How 10 Successful SaaS Companies Win Big with Unfair Distribution Advantages

Given the state of growth in the SaaS industry, it’s hard to imagine that there’s any more room for new ideas or startups. When you start factoring in the incumbent businesses that seem light years ahead, it starts to feel like a heavily-crowded nightclub – and everyone else is late to the party.

When the party gets too crowded, though, you don’t give up – you get creative and bring the party outside. Countless companies have entered crowded markets and used creativity, scrap, sustainable growth hacking, and other factors to create an unfair advantage over industry incumbents and existing players.

Netflix came on to a crowded scene using a new model to take on giants like Blockbuster. Its unfair advantage was the ability to aggregate demand with a model that didn’t require a pervasive presence to succeed. Blockbuster, on the other hand, had to be near its customers in convenient and expensive locations.

Blockbuster eventually tried to emulate Netflix by offering streaming services, but Netflix had already stolen the show.

When you can latch onto significant market share early by doing something different, something that competitors hadn’t considered or are unable to achieve, you introduce idiosyncrasies that people depend on. Even early on after deployment, competition can have trouble catching up.

This is where SaaS companies can quickly gain a lot of traction. Barring other unfair advantages, the simple fact of you having a smaller user base means that you can adapt the design of a product or service, or its functionality, with greater flexibility than larger incumbents.

Likewise, early adopters are far more open to changes in functionality. And a small user base makes it easier for smaller SaaS offerings to manage those who do leave. Losing 10% of users might equate to a few thousand for a small startup; it might be closer to 200,000 for a larger company.

The key to an unfair distribution advantage is finding something that is difficult or impossible for competitors to replicate, or leveraging what you already have to firmly root yourself.

Here are some examples of companies that dominated by unfair advantage.

Salesforce

When Salesforce was launched, it entered a relatively large market, going up against Siebel, a larger incumbent in the industry that held a dominant market share. Rather than take existing companies head on, Salesforce aimed to disrupt from below.

Salesforce focused on small businesses using a simplified pricing model along with low-risk implementation while it touted the “no software” mantra. It pushed this message for years as it systematically worked to expand beyond just CRM, acquiring other companies and absorbing those services (like ExactTarget) to create an all-in-one platform approach.

With a tiered pricing model that made for affordable early adoption, a customizable full-solution platform, and pricing increases based on functionality tiers, Salesforce created a solution to scale from the very beginning.

It also drove customer culture, leveling the playing field for users. Unlike larger software companies, Salesforce encouraged the mixture of customers, administrators, executives, partners, and all levels of employees at various events. In the early 2000s it was a game-changer to give an administrator the opportunity to address executives at an event like Dreamforce. It changed the scope of the net promoter in the tech industry.

GitHub

Code repositories aren’t a new thing. For years, Sourceforge was the basket everyone used to catch and store open source code online. Google (Google Code) and Microsoft (CodePlex) followed suit along with others, but GitHub stormed the scene and developers around the world were enamored.

GitHub is based on the version control software Git, originally created by Linus Torvalds, the creator of Linux. Git allowed others to work on Linux code at the same time without crippling one another. Code could be returned to the central Linux repository and would mesh seamlessly.

GitHub created something that wasn’t just a code repository; it was a site where any software project could operate with seamless collaboration much like the central Linux repository. This approach completely changed the model for open source code. It also helps that public projects are completely free to host, and for just $7 per month you can host unlimited private repositories.

Tinder

There are plenty of dating websites and applications out there, so when Tinder launched, it was going up against some serious incumbents. But those websites were targeting a much different audience. On sites like Match.com and eHarmony, people handle dating very privately. It wasn’t typically something adults wanted to share with one another and talk about.

After all, who really wants to admit that they’re lonely and desperately seeking affection online?

Millennials do, apparently. When Tinder launched, its team knew exactly who they wanted to target with this new approach to dating and hookups. Millennials are digital-savvy and mobile-first, so Tinder took to sororities around the nation to present the application and get groups of young women to install it during the visit.

The team then abruptly went to corresponding fraternities and showed off the app, displaying all the local women that the men knew. This move drove the initial user base from fewer than 5,000 to over 15,000 and began an avalanche of word-of-mouth through the Greek organizations at colleges across the nation.

Unlike the more private and personal dating sites, people who use Tinder have proven to be more casual about its nature. It’s become socially acceptable to talk about, show off, present to friends, and share Tinder stories. This network effect among a younger and more casual generation gave it a massive distribution advantage that largely contributed to its success over industry incumbents, and today the application boasts approximately 50 million users with 10 million daily active users.

Dropbox

Cloud storage is nothing new. Travel back in time to the early 90s, when Compuserve was offering 128k of data storage. The landscape has changed a lot in the last 30 odd years, and there’s no shortage of cloud storage solutions.

Dropbox had a massive task ahead of it, but its efforts to stand out have made the name synonymous with cloud storage, collaboration, and data backups. Its approach was relatively simple, but it made the popularity of the service explode: give it away for free.

Dropbox introduced a referral program early on, offering limited free data storage. You could expand that storage by inviting someone else to set up a free account. Dropbox wasn’t really being original with its referral program, but it did it so well that it’s now the model that other companies aspire to.

By offering up to 16GB of free storage based on referrals, Dropbox went from 100,000 to 4,000,000 users in just 15 months.

What helped drive those referrals was the simplistic approach to the interface, with a UX that was a complete painkiller.

DocuSign

It seems ridiculous to hammer out a digital deal with vendors, partners, or other parties, and then print out documents, sign them, scan or fax them, get signatures, and wait for those to be scanned or faxed back to complete the signature process – and then send copies out to all the parties involved, often involving another round of scans or faxes.

Today, DocuSign has more than 85 million users in 188 countries. That success is largely driven by the platform itself. Rather than wait for the market to change, it changed the market.

When a DocuSign registered user sends a contract or form to a non-DocuSign user, the latter is greeted with the simplest way to sign and complete the document. It begs the question, “Why am I not using this?” The ease of use of the product drives its own distribution and propagation, and has continued to do so over the last decade. Electronic signature tech isn’t sexy, but it’s mission critical for any business that wants to streamline and make things more efficient.

Sometimes it’s the product itself that creates an unfair advantage, because no one else has what you’ve got.

Slack

In a crowded marketplace full of team chat applications like Campfire (and the many similar copycat products), how do you make a simple chat application stand out?

In short, you make it fun. Not only does Slack leverage serious personality to make it more engaging and approachable, the simplicity of the platform makes Slack an enjoyable place to collaborate and communicate.

Slack puts everything into a long continuous thread of information, harkening back to IRC days where we spent hours in chat rooms (you know you’re guilty). Step away too long, and you worry you’ll miss something. This drives people to Slack constantly, much in the same way we live inside our social accounts on mobile devices. Slacking is as normal as using Facebook or email.

The simplicity of it allowed for easy adoption and the word to spread as the software became ingrained, offering teams an enjoyable way to engage 24/7. People are working without realizing they’re working, pushing productivity higher. Couple that user hype with marketing, brand personality, and educational content, and you have a villainously brilliant advantage over the competition.

Zapier

Zapier is a software tool that took integration to the next level, democratizing integrations and making it extremely simple for those without tech knowledge (or access to a developer) to streamline their workflows.

But it wasn’t the tool itself that gave Zapier an advantage – it was the scrappy approach of the founders. Rather than try to outspend others in the market, they went old school. The team knocked on digital doors and connected with companies to ask the question, “What software would you want to integrate if you could?”

Based on the responses it received, Zapier programmed those integrations and handed them back to those businesses. A little bit of scrappy old school growth hacking gave Zapier a major advantage in the arena of workflow automation.

AppDirect

In 2009, co-founder Daniel Saks moved to Silicon Valley and saw the opportunity to solve countless small business problems in cloud computing. Inspired by the potential for change, he and Nicolas Desmarais launched the AppDirect platform to connect developers to small businesses that needed cloud apps and similar services to improve the efficiency of their operations.

In a world dominated by Android and Apple marketplaces, AppDirect gave app and cloud developers a much-needed marketplace for monetization and management. What greatly contributed to the success and growth of AppDirect were the core values of the company, and the direct, personal approach it takes with customers.

In an interview with FastCompany, Saks stated,

“We do a ton of research on [partner] companies’ culture and organizational structure. I will fly at any point to meet a customer. One thing Silicon Valley companies tend to forget is that nothing beats a human relationship.”

AppDirect’s goal was to provide the best level of personal engagement, so that no matter the client’s background or location, they would be completely comfortable.

When a SaaS like AppDirect contributes to the development and success of other SaaS services, everyone pays attention.

Huddle

Huddle wanted a unique approach to collaboration, with teams working together on projects, sharing, and collaborating in the same way the average person uses Facebook. This kind of remote, intelligent collaboration caught the attention of the UK government agencies early on, making them early adopters of the platform.

Getting your foot in the door with larger organizations early on can be a huge advantage over others in the same market. In the case of Huddle, government adoption paved the way for Fortune 500s to follow suit in picking up Huddle’s collaborative SaaS offering.

Snapchat

I know, I know. But I couldn’t resist adding Snapchat to the list. Because their unfair advantage is a fine exemplar of how attention works in our age.

Snapchat has exploded in popularity in a very short span of time, which is surprising given the flood of social apps that already exist. In just two years, the company went from an idea – launched in 2011 – to seeing more than 350 million snaps per day.

This year, Snapchat has grown to round out at a $3.5 billion valuation, which indicates that it isn’t just a fad application that will fall to the wayside.

Snapchat’s remarkable growth and unfair distribution can be credited to its disruptive factor: while everyone else has been living in an age of permanency, where content that is created and shared seems to stick around forever, Snapchat embraces the concept of destruction.

The “in the moment” nature of content that disappears shortly after being viewed provides a very personal, fun, and more secure way for people to engage with one another. It’s built-in privacy that people didn’t know they wanted until Snapchat gave it to them. It was the first app of its kind to offer freedom of expression without public ramification.

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What do you feel are unfair advantages a startup can use to stand out in a crowded marketplace against incumbent businesses? Comment your thoughts below.

Credits: All the product images are sourced from Google and edited using Prisma.