When a Competitor Raises A Big Round

In SaaS, competition is inevitable. Unless your idea is an obvious dead end, you’ll see competitors receiving VC funding. What to do when this happens?

First, don’t over-react. As Jeff Bezos has famously said, obsess about customers, not competitors.

If you have already achieved product-market fit (PMF), you should know exactly what your customers want. A competitive funding announcement shouldn’t tell you anything new. However, watch out for blind spots.

On the other hand, if you are pre-PMF, you are likely still building visibility into your target market. If a competitor raises a big round, it could be a source of useful information.

Here is the key question: What Does This Say About What Customers Want? Does the funding announcement yield any new information on what customers are valuing or not valuing in your target market?

A few additional questions to consider:

• Is it surprising that customers would like the competitor’s product? If so, why?

• What do I know about the target market that my competitor doesn’t know?

• Is there anything they might know that I don’t know?

• Who in their target market will be under-served by their product (and therefore a ripe prospect for my product)?

• How will my product be differentiated enough to stand out?

Usually, a competitor’s funding progress should have zero impact on your strategy. Still, you should be prepared for a competitor’s funding announcement to trigger questions from customers, team members, and investors.

It’s good to be ready for these types of questions - they are inevitable. Ideally, you can strike a balance between acknowledging the reality of a competitor’s progress and maintaining conviction that you are building what will be a dramatically superior solution for your target market.