Ask HN: What to do when your once potential competitor becomes a real competitor

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.

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.

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.

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

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.

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.

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.

> 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?

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.

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.

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.

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.

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.

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.

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.

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.

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?

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.

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