Dear SaaStr: How Can a New Startup Take on a Big, Established Leader?

How can a new start-up possibly take on a successful big market leader?

The main advantage is you can pursue a market or opportunity that is not worth their time. Yet.

Big, established tech companies aren’t stupid, or ignorant. Not at all. They are better aware of tech trends than you are, usually. After all, they have all the customer data.

But so many things just aren’t worth their time … yet.

As a rough rule, anything < 10% isn’t material or worth their time. I.e.:

• Anything that today doesn’t seem like it can be > 10% of the business/revenues overall; or at least,
• Anything that today doesn’t seem like it can be > 10% of a division’s business/revenues overall.

So many things start off too small to matter. Many SaaS companies themselves are coming up on $1b in ARR. So if they don’t see any area worth $100m+ in ARR to them … it’s not worth their time. Not yet. Not unless they see an existential challenge from the new technology / product / etc. More here: The $1 Billion+ ARR Club | SaaStr

That doesn’t mean they don’t see it, or get it. They are tracking all the changes in the industry. Their know their product and tech stack is getting old. It’s just most changes, niches, and new products are not big enough yet to marshall substantial but fixed resources to attack.

And that’s another thing that people don’t get. Big Companies have tons of resources. They absolutely have 10, 20, 40 extra, pretty darn good engineers to allocate to a new project, product or initiative. That can build whatever you are building.

But they don’t have unlimited resources. Even if a group at a BigCo has 500 engineers, that may be all they get for now. So they have to pick where to put those 20, 40, 100 “extra” engineers. So again, they’ll put it on something material.

What your little start-up is pursuing probably isn’t material to them, yet.

Once it is, they will enter your space. Fortunately, by then, you’ll have years of experience and learnings.

______________________________

From the head of innovation at Global 100 leader BT:

(note: an updated SaaStr Classic post)

Published on February 18, 2023