Last week, I was reminded of an important idea in startup land. I was catching up with a friend, and he made the comment that when competitors go big, don’t automatically go bigger.
This reminded me of our experience at Pardot in building a B2B marketing automation platform. We were the scrappy upstart based in Atlanta, competing against heavily funded competitors on both coasts. Everyone kept telling us to raise money to capture the market and outcompete our rivals. While they raised over $100 million each, we kept our heads down, bootstrapping the business and focusing on a core segment we felt we could win.
We defined the segment as the lower, mid-market, with a focus on delivering the most bang for the buck. At the time, we positioned it as the highest amount of money we could charge to a mid-level or senior marketing manager, such that they didn’t have to get sign-off from finance or anyone else in the organization. We eventually arrived at $1,000 a month for the base package, allowing customers to put it on their credit card and us to deliver a great experience. At that price, we lead with a customer acquisition, onboarding and customer success process delivered over the Internet.
In this B2B marketing automation space, it was unusual that there were several great outcomes across the different competitors, where the big incumbents in complementary spaces acquired their way into the market. Our competitors were going big, and instead of us going bigger, we went more niche. Human nature is to immediately want to one-up the opponent. Entrepreneurs would do well fight that urge and evaluate all the options.
David Cummings on Startups 