Ideas and Validation March 27, 2020

Is the SaaS market oversaturated?

Jon K. Bernhardsen @jonbern

I'm a fairly experienced software developer, but relatively new to the indie hacker scene. One of my long term goals is to build a successful SaaS on the side that can help me diversify my income stream and become more anti-fragile.

However, what strikes me is that whenever I come up with an idea for a SaaS, and start checking the competition, it seems the market is already very crowded. I can easily find more than 10 existing companies that do the same thing, and many of them seem quite good.

Am I too late to the game? Should I have started 10 years ago? Or are my ideas too generic and obvious?

From listening to the podcast I have learned that I need to "niche down" the product idea, and that makes sense, but at the same time it seems that when I try to niche down, it's still a crowded market.

Looking forward to hearing what you fellow IndieHackers think.

Is the SaaS market oversaturated today, or are there still good opportunities out there?

Thanks!

  1. 13

    @Kevcon80 wrote an awesome response already, and I have a some points to add.

    1. Some areas are definitely saturated, generic CRM for B2B, for example. But recently someone here announced they were offering a CRM for people that sell direct to consumer. My feedback was that I'd been waiting for years to see that built, as the existing options don't work well for that particular use-case. There are millions of consultants, lawyers, trainers, etc. that sell their services direct to a consumer that aren't buying on behalf of an employer.

    2. There are way too many clones! Even for IH now there are sites trying to build for the exact same audience, for the exact same purpose. Why bother? It's hard enough to get customers, but to try to steal them, good luck! Wouldn't it be better to evaluate what particular things you believe are missing from the service you want to clone, and then try to offer that instead? In this sense you can attract the same or similar audience to your product, and maybe even the other company that is already far ahead could buy your product in the future.

    3. Find a subject matter expert or corporation who can be a strategic partner, to help with the idea and the first customers. Lawyers are going crazy right now because their traditional business practices are getting completely tossed out the window by this quarantine. 99% of lawyers, (I made this # up), have worked from an office on paper files, and meet their customers in person. Now cloud-based practice management, and video conferencing software is seeing exponential growth from that profession.

    4. If all else fails, develop a JavaScript framework. That seems to be a real popular thing to do, and the industry allows many redundant entrants. LOL

    I have no podcast or blog to send you to, I just ramble here.

    1. 5

      Yet another JavaScript framework, that's exactly what the world needs. I like your style! :P

      Your first and second points are exactly why I started pondering whether the marked is saturated. Unless you're able to identify an edge, or scratch an itch that the competition isn't covering, I think you have the odds stacked up against you if you start out today.

      Your third point is probably a very good approach. Using your existing network, family, and friends, and speaking with them to try to identify whether they have some problems that are worth solving. Of course it's no guarantee, but at least you will have one customer from the start, and you will have someone with a real pain, and understanding of the problem at hand.

      Thank you for you reply. It was more than ramble to me. Appreciated!

      1. 2

        If you find a strategic partner that can also be your first investor, it really sweetens the deal, and then they're literally invested in your success.

        1. 1

          Indeed, if they can invest even better!

          However, at which point are you no longer an indie hacker? Are you still an indie hacker if you receive investment from someone?

          Also, what would the potential negative aspects of receiving investment be? Lack of control and independence? Pressure from your partner(s) to deliver within a given time period? The latter, combined with still having a full-time job can be very stressful if it takes a long time for the project to be successful, or if it never becomes a success.

          1. 2

            However, at which point are you no longer an indie hacker? Are you still an indie hacker if you receive investment from someone?

            I don't make the rules, but I've also had this thought. I'm trying bootstrapping and looking for a strategic partner / investor at the same time. Whatever it takes to push my project forward and get me beyond being a wantrepreneur. The idea is to have plenty of dolla bills to wipe the tears away from any hate that comes my way. :-P

            Also, what would the potential negative aspects of receiving investment be? Lack of control and independence? Pressure from your partner(s) to deliver within a given time period?

            I'll offer a solid maybe to any and all of that. There's no free lunch.

            The latter, combined with still having a full-time job can be very stressful if it takes a long time for the project to be successful, or if it never becomes a success.

            You're unlikely to get investment if you tell the potential investor that you're planning to keep your full-time job while working on this "side project".

            1. 2

              LOL, I hear ya! Tears be gone!

              Indie hacker or not, I think in the end it's about understanding what is right for you, and following that path. That's where the advantage of life experience, and knowing yourself comes into play.

              Yes, maybe the biggest drawback of receiving investment is that you become committed, not only to yourself, but to someone else. I'd say one of the advantages of being an indie hacker, is that you can lower your risk by keeping your full-time job while seeing how your "side-project, or side-business, develops. You can still give it a 100% (of your spare-time).

    2. 2

      I have no podcast or blog to send you to, I just ramble here.

      Here's me thinking you're about to send me to a link your blog, YT, podcast, t-shirt shop and something else in between.

      1. 2

        Meh, I'm not a big talker. I listen or read and then respond. 1995-2008 was my social era, now I prefer to mostly keep to myself. It's actually why I changed my startup strategy from being the face of a product company, to being the behind-the-scenes support system of product companies.

  2. 9

    There's still plenty of good opportunities. How are you going about finding an idea?

    I'd recommend being a bit more strategic than just brainstorming. I have a ton of thoughts around this category, but I'll try to offer the shortest two cents that I can. Happy to expand on any if I'm unclear.

    Don't be afraid of competition.
    A lot of people have an idea, search Google, and see either:

    • A ton of companies doing similar things
    • No companies at all

    If they see a lot of companies, they say "Oh I can't do this idea, there's too much competition". And if the see no companies they say "Ah well there must be a reason no one is doing this, it must be a bad idea".

    It's easy to have let every idea fall into one of these two categories. I'd rather take an idea with competition than one without.

    Figure out if your idea has 'pull'.
    I'm a big fan of the concept of 'pull' for Indie Hackers. While the first largest point of failure for Indie Hackers is not ever going live with a project, the second biggest point is building something that no one wants.

    I wrote a good bit about pull here: https://www.indiehackers.com/post/you-need-to-understand-the-3-reasons-people-buy-0d952dadde

    Use constraints to narrow down your ideas.

    Even if you have a great idea, it may be a bad idea to work on it. For example, a push idea doesn't fit with being a bootstrapper, in my opinion. Likewise, you should probably avoid the following categories:

    • It would take more than two months to make the MVP
    • Your customers would be a group of people that you don't particularly enjoy
    • It's not clear to you how you would reach your customers
    • It's a dying or declining market

    These are just personal recommendations, I'd suggest you add/remove from them.

    Good idea checklist

    Last but not least, I'll leave you with a small checklist that I believe a good idea should have:

    1. A good idea should have pull, at least for an IHer. You should have a good understanding of exactly who is looking for this product.
    2. You should have a good understanding of what "job" your potential customers are trying to accomplish. People buy products in order to remove an obstacle from their life. Find out what job they are trying to accomplish. Additionally, why do some people choose competitor A over competitor B? What is the one or two things they care about most that makes them choose one over the other?
    3. Understand your positioning. What would your product's unique advantage be over its competitors, and what subset of the people looking for this product would care about that unique advantage? Market to them.
    4. Have a solid idea of how you could reach those visitors. Do they hang out in reddit, slack, or other groups online? How big is the search volume, could you do content marketing and have them come to you?

    I'll be talking about all of this a bunch on https://firsttimefounder.transistor.fm/ in the next episode, since it's been on my mind a lot.

    Good luck!

    1. 2

      @Kevcon80 totally agree with you about market pull. I've seen it firsthand in two different products. One I tried for years to push it to customers with no luck. The other felt like a ball rolling downhill, customers flocking in to try it out with large sales that went so smoothly. I was practically dumbfounded at the ease in which I was selling it.

      1. 1

        Yep, it's a huge difference. I think this is why "product-led" has become a bit of a buzzword recently. I like the idea that the product drives the business, but I think it misses step 1, which is how to actually go about deciding on that project!

      2. 1

        Another important tip I got from Ryan Holiday seconding No.2 as an answer to where do you find the right people for your product?
        "If it isn't obvious to you, then you don't know your industry well enough to even consider launching a product."

    2. 1

      Thank you for your insightful reply. It is much appreciated, and I will try to internalise your ideas and message.

      I think I certainly fall into the first category of people, at least until now.

      I like your perspective on why a crowded market might be a good thing. It can mean that there's a lot of people that are willing to pay to have that problem solved. On the other hand, it can also mean that it's an easy problem to solve, with a low barrier of entry, and I think it's very important to be able to identify which one it is.

      You also have a very good point regarding knowing how to reach your customers, and this is something I also have struggled with. Previously, I have followed the "if you build it they will come" strategy without much success. Going forward, I will make a plan for this even before writing the first line of code.

      I have subscribed to your podcast, and I'm looking forward to learning more about your ideas. Thank you!

      1. 1

        Thanks! I just do the podcast for fun and because I love the IH community, you won’t find any up-sell there (unless you happen to like my product, but my market isn’t founders per se).

        By the way, your post inspired me to write another post about how to stand out in a competitive market. Would love to hear your thoughts!

  3. 4

    As @Blake_Emigro mentioned, some areas are saturated. I've seen this first hand building my first SaaS startup in the email marketing niche. Way too crowded and less room for innovation.

    On the other hand, there will always be many opportunities in the space. Think about this:

    1. New platforms emerge every year, meaning new problems can be solved for the users of those platforms. (e.g. Slack or Shopify marketplace didn't even existed few years ago)
    2. New technologies emerge every year, meaning the entry barrier will be lower in categories otherwise hard to enter with little capital.
    3. New markets emerge every year, meaning you can take an existing product and niche it towards a new market. (e.g. bank for freelancers, CRM for influencers, credit card for startups)

    No matter what kind of product you're looking to build, make sure to actually validate the idea and get at least few people to commit to the product before starting building it.

    1. 2

      New platforms emerge every year, meaning new problems can be solved for the users of those platforms. (e.g. Slack or Shopify marketplace didn't even existed few years ago)

      Yeah, the hold lifetime that a product can maintain a hold on a market is drastically shortening. I first tried Slack in 2016 and my thought was that the Microsoft chat app that I was using at work in 2014 was better. I haven't tried Microsoft Teams, but I'm pretty sure it will address some of the more annoying parts of Slack...

      No matter what kind of product you're looking to build, make sure to actually validate the idea and get at least few people to commit to the product before starting building it.

      The best piece of feedback I received was from some user testing I did with my Balsamiq mockups. I watched a woman use my demo, and she said to me, "it's nice, but kind-of boring." I was blown away, it made me realize I was designing enterprise software to sell to consumers. Changes were made before a line of code was written.

    2. 1

      That's very sound advice. The "build it and they will come strategy" can be very costly in regards to time and effort.

      Thank you!

  4. 3

    The short answer is yes there are opportunities and there always will be. I came across a blog article yesterday discussing how the golden ages of blogging are practically over. I was surprised to read that and then checked the date. It was written in 2011. Now, 9 years later, the most effective marketing strategy is content marketing.

    There are two schools of thought about market saturation. Either there are too many competitors and you don’t stand a chance or another way to look at it is, there are lots of competition in this space which means there is money to be made. Remember, it’s always easier to stand in the flow of the money than just inventing something totally new and expect people to flock to it. Especially if the ideas have been market tested. I suggest you check out @csallen's interview with @amyhoy at https://youtu.be/KyKTkr3Rvu4 where she talks about getting a tiny slice of a big cake (which brings her $500,000 in ARR).

    If you’re a startup trying to get investor money, it’ll be harder to convince angels or VCs to fund another uber or another facebook as many have tried and failed and the market is now oversaturated.

    If you have noticed, there’s always a wave of similar startups competing against each other when ideas are hot and new [operating systems, word processers, spreadsheets, search, ecommerce retailers, music sharing, video sharing, social networks, chat/voip applications, sharing economy applications, delivery apps, chatbots, etc…] Each wave had hundreds of VC backed startups that fought it out with a winner take all mentality. To outsell an existing market incumbent, you would need to triple your marketing budget or 10x the value to have others switch to you. Just imagine how expensive that is.

    On the other hand, it would be much easier to convince potential investors these days of building an AI based proptech startup. Why? AI is hot, and hundreds of startups are already being funded. No investor wants to miss out on the next best thing. Just check out Joma interviewing his brother who sold his startup for $60 Million https://youtu.be/fB7nyxXaczY.

    If that’s your goal, then you should not look at any competition. See where the market trends are and dive deep with a partner. Eric Schmidt once told Marissa Mayer when she asked him about the best career advice. He answered her “See where the next big wave is and ride it”. So, build your MVP, try it out with a couple of customers and network till you get the necessary funding to take it to the next level. But beware, if you get investor money, then you basically have three options: sell, go public or shut down. i.e. you’re forced to scale quickly or die.

    Now, if you’re an Indie developer who wants to make extra income on the side (~MRR >= $10,000) which is kind of the defacto level of calling your SaaS project a success. Then, the dynamics of the game are different. You need to:
    [1] Choose an established market where customers are clearly paying money every month for other competitive solutions.
    [2] See where you can offer something unique by brainstorming ideas and talking to your potential customers. Maybe niche down to specific target market or build a few unique features that others haven’t gotten the time to implement them.
    [3] Build an MVP / Mockup / prototype and see if it flies.
    [4] If customers validate it, then go ahead and build it.

    As an Indie Developer, never build something that is not customer validated unless it’s a personal fun or passion project. You can read Amy Hoy’s blog article that explains the same thing in more detail. https://stackingthebricks.com/pizza-crust-problems/

    If you want to go on that path, I suggest you take Pat Flynn’s course “Smart from Scratch” which is really quite good to put you in that “customer centric” mental state. Thankfully, Pat provided the course for free to help entrepreneurs who are staying home during the COVID-19 epidemic:
    https://courses.smartpassiveincome.com/p/smart-from-scratch

    Good Luck,
    Ismail

    1. 1

      Thanks Ismail, that's a lot of good info. Maybe we will look back at 2020 in 10 years and recognise this era as the golden era of independent SaaS companies.

      It has become clear to me that I've looked at existing competition in the wrong way. It's actually a good sign, because it means it's a problem that people are willing to pay to have solved. This became even more clear to me when I watched the interview with @amyhoy that you shared.

      Thanks!

  5. 2

    Hey @jonbern thanks for putting up this discussion

    Short answer: There's never the best time. Anytime is a good time.

    What makes your idea different is how you execute and whether you move fast enough.

    Think about the evolution of ICQ, MSN, Whatsapp...

    Consumers behavior change over time, so does marketing and problems :)

    1. 1

      Great point! Also, I have to admit I miss ICQ :P

  6. 2

    The best time to start would have been 10 years ago, but the second-best time is now.

    For all the extra competition and saturated niches there are, the tooling is so much better, and there are so many more companies that are used to buying SaaS for their problems.

    1. 1

      That's a good point! Even though the competition is greater today, the willingness to use SaaS products is also much higher.

  7. 2

    Every idea seems to already have a solution somewhere. So apparently the game is all about doing something in a new way.
    "crowded market means good possibilities", otherwise known as a gold rush.

    Personally I'm definitely suffering from some saas/software/app fatigue, there's just so much fuzz and noise out there, but honestly, most of it's crap, built in 10 minutes by someone "less" experienced in creating proper software. So for me the gold is in finding "real" software created by a craftsman.

    1. 1

      That's an interesting observation, and it makes me think of the people who had the biggest probability of becoming rich during the gold rush, which was the merchants selling tools and goods to the gold diggers.

      On the other hand, even that trade can become crowded given enough merchants!

  8. 1

    SaaS isn't a market. I think that's a bad way to think about it. It's a model of revenue. Thinking about it this way is just a way of saying "is it overused?", or at the very least that's what I am hearing.

    That being said, I get what you meant by this post. No, it's not overly "saturated". It's just all the people who got into it early found success very easily. Things are easier when you don't have competition. This goes with anything. Just find a niche and you can still probably succeed. It helps if you're part of that niche and understand it to begin with.

    There are riches in the niches.

    Customers don't buy into something because it's a SaaS. They do it because the service provides a lot of value to them or is perceived to give plenty of value to them.

  9. 1

    For something as generic and as broad as SaaS to be out of opportunities is like for things to stop growing on the Earth. Maybe here and there but as a whole SaaS could not possibly stop growing unless the economy also stop growing.

    New technologies are born all the time so there are always new opportunities no matter what. Events happen, values change, things move all the time. There will always be new opportunities. But when you don't have a good idea, maybe you're not positioned right, maybe you're not in the know of a new trend, maybe the problem you're tackling isn't hard enough (all the low hanging fruits are already picked but I doubt this).

  10. 1

    I was reminded of this great lecture by the contrarian entrepreneur / investor, Peter Thiel.
    "Competition is for losers"
    https://www.youtube.com/watch?v=3Fx5Q8xGU8k

  11. 1

    We are in a crowded space, but after three years of research the TAM is still 82% available. Execution is key.

  12. 1

    It could be saturated but that does not mean you cannot compete and even succeed.
    In fact, most of the successful SaaS companies today were not pioneers in their respective industries and, in fact, entered the game very late. So, go right ahead and jump in!

    1. 1

      Do you have any concrete examples of this, and what they did to differentiate themselves to become successful?

      One example I can think of is Slack, which was hardly a novel product, but maybe its ease of use and setup gave them an unfair advantage? From my own experience, I have seen that developers are the ones that initiate the use of Slack, often with the management initially unaware of it, and then later it becomes adopted/official in the company.

      What's more important, the product or the marketing strategy?

      1. 2

        What's more important, the product or the marketing strategy?

        I think we all know that both are very important. If the product has inelastic demand, then it is more important than the strategy. If the product has elastic demand and a significant substitution factor, then the strategy becomes very important.
        In my opinion, most SaaS ideas has elastic demand and can be easily substituted for the competition. This is where the most important factors come in: time and chance.

        About examples: I think the list is endless really. Start with MailChimp and the countless (successful) companies that literally do the EXACT SAME THING as them.

        Other than that, my personal favourite is Whatsapp because it was released around the time I was getting into the "chat culture".
        When it was first launched, there were many other products that were way better than it but it quickly caught fire. Why? I don't know but it might have something to do with their clever signup process that was, at the time, very convenient... literally "install and forget".

        So, as one Indie Hacker put it, don't look for a revolutionary idea. Just find out what others have already done and bring your own flavour to it. This approach bears a key advantage: the idea is, in a way, already validated.

        1. 1

          Very inspiring. Thank you.

          I think your point about the idea already being validated, and bringing your own flavour to it is very interesting.

  13. 1

    Honestly, I think it is about your ideas and not the SaaS market in general.

    1. 1

      That could well be, and if that's the case it's actually good. I can improve my ideas, but I can't change the market situation.

  14. 1

    I was asking myself the same question as a consumer of SaaS B2B products: so many of them, and they all look the same! It’s easy to forget that as the costs of building a company get lower and lower, so the barriers to entry into an industry: very hard to defend market share.
    There is still space for innovation, but it is hard out there. When I feel discouraged by competition, I always think about Google: everyone thought the search engine market was oversaturated when Sergei and Larry founded it. Who’s laughing now?

    1. 1

      Indeed, but at the same time if the market is crowded, you have to be significantly better than the competition. Your marketing and business development needs to be on point too. We know from history that having the best product isn't always sufficient to becoming the market leader.

      When it comes to Google, I think their dominance is coming to an end when it comes to search. More and more people are becoming privacy aware, and alternatives such as DuckDuckGo are becoming increasingly better. So, you're right, there are still opportunities! Markets change, sentiments change, and our societies change, all leading to new opportunities for those who recognise them.

  15. 1

    but at the same time it seems that when I try to niche down, it's still a crowded market.

    Welcome to my world.

    Everyone and their mother have the same idea of niching down, hence the crowdedness.

    You still have to jump in and compete regardless.

    There are a billion Shopify stores, yet more and more are opening and still doing well. There are a billion creators on Gumroad, yet more and more are sprouting up and still doing well. There are a billion YouTube channels in various niches... You know the drill.

    You STILL have to compete. Build your own tribe loyal to you, that's one defensible competitive advantage. Maybe bring something completely fresh to the table in terms of tech (but people will copy it right away). Have a marketing shtick that lifts you head and shoulders above your competition -- maybe a YouTube channel or a blog or a killer email list?

    1. 2

      Good insights, who said it was supposed to be easy right?

      What about making tools for all these billion Shopify stores, and for the creators on Gumroad, and the YouTubers? At least you have a big market, and maybe it's not THAT crowded there yet?

      1. 2

        It's still very crowded. Look at the Shopify store and Wordpress plugin market. They supply to creators/entrepreneurs, and they're still so many of them. You can even compete directly with Gumroad.

        I don't think it's about avoiding crowdedness anymore. It's about positioning correctly (your strategy) while having a defensible, non-replicable advantage (your tactic) so that you can differentiate effectively among a sea of competitors.