco
contract bids).

I only hope the people which will actually make the decision listen to the
technical sides' arguments and don't go for the feature-rich but bad-UX
solution (I also expect bad UX to be a proxy for yet-to-be-discovered hidden
limitations).

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nemanja
One thing that helped me in the past is differentiating on how fast I could
move the deployment / customization of our solution vs. a larger competitor.
The service we offered was pretty complex in terms of business requirements
(periodic, enterprise-wide, hierarchical data collection of say 10-15
schedules with workflows, status reporting, followups, etc) and it took our
larger competitors ~2-3+ months to turn the deployment. One tactic I employed
was to ask the prospect for an excel spreadsheets they used in the past and
customize the system a bit before the presentation. This had a big wow factor
since we already had something that looked familiar and was almost there, made
my contacts look good in front of their bosses and eleviated most of the
deployment risk (savvy clients really understood that most of the risk was in
deployment). We were often able to commit to ~2 week deployment and that made
a huge difference. We were winning really large accounts, too (Fortune 100s).
Now, this may not scale, but that's a beauty of an early startup - you get to
and should do things that may not ultimately scale and may win as a result of
that.

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ChrisNorstrom
1- The most important lessons learned from building are watching the product
and yourself fail and remembering those lessons for next time.

2- You still haven't failed yet. You haven't launched yet. You haven't run out
of money yet. Why would you quit? Don't you want to see how people respond to
your product?

3- If you stop now your greatest competitor is you. Not the other guy. You'll
just destroy your chance at money, growth, and learning some awesome lessons
in launching a Saas.

4- If you quit you will have spent 2 months working on this for nothing.

~~~
personlurking
What if you've spent x months focusing on the product instead of the business
(ie, not seeing what potential customers think early on), get to roll-out
point and hit a roadblock? A roadblock that lets you pause for a second to
realize the product reach may be quite limited vs another path that you
could've gone with from the start.

This is my situation. As for your 4 points, I realize all of that now and
totally agree with it, but I do wonder about the certainly larger market if
I'd go down the other path now.

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pbreit
If you're already worried about competitors and looking to compete merely on
price, I'm afraid you might not be cut out for this. For starters, I would
highly doubt that you and this big company would be going after the same
customers. It's relatively easy to find niches that big companies can't or
don't want to serve.

~~~
xoail
I see your point. My worry is mostly on the lines of wether I can fight with
them as a solo founder working part-time on this. But on further analysis, I
feel there is a chance of holding a good fight by focusing on certain niche
markets as you've highlighted.

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sumedh
> or give up and start-over on something else?

So what happens if you hit a similar problem when you start over on something
else?

~~~
janson0
This is a great, short piece of advice.

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gumby
A couple of points:

Find a vertical niche that you can dominate and build out from there. If it's
a new area, or a relatively new area, your competitor can't build a product
that will appeal to everyone. So you two may not even compete head to head for
a while. And since you're small, you're probably more nimble and can make a
better reputation. And you won't have to compete on price -- you might even be
able to charge more than they can once you have a few customers.

Once you start a company (assuming you do) you can offer stock that costs less
for a larger stake in the company than your competitor could. The only people
who want to work for Google or Facebook are those who work for the salary --
the stock is high priced and isn't going to go up by any appreciable multiple.
So in addition to the fun and terror of working for a startup, you have
something the other guy can't offer.

------
logn
I recently chose an invoicing/payment provider. And also a gateway/merchant.
For each of those there are at least 10 solid offerings in my price range. I
ended up making my choices based on really specific features I preferred when
anyone else looking at the situation would think they're all comparable. The
world's a big place and people will choose you.

Furthermore, sales is a powerful skill if used right and striking up an email
conversation can be more persuasive than a bullet list of features or meeting
some price-point. And when you're building you're product from scratch you're
in a great position to add features based on initial feedback and build the
product that at least a small set of users really want. I think solo technical
founders have an enormous advantage here as there's no obstacle to reform the
product in an early stage.

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tomasien
It's unlikely that a competitor with only a $1bn market cap building a similar
product to you will be the reason you are or aren't successful unless they're
OTHER product makes their new, more similar to yours offering more valuable by
extension.

Unless you're certain that their product will be much better than yours no
matter what and they've gotten it exactly right, just learn from them and keep
going. However I should reiterate: if you think their product is perfect or
close, don't keep going. I've seen people do this and there's no point -
you've lost the passion for the project at that point because you'll just
stare at their product and wish your product could be like that. You won't
think critically and differentiate, you'll just try to catch up.

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drawkbox
It is good to be aware of competition but if you constantly compare yourself
to others you will either be too good or not good enough, which leads to
laziness and chasing the leader respectively.

Being first is nice but just the fact that there is competition is some
validation that the service is needed. Better to compete early rather than
when it is a commodity down the line. Being early but not first does have some
advantages as it is market research. The "Google wasn't the first search
engine" line of thought.

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geoffbrown2014
The bells and whistles comment struck a chord with me. That can be a
tremendous advantage to you if the company bundles all those features. Go talk
to customers and find out how many of the features they actually use. If they
only use 15-20 percent of the features then focus on that small subset of
features and do it better than the big guy. If the majority of users use the
majority of the product then I think you will have an uphill battle. Think
about your customers not your competitors.

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rational-future
FWIW I personally don't buy any products or services for my business, that are
backed by a one man company. The risk that you may get sick or bored or bought
out or hit by a bus, etc. is too high.

If you're not a sales ninja, you'll have to finish building the product,
before you get any sales. Contact your competitor competitors, see if they'll
be interested in cooperating.

~~~
patio11
One can very easily check whether one's target customers are averse to dealing
with a one-man shop. Ask them to buy your thing. If they don't ask "Are you a
one-man shop?", they are not averse to dealing with one-man shops.

A surprising number of enterprise customers are not averse to dealing with
one-man shops. It blows my mind at least once a week.

Supposing that a customer does give you the one-man shop objection, you don't
say "Oh rats, well, good luck then." You summon your founder gumption and say
"Sure thing, I understand that you want to buy this software but have
understandable reservations about dealing with a one-man company. What can we
do to fix this? Help me understand this a bit more -- is this coming from you?
From other stakeholders? Corporate policy? You had a bad experience once?"

After probing for the nature of the objection, you can offer solutions to it.

You might go out of business: I've answered this before. "I've been in
business since 2006 and profitable every year since then. Nobody knows what
the future holds, but I'm cautiously optimistic. I'd hate to get a real job."

You might get hit by a bus: "I certainly hope I don't get hit by a bus but
I'll be extra careful crossing streets, just for you! _pause for laughter_ No,
seriously speaking, I totally understand how you guys need business continuity
for core services. What if we had a written business continuity plan? Would
that help? I can have lawyers and a well-regarded tech firm get one together
for us as soon as you get me a LOI."

We need code escrow: "Who is your preferred vendor for code escrow? Great,
we'd be happy to work with them. Tabling that issue for a moment, is there
anything else you need from me, or can we proceed to the next step?"

You could break stuff: "We carry an industry-standard Errors and Omissions
insurance policy in the amount of $1 million. The insurance company was happy
to write this policy because we take steps like X, Y, Z to make sure that we
don't break stuff. Does $1 million sound adequate?" -> "Great then, we're
covered." or "Interesting. Help me understand how you're arriving at your
number for how much is at stake here. I'd be happy to quote you for services
commensurate with the value you get out of our system, and we'll only move
forward if I can get our insurance underwriter to approve that level of
coverage."

~~~
raffi
I am a one-man shop and sell software in the enterprise space. I also have
competitors and while I see my product as very different, a lot of my work
goes into educating my market about why.

Most of my customers are household names and they're not averse to dealing
with my one-man shop. It doesn't even come up. Their staff wants my software
and they work their process to buy it. That's it.

I have not had to answer any of these objections (thankfully). I'd probably
pass on the customer if they came up.

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moubarak
Like patio said, don't compete on price. Later you will find out your product
is worth what your competitor is charging and you'll feel bad about it. Most
importantly, your competitor might have many employees, but be sure that the
team working on that specific product is small. This is exactly the mentality
that Steve Wozniak had when Apple first started.

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shuzchen
You should definitely continue with your product, and you've now got a big
stamp of product validation in terms of a huge company putting resources into
the same market. To be clear, you should still do your own validation study
(get your own product in front of customers) but I see this as good news that
confirms you're heading in the right direction.

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MalcolmDiggs
You've lost First-Mover Advantage, that's all. I'm sure your business model
was premised on more than simply doing something first, wasn't it?

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mstanley
if there are no competitors, there likely is no market. ideas are rarely
unique (and even when unique, are quickly imitated). execution is everything.
don't see increased competition as a bad thing. Rather, view it as
confirmation you are onto something. keep going. be prepared to fight. and do
it better.

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pknerd
You have more freedom to iterate your product than them :-)

