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How to Beat Billion Dollar Competitors
Stories from the trenches of how we competed and won
Every entrepreneur struggles with how to compete and differentiate from their competitors. In my first three companies, we competed with billion-dollar competitors in highly competitive markets. Luckily, we managed to have success in all three.
In this post, I will share how we competed in each of them and found success. All three companies were in the Inc 5000 and fast-growing companies.
Here are the 3 different stories we are going to cover in this article:
Timing the wave (VinSolutions)
Focusing on SMB (Stackify)
YOU are the difference (Full Scale)
Timing the wave
Competing against industry giants sounds like a terrible idea. They are massive and dominate all the market share. However, it can be ripe for disruption in markets where you only have 2-3 large incumbent players. They stop innovating and become very complacent.
The key is timing major market changes, which is precisely why we won.
VinSolutions was started in 2003 to help car dealers manage and advertise their inventory online. It was the very early days still of online shopping for cars. Over time, our product expanded to websites and a complete CRM system.
During this period, shopping for cars online was quickly becoming the norm. The magazines at the grocery store were on the way out, and sites like AutoTrader.com and Cars.com were the new way to find cars.
This caught the current CRM vendors with their pants down.
Riding the wave of change
CRM functionality in the automotive industry was originally focused on long-term follow-up on old sales transactions, service customers, and people who came in to do test drives. You know, all those annoying letters and postcards they sent you.
None of the legacy CRM systems were designed for the new wave of online shopping. Sending emails or text messages was a foreign concept. Integrating seamlessly with a dealer’s website didn’t exist.
We saw the opportunity to build a CRM system focused entirely on handling internet leads. The market was ripe for disruption, and we had 3 major advantages:
Browser-based/Price - Most competitors were old client-server apps installed on servers at the dealership with long-term contracts. Our month-to-month, no-contract web-based system was way cheaper and easier to use.
Internet leads - We focused on being the #1 system for sending emails and handling Internet leads.
Website integration - We also provided websites for the dealers, allowing us to uniquely integrate some really cool features.
Here is a walk down memory lane…
We owe a lot of our success to timing. We built an excellent product for handling internet leads and were at the right place and time. The recession of 2008 and 2009 dramatically helped us. I know that sounds crazy at first, but GM and Chrysler also went bankrupt then.
The reality is that when companies make a lot of money, they don’t worry too much about how they spend it. Once we were in a recession, everyone cared. They were looking for ways to save money and optimize their business.
It was the nail in the coffin for expensive traditional advertising in newspapers and local magazines. Everything went to online shopping, and we had the best product in the industry. We were right there, ready for the market to shift to us.
Another example of this kind of shift is remote learning. There were great solutions out there, probably struggling to grow. Then COVID-19 happened. Nearly overnight, every kid in the world was using remote learning tools. The market shifted to them.
Some significant technological changes or events are disruptive every few years. For example, the shift to mobile in 2006, the recession of 2008, COVID in 2020, and generative AI in 2023. These shifts cause significant changes, and older vendors get disrupted by newer and more innovative players.
Build it and sell it!
As a startup, one of your goals is to sell to one of the giant industry players. One of the CRM vendors tried to acquire our company, VinSolutions, but ultimately we sold to AutoTrader.com instead in 2011 for $150M. Today, VinSolutions is the #1 CRM solution for car dealers with several thousand customers. Most of you in the USA have probably received emails from their system!
Big companies need startups to innovate so they can buy them up. These large companies cannot usually innovate on their own due to their large size. They can’t move fast enough, have old architected software, and simply won’t take the risk. Their core business isn’t growing quickly, so they use their profits to buy smaller companies that are growing faster. Your goal is to sell to them. Rinse and repeat.
Ironically, VinSolutions hasn’t changed much since 2011, and the industry might be ripe for disruption again!
Focusing on SMB
Based on my experience at VinSolutions as CTO in a high-growth SaaS company, I felt there was a need in the market to build an application monitoring tool designed for developers. Most tools were designed for system administrators and were not application-centric. I decided to start Stackify and was the CEO.
Today there is a new industry and buzzword around “observability.” We were one of the first companies to do that before that terminology existed. We tightly integrated application errors, logs, metrics, and APM performance tracing in one easy-to-use platform.
My company, Stackify, was relatively small, though. We didn’t raise the big VC money and go that route. We had a considerable challenge competing with New Relic, AppDynamics, and, later on, Datadog, Elastic, Microsoft, and other newcomers to the APM space.
So how did we compete with those big companies?
We purposely focused on small to medium-sized (SMB) and international customers. We were taking the customers that AppDynamics and New Relic didn’t want. Their average customers paid $50,000-$100,000+ a year and more. Our average customer was paying $3,000 a year. Our business model and product were designed for ease of use and small accounts.
Another significant advantage to us was our go-to-market strategy. While AppDynamics and New Relic spent tens of millions on sales and marketing, we wrote blog posts. Our website attracted up to 10,000,000 visitors a year, which helped us reach the mass market. If you are a software developer, I bet you have been to the blog, even if you don’t remember it!
We were at a different price point, and our product was focused on developers. That, coupled with a go-to-market strategy that reached a massive audience of smaller companies, was a winning combination for us. Stackify was #379 on the Inc. 500 in 2019. We didn’t have the big VC funds, but we had the best team I’ve ever worked with, and we did an incredible job.
I’m not going to lie, though. Competing against New Relic, AppDynamics, Datadog, Elastic, and Microsoft Application Insights was difficult. We were able to make it work by focusing on our niche in the market. We exited the company in 2021 to Netreo. I definitely have a lot of battle scars from the experience.
You can be successful if you find your niche and unique go-to-market strategy.
YOU are the difference
While scaling up Stackify, one of the significant challenges was being able to afford software developers. As a startup, you can only afford so many employees at $150,000 a piece. My friend Matt DeCoursey had great experiences with developers in the Philippines. I decided to try it, and we partnered on a service business that became Full Scale. That business now has over 300 employees.
There are seemingly thousands of companies that do outsourcing of software development. Be it outstaffing, outsourcing, offshoring, nearshoring, consulting, or whatever you want to call it. Engineering leaders like myself get spammed by these companies almost every day. There is infinite competition.
That competition includes giant companies like Accenture, Wipro, Tata Consulting, and Cognizant. These companies make multiple billions a year in revenue and hundreds of thousands of employees each. On top of this, the service is more or less a commodity. There are thousands of companies that provide outsourcing or custom software development services.
We were able to differentiate ourselves by being based in the Philippines, focusing on senior-level talent, and providing a staff augmentation model. Those were great, but those alone were not a go-to-market strategy for attracting customers.
Our target customer is getting spammed daily by our competitors. We all provide essentially the same service. I have since talked to many companies similar to Full Scale. They all have significant challenges with how to find new customers.
Within the first 6 months of Full Scale, we hired 100 people. It took off like a rocket. We couldn’t hire people fast enough. Even worse, we couldn’t find laptops in the Philippines or office space fast enough. The company was growing rapidly.
So why were we successful when our competitors struggled to find clients?
Selling based on trust
Hiring software developers is a critical decision for companies. With good developers, their company could be the next billion-dollar unicorn. With bad developers, their startup is undoubtedly doomed.
Hiring a team of 5 developers costs hundreds of thousands of dollars annually. Based on spam emails alone, people don’t hire software developers from unknown companies in India, Latin America, Europe, etc. The decision is too big. The risks are too high.
In these types of scenarios, people buy on trust. They rely on referrals or their relationships to make such big decisions. They may also try to use marketplaces that create some form of trust factor or guarantee.
For phase one, we initially grew quickly by selling to our personal networks of connections. Eventually, that initial growth plateaued.
For phase two, we focused on another way to build trust. We leveraged our podcast to build relationships with guests and with our listeners. After a listener listens to dozens of episodes, that also builds trust. The Startup Hustle podcast has also been a big key to our success.
For any business, referrals are also essential to growth. Something else we commonly see is an employee of a current customer switching jobs and bringing us into their new company. Full Scale now has a sales team and is growing in multiple ways.
In the early days, the difference was us. It didn’t matter how many competitors we had or how big they were. Our potential customers didn’t know any of our competitors either. But they knew us, and they trusted us. That is what ultimately mattered.
In a crowded market, your personal brand and your network are the difference.