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Ask HN: Is it worth starting a SaaS in a niche that already has a clear leader?
90 points by iDemonix on Feb 6, 2016 | hide | past | favorite | 52 comments
I've been wanting to make a SaaS business for years. I've done PHP freelancing for years for some cash on the side of my full time Systems Engineer job, but rather than develop stuff for other people I'd like to take a break from that and make something for me.

My work, and several of my clients I've had, pay for and use StatusPage.io. I've always thought I could make something similar (obviously not as fully-fledged as SP.io) as it would interest me. At work I play with stuff like Redis, Galera clustering, VM management (Puppet etc) and outside of work I play with PHP - so this seems like it'd be a good project to bring them both together - I get to build/develop a site and also make it autoscale with AWS (never used AWS) etc - fun all around.

Is it worth doing months of research trying to find an 'untapped' niche or something that doesn't have a major leader, or is every niche going to have competition and I should just give it a go regardless if I'm looking to learn. I would love to learn, I'd class it as a success if it paid for its own hosting and made me more than say $100 a month.

Unless you're incredibly smart (i.e. not me), you should be going for niches where money is already being made and there are clear leaders you can go after. Otherwise you don't know if people will pay for your thing and don't have any people to use for research or as customer personas.

That out of the way, an area like that covered by StatusPage will cause you grief, at least with doing it at 'business scale'. People expect a status page to never go down and to be available even when The Worstâ„¢ occurs. It's not merely a software challenge but a huge operational and customer service one. Good luck though!


The only exception to that rule, which I feel is worth mentioning, is the infamous two-sided marketplace or network-dependent business.

In both cases market leaders have clear lock-in and it's very hard to compete with them without a huge pile of money.

But obviously the StatusPage idea discussed here doesn't have that problem.

Others have pointed out that A) the particular market you're looking it is somewhat tricky because of reliability requirements; and B) that a market with competition is a market with customers who will pay money, which is very true.

I want to offer a counterpoint to B, which is that a market with a clear leader is a market that isn't nearly as big as you think it is. The reason for this is that peeling customers off an incumbent is a lot more difficult than it seems at first. The temptation is to tell yourself, "This is a success if I get even a little bit of the market." That may be true for a market that's wide open, or that doesn't have a clear market leader. But if there is one, then your market size is really more like 20% of the addressable market, and your little slice of success has to be a lot larger than you think it is. And if its a good market, you've probably got a LOT of competitors thinking the same thing, and you're fighting it out over the slice of the market you can actually get to. I've experienced this in the event registration space, where a few companies like EventBrite dominate, and 300 other ticket companies fight it out for the 10% of the market that's actually up for grabs. Your marketing costs skyrocket, the customer acquisition costs are dramatically increased, and you're looking at a long slog to get to profitability.

All of that said, this doesn't mean don't do it. I'm a big fan of niche products, and being able to do the technical side means you've got an advantage over some potential competition who have to hire or contract out that part. But be aware that business success in a venture like this is harder than it may seem at first.

If a vendor leaves an umbrella under which you can profitably compete, then there's a business there. Or if you can differentiate enough. Heck, why not?

That said, the risky thing about this in particular is infrastructure products like StatusPage and PagerDuty and Runscope have to work all the time, every time.

If your site is down and PagerDuty doesn't alert you - you're an ex customer. If Runscope gets bogged down and you miss out on metrics for 10-20 minutes, and your clients start leaving - you're an ex customer. If StatusPage goes down in the middle of your outage, you're an ex customer.

And in all those situations, you're going to make noise on your way out (twitter, medium, whatever).

This is incredibly difficult for a solo, bootstrapped operation to achieve. It costs real money and takes real expertise to get that level of performance and availability out of your infrastructure (not to mention what you need to do in the application). This stuff is completely orthogonal to, say, writing the app itself. You can be an amazing Rails/Django/whatever developer and totally mess up your infrastructure - it's super easy to do so.

On the other hand, being a generic SaaS operation charging reasonable fees - no one has expectations of 100% availability, and if people can't access your invoicing app or recruiting backend or whatever for 20-30 minutes in the middle of the night - no one is going to complain.

What are your goals? To build some income? To learn AWS, PHP, etc? It sounds like you've got a couple of different goals here.

I suppose my goals are a culmination of all of them. The end goal would be to have some nice passive income (i.e. $1000/mo) but that would likely be income from multiple projects etc. This specific post was about taking that first step.

I suppose there's a lot more than a software problem behind SP.io, the 24/7 availability infrastructure etc. I'm not tied to that idea at all, it was just one of a few things I use in my day job that I thought I cold re-create with some improvements to areas I find annoying/lacking.

I'm in a very similar position. I build a product[1] to monitor website server and send notification.

I think that no matter what your idea is, it always has some other competitor already establish in that industry. Think of it this way: we have car, Toyota, Honda, Ford,...Lots of car company. We have beer, bunch of beer. So I don't see why we shouldn't build a product even it's already has a clear leader. Why do Gitlab build their product when Github BitBucket is so big...

At the end of the day, business is all about finding client. All you have to do it build a product, good enough, find some client, and go from there. You can even pivot your product to something completely different. You may gain more experience, knowledge deal with the system which may leads to other production.

You gotta start something first. The purpose is to have a sense of what is going on. No matter how good a product is, I always see someone complains about some aspect of it. That means it has room to improve, it has another way to do it, to make it better and sell to those people.

So, yes. Go ahead. Build it. And let it know when you launch it.

[1]: https://noty.im

Have you had any success?

I think going into any market knowing you won't have any advantage (tech or otherwise) is how you waste time (and potentially money).

A few years ago I saw a keynote at a game development conference talking about how on the app store most developers copy successful games. The presenter (David Whatley) called it mining for gold where others have already turned up every nugget possible (paraphrased because it's been a while...).

I think that's a good way to look at this as well. As a user of statuspage.io I can tell you that they leave a lot to be desired + their pricing isn't attractive. They have however a pretty robust and compelling solution.

Can you do something that will make me leave statuspage.io (after spending hours customizing my page) and _need_ to move over to your service? If so the answer is GO FOR IT and don't look back. I have a feeling the answer is no, and that's why you're unsure, at which point I'd start looking for other problems to solve.

Peter Thiel makes a good argument in his book Zero to One that every company needs to be designed to be a monopoly. While I disagree with some of that (competition is healthy), as a founder I know the importance of your differentiator being leaps ahead and not just an update away.

P.S. - The reason we pay for statuspage.io is because we don't have to build (and maintain) the whole management system and don't want to worry about it. For any legit company it's worth it.

There's only one way to find out if you can get the level of success you want :)

Unless you wanted to try your luck in the social network space, because there's no way anyone could achieve anything against the clear leader MySpace.

If people are paying for it, that means there's a market for it. Most products fail because they don't solve a problem, and not because they don't get built.

So, if you can find sufficient differentiators (or the market is big enough), I'd say yes. Otherwise no.

Having done this in a small niche to some success, here is my advice:

- start with a product that solves one or two pain points of the incumbent tool.

- compete on price in the beginning and as you add value, raise prices for new users.

- you can do things that don't scale early on like offer great support. Your big customers have the founders phone number. That sort of thing.

- find some shelf space you can own by targeting seo in chosen, winnable verticals. It's hard to do successful sem when you're small. You don't even have enough traffic to split test easily. Acquiring free traffic sources is necessary.

- remember, saas is a ramp up. 10% month over month growth gets pretty big before too long.

One thing I'm learning on a similar adventure is that either you make money or you don't make a penny.

Breaking that "first paying customers" barrier is difficult. Don't get discouraged when you show your project and no one pays attention, because that's what's going to happen and that's when you will really have to work hard for your dreams.

Programming is easy. Keeping your morale high is extremely difficult.

"...I should just give it a go regardless if I'm looking to learn. I would love to learn, I'd class it as a success if it paid for its own hosting and made me more than say $100 a month."

I think you've made up your mind but are just looking for a bump on the right direction. Go do it! You know you want to try. At worst, you learned some new stuff.

Another reason to do it is you will look a lot better to many prospective employers.

> I'd class it as a success if it paid for its own hosting and made me more than say $100 a month.

Then yes, absolutely!

Even if you were driven by revenue opportunity, it can still be worth starting a SaaS in a niche with a clear leader as long as you can clearly beat them in a few ways (ie. undercutting price, better UI / UX, etc).

Your "Then yes, absolutely" makes it sound like it is easy to make a SaaS with a monthly $100 revenue. Is it so?

The OP said he already uses the service from the competition for his clients so at the least he will be able to switch them over and have some revenue.

It's not hard at all. Find a company with a problem they're willing to pay $100 a month for. Tailor the product to their needs. Sell it to that company.

Can you turn it into a viable business? Depends on how hard you hustle.

> Find a company with a problem they're willing to pay $100 a month for.

That doesn't seem easy at all.

Why wouldn't it be? There are companies all around you. From the gas station down the street to the finance businesses downtown. They all have problems, and they all have money. Some of those problems can be solved with software. All you have to do is keep talking to them until you find one.

$100 a month is practically nothing on an American company's budget. To many of them, $1K a month and $100 a month mostly looks the same. They'll happily pay either amount, so long as the solution provided actually does what you say it does and it isn't a hassle.

Not sure if you'd consider StatusPage.io as a "clear leader". They claim to have around 2000 customers ( http://blog.statuspage.io/introducing-private-status-pages ) which I consider a small number of a potential target group. From some other posts, their revenue is around $3M/annually.

So if this is a $5M potential market, probably there is a clear winner. If this is a $100M potential market, things are just starting.

It is a great idea to go after an existing niche with an established leader. Why? Because people have already figured out how to acquire customers and make money.

For example, t-shirts were invented forever ago. Plenty of people start t-shirt companies and make money doing it. Hanes sells WAY more t-shirts than you will. It doesn't matter.

An established market is a better place to play than a totally new thing. You can be a very small operator and still make a very good living for yourself.

Think about Basecamp as another example. Microsoft Project owned project management. Basecamp came into the same market with a different angle and made a business out of it.

Traditional wisdom says stay away from existing big fish. I would say swim right next to them or in their wake. There are always little subniches and different ways you can sell the same basic solution in a different way.

Another way to look at it is software is a bit of fashion. People get tired of the same thing. So, sometimes they go buy a new thing that might have one feature they care about that the old thing didn't.

Most huge products you know about, use, and love started in niches that had established leader. This is true for iPhone, iPod, Mac, MacBook, Chromebook, Github, Facebook, Google, Twitter, MySql, Firefox, Chrome, Android, BlackBerry, Galaxy S, Xbox, Playstation, GoPro, and on and on and on and on and on.

Do yourself a favor, make a pitch page, have a beta sign up form, and start finding people to sign up for your beta. It doesn't even have to be a built product yet. It can be unfinished.

The only thing you need to have a business is customers that pay you money. You figure that out and it doesn't matter what niche you are in.

Peter Thiel gave a great talk about "second mover advantage".


Choose an existing market/app and go after it, but only if you bring a 10x differentiator.

I hear the "10x better" thing all the time, and it seems like an insurmountable barrier to me. I can only think of a few products that were 10x better than their predecessors.

Google maps - probably 10x better than the static maps before it.

Word - not 10x better than Ami. Excel - not 10x better than 123. Gmail - different but not 10x better than what I was using.

Nope, I got Google Maps, that's it.

Here's what I got:

- iPhone and iPad

- Broadband, technically not a product I guess.

- Salesforce.com, if you were around during that time, I think you'd agree.

- Touchscreen Ultrabooks, I don't care what anyone says, I LOVE them!

Personally I don't think Google Maps (upon it's conception) was 10x better than Mapquest. Even for a while after Maps came around, Mapquest was pretty compelling. Yahoo Maps was also around during this time, circa 2002 I believe, though I don't recall using it much.

I can think of quite a few products that weren't all that great upon first release. Sometimes it takes a few iterations/generations for it to really make sense.

Google didn't have to bring a 10x differentiator to the table in order for Google Maps to be worth it for them. They had other reasons for building it than directly making money off of it.

If you don't have to actively sell your product then the rules change.

I don't think it really needs to be 10x. It needs be significantly better at something, and enough so that you can get people to switch to your solution.

Or you might have a clever strategy for reaching potential customers that the elephant in the room hasn't reached yet. That could be enough to carve a niche on your own.

Sometimes just having a different pricing model is enough.

Exactly. Some aspect of the product should be 10x better than the competition.

Could be 10x lower operating costs by moving an on-premise solution to the cloud.

Could be 10x faster config and deployment.

Google's search engine was 10x AltaVista.

As someone who started a Saas in a niche market that had a long standing leader I'd say this:

Ask yourself not whether there is a leader in the market, but whether that industry is in flux and whether the buyers in the industry are apt to seek and adopt something new.

If you don't get the sense that things are fluid in your target market, then I'd recommend staying away. In some markets people just don't like change.

IMO it's not about whether there is a leader, or whether it's an untapped market, it's all about how the market reacts to new things.

Look for reactions to other products in the same market on social media. Was there excitement? apathy? Why? Consider this a preview of the kind of reactions you're going to get. If you don't like it stay away.

I replied a similar thread sometime ago with a short-story, if the OP is interested here it is: https://news.ycombinator.com/item?id=10540657

The presence of a leader means there is a market, which is a good sign.

> I would love to learn, I'd class it as a success if it paid for its own hosting and made me more than say $100 a month

I think you know the answer you're looking for. Go for it.

I think you need to ask your self how you'll market it. adwords? create a landing page with a free trial link to a wuffoo form to collect lead info. on the thank you page mention your collecting names for beta. then do the math and see if its worth it. or create a landing page and start blogging to get traffic. another option would be to partner with website creators and or hosting providers and work out a partnership to split the profits.

Look at more traditional businesses like restaurants. If there is a restaurant in the area, you might think - oh dear, no place for me here. But no, on the contrary, businesses thrive because of the environment around them. This existing restaurant offers "local food", so you offer Italian or "for single mothers with little kids". The spot becomes full of restaurants and there always will be customers to come to your place because they just happen to be in the area.

You go to a flower market - there are tens of different vendors selling similar quality, similar product at the same price and at the same closed space. And they are doing fine.

Or look at a traditional marketplace - you have tens of farmers selling very similar product. And yet they are coming together to sell their fruits and vegetables. True, maybe there are different dynamics there, there are more buyers than vegetable stands and if the line is longer than 5 people you move to another stand.

But I believe the same works with software and Internet Businesses. It does not harm anyone if there are different tools doing similar things. Look at digital cameras - there are hundreds of them and there is a market for each.

A great example is Coca Cola and Pepsi. Pepsi was created because it was understood that with the market saturated with one product there would obviously be people who would buy Pepsi just because it's not Coca Cola.

Competition is a very sound and healthy environment to work at because you can perfect your product and narrow down your target audience. As @petercooper said: because you see that there already is a business that thrives, you save yourself a lot of trouble testing if anybody wants to buy such a product.

Now marketing is the key.

In a busy market, distribution is king. It's hard to get your name out there.

Speaking of unknown players in this space, check out the wonderfully minimalistic updown.io. It's much cheaper than SP and really is quite good.

Here's our dashboard: https://updown.io/szug

Wow this looks good, just signed up.

Niches with a single dominant provider are generally a hot bed of discontent. If you know the market well enough and understand the issues that cause the discontent then it's an excellent place to be.

1) I'm currently building a product in a niche with a clear leader. Turns out it isn't that hard to steal customers from them because they appear to be rather comfortable and are unwilling to listen their customers.

2) Whatever niche you initially pick - please make the effort to do some basic customer discovery. Call some folks up who are directly experiencing the problem you are trying to solve. Even talking to 20 people will give you a lot more to go on. People are much more willing to talk if you aren't selling them anything.

> I'd class it as a success if it paid for its own hosting and made me more than say $100 a month.

If you can "niche", absolutely. A market leader cannot be serving everyone's needs precisely.

Give it a go. Actually doing it and learning from your failure or success is much better than endless analysis of niches.

Just make sure to have definite goals to make sure you are making progress along the way. If you miss goals continuously, maybe you should readjust your goals, maybe the niche is too difficult to break into, or maybe you need a different approach to marketing & getting traction - learning the "art" of finding out what it is will in itself be an invaluable experience.

Good luck!

Yes of course. What are you waiting for.

However my advice would be to find something truly uniquely different to your business, not just incrementally better or just incrementally different.

If you're going into a market with an existing market leader, you need to make sure you have a better way of attracting customers.

A lot of engineer types don't understand the sales cycle and how to design their sales funnel to capture curious visitors and cultivate them into paying customers.

Before launching a SAAS, look at whether you have a plan on attracting your "ideal customer" at a rate that makes economic sense to start your business venture.

"Never be afraid of a crowded market... just be better than everybody else." ~~ Bob Parsons

Note that "better" does not necessarily mean "better product". It could mean better marketing, better sales force, all of the above, or "other".

I suggest that you read The Discipline of Market Leaders, Marketing Warfare, and Differentiate or Die, and give serious thought to those ideas.

You need to pick your niche well. Go for one where people have lots of different opinions about how it should be done, then pick a particular niche. Bug tracking/project management is a good example of this: there's the big winners (say Jira) in the space, but then there are niches with enough people who want something different to Jira.

Are there niches in the statuspage space? I doubt it.

If you can sell it, build it.

There's definitely a lot of sites that don't use anything like statuspage.io, go out and convince them it'll help.

Talk to people who you think would be your customers. Good ol' fashioned market research.

If you can't sell it, build it anyway - but don't quit your job :)

Keep your first idea simple and focused because you have a lot to learn. You will need to integrate with services for payments, customer communications, support, a status page :-), etc. These all take time but are fun to learn about.

That's a good point, I suppose I should focus more on the learning than the income for the first project.

I say yes. If someone else is successful you know that it is a proven market.

Depending on how big they are you might not be able to beat them, but that doesn't mean you still can't be successful.

If you're looking for a final external "push" from a stranger, you've come to the right place. Start it. Build the thing you envision. Don't worry about competition in your space for now. Build the best product you can. Learn the stuff you want to learn. Show it to people. Talk about it with clients. Life is short and you only get one shot at it.

Many a company has been successful simply for not being the other guy.

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