Startups have 4 main weapons to fight the market leader

1. Price

If the market leader is really expensive, startups can undercut them to gain a foothold.

Take the example of Fathom:

• They mirror many of the features of Gong but at a fraction of the cost.

2. Product

If startups have a truly revolutionary difference from the market leader, they can create meaningful differentiation.

Take the example of Figma:

• They have many of the same features as several Adobe apps, but they allow for real-time collaboration.

Note: this needs to be a 10x difference in quality or impact, not a 2x or 3x difference.

• "Better UX" isn't a 10x differentiator

3. Distribution

Someone once said (and please comment if you know who because I can't remember) that it's a race between startups getting to distribution before incumbents are able to innovate.

If you are able to spread your product to your customers FASTER than the market leaders, you can carve a differentiated spot in the market.

Take the example of Zoom:

• They created an innovative freemium plan that included 40min calls for up to 100 attendees, which allowed for a viral spread while Webex was relying on mostly top down sales (which was much slower).

4. Segmentation

This approach requires focusing your efforts on a specific market segment that is underserved by the market leader and doing everything you can to make the perfect product FOR THEM.

Take the example of YouCanBookMe:

• It might be hard to imagine how you could carve out a meaningful slice of the market from a company like Calendly, but founder Bridget Harris was able to bootstrap the company to $5m ARR by focusing on a segment of users that needed to have meeting links automatically translated into multiple different languages.

This is my favorite of the four approaches because it's by far the most accessible method to any startup.

It doesn't require having a revolutionary innovation or a massive distribution network.

It simply requires focus on a group of people or a specific use-case and the commitment to solving their problems better than anyone else.

By choosing a specific segment, you will likely be able to create a 10x better product (by targeting all of their pain points) AND get 10x better distribution (through incredibly targeted methods).