Competitor Risk: Product-Market Fit, Decentralization, Ecosystems

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💎 Why It Matters

Time is wasted trying to create new markets.
Non-venture businesses may be placed on venture paths and ruined.
Some choose glory over freedom without realizing the consequences.

🔍 Problem

Time, money and energy are often wasted trying to create new markets.

💡 Solution

Index into an existing market instead of trying to create one.

🏁 Players

Podcast Hosting Services

Community Platforms

Calendar Booking

CRMs

Form Builders

🔮 Predictions

Technical moats will become irrelevant. Code is being commoditized.
Million-Dollar, One-Person Businesses will increase. APIs, productized services, fractional roles and no-code lower transaction costs. Leading to smaller firms.
Acquisitions will become more common. Buying product-market fit saves time. You can pay for success ($3,000 MRR) instead of attempts (3,000 failed experiments).
(📈 Pro) Winner-take-most markets, as we know them, will change. Decentralization lowers switching costs. SushiSwap is a warning shot to incumbents.
(📈 Pro) More SaaS companies will be built with no-code. InvestorFuse reached $50k/mo using Podio and Zapier. SendPilot.co runs on Bubble.

☁️ Opportunities

Buy instead of build. Save time and reduce market risk. See Micro Private Equity.
Stack risk reduction plays. Presell into fragmented markets. This will expose weak distribution and messaging. It’s better to find out sooner than later.
Build Proprietary Distribution
- Blogs (FYI)
- Films (Mailchimp)
- Courses (Webflow)
- Conferences (Moz)
- Newsletters (Close)
- Communities (Spiffy)
- Podcasts (ConvertKit)
- Growth Tools (Ahrefs)
(📈 Pro) Lower customer switching costs. ConvertKit’s concierge service helps you switch from competitors. This combats embedding effects.
(📈 Pro) Build a productized service first. Craig Hewitt built Podcast Motor before Castos. The former led to insights and relationships useful in the latter.
(📈 Pro) Use lifetime deals to enter crowded markets. See SendFox and Nichesss. Feature parity and lifetime deals may be enough to threaten subscription-based competitors.
(📈 Pro) Build an ecosystem around your product. MailerLite has experts. Integromat has a partner program. These lead others to ‘invest’ in your platform.
(📈 Pro) Leverage others’ audiences with an affiliate program. Transistor.fm and ConvertKit offer recurring commissions.
(📈 Pro) Prioritize markets with embedding effects and expansion revenue. This unlocks negative churn. See Zapier, Integromat and Automate.io.
(📈 Pro) Use G2’s categories to find out which market to index into. There are hundreds.

🔑 Key Lessons

Be a fast follower to a fragmented market. See emerging markets:
- AI-Generated Copy
- Sheet-To-Site Apps
- Automation Platforms
Fragmented markets are won or lost on distribution.
Run towards competition. Ask how to capture demand. Not whether it exists.
(📈 Pro) You can be marginally better and succeed in fragmented markets. You can be 3x better and lose to incumbents in winner-take-most markets.
(📈 Pro) Taking market risk without network effects leads to the worst of both worlds. You’ll blaze the trail and split the prize.
(📈 Pro) “This has never been done before!” — “I have an idea!” — “I need you to sign an NDA.” These are anti-patterns.
(📈 Pro) Zero to one is a myth. We stand on the shoulders of giants. VRBO preceded Airbnb but the latter has liquidity.

😠 Haters

“Screw all of this. I want to build a unicorn.”
Just know what you’re getting into.

“This is a race to the bottom.”
There’s still a game being played. It’s in distribution. Code is being commoditized.

“It takes just as much to go big as it takes to go small.”
That may apply to energy expended. The expected returns are different. Dentists have higher expected returns than rockstars.

“You’re thinking small.”
It comes down to taste. I prefer freedom over glory. Choose your own adventure. Consciously.

“Freedom and glory aren’t mutually exclusive.”
They aren’t. But they often conflict. That’s why it matters.

“It’s immoral to copy.”
Whoever you copy, copied someone else.

🔗 Links

Micro-SaaS • Most Micro-SaaS companies live in fragmented markets.
No-Code • No-Code lowers barriers to entry. Code is being commoditized. Trust is not.
Million-Dollar, One-Person Businesses • Transactions costs are dropping. Firms are getting smaller.
(📈 Pro) Micro Private Equity • Buy product-market fit if you can.
(📈 Pro) Nobody Starts Out Original • “Copying is how we learn.” – Kirby Ferguson and Edmund Amoye on everything being derivative.
(📈 Pro) Trends and Opportunities for Building a SaaS • Rob Walling and Courtland Allen on competitor risk, market risk and customer risk.
(📈 Pro) Media House is the New Marketing Strategy • Build proprietary distribution.
(📈 Pro) Audience-First Products • An audience leads to optionality.
(📈 Pro) Micro-Marketplaces • A look at fragmented marketplaces.
(📈 Pro) Presales • Reduce market risk by preselling into fragmented markets.
(📈 Pro) Bootstrap Funds • A relatively new route for bootstrappers.
(📈 Pro) DeFi • Winner-take-most markets are being disrupted. Lower switching costs act as a check on power.

🙏 Thanks

Thanks to Rob Walling (TinySeed), Courtland Allen (Indie Hackers), Jeremy Abraham (Spiffy), Stewart Townsend (Channel as a Service), Tyler King (Less Annoying CRM), Logan Johnson, Natwar Maheshwari (Mailchimp), Sibi Murugesan (Earnest Capital), Paul Martin (Lyrico), Lu Doan (DocuDeer), Kenneth Dreyer and Daniel Wulf (Wurst Circle). We had a great time jamming on this report.

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