Competitor Risk: Product-Market Fit, Decentralization, Ecosystems

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๐Ÿ’Ž 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.

๐Ÿ” Problem

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

๐Ÿ’ก Solution

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

๐Ÿ Players

Podcast Hosting Services

Community Platforms

Calendar Booking


Form Builders

๐Ÿ”ฎ 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).
  • (๐Ÿ“ˆ Pro) Winner-take-most markets, as we know them, will change. Decentralization lowers switching costs. SushiSwap is a warning shot to incumbents. 
  • (๐Ÿ“ˆ Pro) More SaaS companies will be built with no-code. InvestorFuse reached $50k/mo using Podio and Zapier. runs on Bubble.

โ˜๏ธ 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. Itโ€™s better to find out sooner than later.
  • Build Proprietary Distribution
  • (๐Ÿ“ˆ Pro) Lower customer switching costs. ConvertKitโ€™s concierge service helps you switch from competitors. This combats embedding effects
  • (๐Ÿ“ˆ Pro) Build a productized service first. Craig Hewitt built Podcast Motor before Castos. The former led to insights and relationships useful in the latter. 
  • (๐Ÿ“ˆ 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. 
  • (๐Ÿ“ˆ Pro) Build an ecosystem around your product. MailerLite has experts. Integromat has a partner program. These lead others to โ€˜investโ€™ in your platform. 
  • (๐Ÿ“ˆ Pro) Leverage othersโ€™ audiences with an affiliate program. and ConvertKit offer recurring commissions. 
  • (๐Ÿ“ˆ Pro) Prioritize markets with embedding effects and expansion revenue. This unlocks negative churn. See Zapier, Integromat and
  • (๐Ÿ“ˆ Pro) Use G2โ€™s categories to find out which market to index into. There are hundreds. 

๐Ÿ”‘ Key Lessons

  • Be a fast follower to a fragmented market. See emerging markets:
  • Fragmented markets are won or lost on distribution.
  • Run towards competition. Ask how to capture demand. Not whether it exists. 
  • (๐Ÿ“ˆ 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.
  • (๐Ÿ“ˆ Pro) Taking market risk without network effects leads to the worst of both worlds. Youโ€™ll blaze the trail and split the prize.
  • (๐Ÿ“ˆ Pro) โ€œThis has never been done before!โ€ โ€” โ€œI have an idea!โ€ โ€” โ€œI need you to sign an NDA.โ€ These are anti-patterns.
  • (๐Ÿ“ˆ Pro) Zero to one is a myth. We stand on the shoulders of giants. VRBO preceded Airbnb but the latter has liquidity.

๐Ÿ˜  Haters

โ€œScrew all of this. I want to build a unicorn.โ€
Just know what youโ€™re getting into.

โ€œThis is a race to the bottom.โ€
Thereโ€™s still a game being played. Itโ€™s in distribution. Code is being commoditized.

โ€œIt takes just as much to go big as it takes to go small.โ€
That may apply to energy expended. The expected returns are different. Dentists have higher expected returns than rockstars. 

โ€œYouโ€™re thinking small.โ€
It comes down to taste. I prefer freedom over glory. Choose your own adventure. Consciously.

โ€œFreedom and glory arenโ€™t mutually exclusive.โ€
They arenโ€™t. But they often conflict. Thatโ€™s why it matters.

โ€œItโ€™s immoral to copy.โ€
Whoever you copy, copied someone else.

๐Ÿ”— Links

  1. Micro-SaaS โ€ข Most Micro-SaaS companies live in fragmented markets. 
  2. No-Code โ€ข No-Code lowers barriers to entry. Code is being commoditized. Trust is not. 
  3. Million-Dollar, One-Person Businesses โ€ข Transactions costs are dropping. Firms are getting smaller. 
  4. (๐Ÿ“ˆ Pro) Micro Private Equity โ€ข Buy product-market fit if you can.
  5. (๐Ÿ“ˆ Pro) Nobody Starts Out Original โ€ข  โ€œCopying is how we learn.โ€ – Kirby Ferguson and Edmund Amoye on everything being derivative.  
  6. (๐Ÿ“ˆ Pro) Trends and Opportunities for Building a SaaS โ€ข Rob Walling and Courtland Allen on competitor risk, market risk and customer risk.
  7. (๐Ÿ“ˆ Pro) Media House is the New Marketing Strategy โ€ข Build proprietary distribution.
  8. (๐Ÿ“ˆ Pro) Audience-First Products โ€ข An audience leads to optionality
  9. (๐Ÿ“ˆ Pro) Micro-Marketplaces โ€ข A look at fragmented marketplaces
  10. (๐Ÿ“ˆ Pro) Presales โ€ข Reduce market risk by preselling into fragmented markets. 
  11. (๐Ÿ“ˆ Pro) Bootstrap Funds โ€ข  A relatively new route for bootstrappers.
  12. (๐Ÿ“ˆ Pro) DeFi โ€ข Winner-take-most markets are being disrupted. Lower switching costs act as a check on power.

๐Ÿ™ 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 JohnsonNatwar 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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