The SaaS Graveyard: Why most SaaS fail
In the good ol’ days, it was really easy to start a business. You just looked around your village, found something no-one else was selling, and sold that thing.
No candle-maker? Sick. Just dip a string in some animal fat and you’re set for life. No social media, no paid ads — just occasionally yelling “GET YOUR GROSS SHEEPY FIRESTICKS HERE” whenever someone walks past.
But now?
Now, you’ve got to compete with everyone else in the entire world.
It’s a fucking nightmare.
And no industry has been more affected by this than software. Especially in this age of no-code, AI, and ‘vibe coding’, where you’ve got a new competitor every other day.
You’ve worked tirelessly on your app for six years? So what? Bret from Arkansas just used ChatGPT to create the exact same app. Sure, his software isn’t technically “secure”, and it’ll grind to a halt as soon as he’s got more than 11 users. But the suckers on Product Hunt don’t know that!
This is why 70% of tech startups fail within the first five years. There’s simply too much competition, and not enough demand.
But this isn’t a story of doom and gloom. I’m not the kind of writer to kill off a fan favourite just for the shock factor (looking at you, The Walking Dead). The good news is that 30% do make it past the five year mark.
Whether you’re a founder, CMO, fractional CMO, marketing manager, marketing assistant, or the partner of a founder who’s been roped in to help with marketing, my blogs are for you.
But first, I’ll let you in on a little secret — the success of a startup is not directly tied to the quality of the product.
Of course, it helps to have a good product, especially in the long-run. But quality is irrelevant if you can’t get people to use the damn thing. And getting people to use the damn thing is the job of good positioning.
To use an ethically-questionable horse racing analogy — your product is the jockey, and your positioning is the racehorse. Sure, you need a trained jockey, but it’s the speed of the horse that wins the race.
Whereas having a good product with bad positioning is like hiring the best jockey in the world, and forcing them to race upon a geriatric Chihuahua. You’re not going to win the race…and you’ve probably killed a dog.
(OK, that analogy got pretty dark. I’m sorry about that. But hopefully I’ve made my point and won’t have to kill anything else in this book.)
Case Study: Clinkle vs Venmo
Picture the scene…it’s 2012 and you’re listening to Gangnam Style while posting to your brand new Instagram account. Donald Trump is still just that buffoon from The Apprentice.
Good times…
There is also growing excitement in Silicon Valley about mobile payments due to the skyrocketing popularity of smartphones, and there are two companies vying for the spotlight.
One is Clinkle, the brainchild of Stanford student Lucas Duplan. Clinkle emerged with huge amounts of hype, which quickly translated into huge amounts of funding. It positioned itself as the future of payments, promising new technology that’ll change the way we pay for things. Rumours spread about what this secret ground-breaking technology could be. There was talk of revolution!
The other is Venmo. It had already been around for a few years, and wasn’t promising to revolutionise anything. Instead, it was simply trying to solve the problem of easily paying friends back without cash, cheques, or bank transfers. It didn’t even allow consumer-to-business transactions back then.
You already know Venmo won. But why?
(And if you didn’t know it was Venmo, I suggest getting out more)
Clinkle had more advanced technology, more features, it solved more problems, and had more use cases. So what was the problem?
Simple — people didn’t know what it did or how to use it.
They promised to solve all the problems, but no-one no-one actually understood if it would solve their problem. And when they tried to understand, it was confusing and overwhelming.
Whereas Venmo made it perfectly clear. They were a social utility for paying your mates back.
Their positioning was clear, concise, and targeted. When consumers compared the two, Venmo gave them more confidence that it would actually solve a real-life problem.
It’s not always that simple
The above case study is a good example, but positioning battles are rarely this cut and dry.
In fact, this one wasn’t that simple, either.
It’s easy to fall into the trap of believing your competitors are your biggest competition. Which semantically makes a lot of sense.
But in most cases that’s only a small part of the fight.
As well as competing with Clinkle, Venmo was also competing with cash, cheques, bank transfers, and hoping your friend forgets you owe them money.
If their target customers don’t believe there was a problem to solve, the tussle between Venmo and Clinkle is irrelevant and they both fail.
Before apps like Trello and Todoist became popular, their closest competitor would have been pen and paper. In fact, it still is.
And these other competitors can come in many forms:
Manual processes
Spreadsheets
ChatGPT
Notion templates
Cheap outsourcing (Fiverr or Upwork)
Or it could be another piece of technology that solves the problem in a completely different way.
When Slack launched, its most dangerous competitor wasn’t another chat app like Jabber, HipChat, or IRC. It was email!
This is why positioning is so important. You need to make consumers believe three things:
They have a problem worth solving
You solve that problem
Your solution is better than the alternatives
Together, these three make up the Positioning Belief Triangle, which I go into more detail about in SaaS Positioning: The ultimate guide.
But the headline is that if people don’t believe these three things about your product, you’ll just become another SaaS in the graveyard.
And we don’t want that!
