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The Value of Competing with Large Incumbents, The Role of M&A Teams and How to Leverage Them - Tactician: #00116

The Value of Competing with Large Incumbents

When you square off against these big corporations, it’s like a David and Goliath story, but Goliath is accidentally handing out flyers for David.

‘Y’all check out David; he’s got some slick slingshots!’

The Value of Competing with Large Incumbents

Key Concepts and Tactics:

  • Understanding the Value of Competition: 

    • Point: Recognize that competition from larger players can actually help create demand and market awareness for your offering. 

    • "Recently Udemy founder Gagan Biyani shared his journey of raising funds for Udemy. He shared -

      • ‘When we started Udemy, a common investor challenge was: Why couldn't YouTube do this? The answer is paradoxical…’"

    • "YouTube provides more online education than any other platform in the world. But this HELPED Udemy grow instead of hurting Udemy's growth." 

    • "YouTube created the demand and behaviour of watching educational videos online, but it didn't quite solve the same need as Udemy."

  • Identifying Unmet Needs:

    • Point: Identify the specific needs that larger competitors are not adequately addressing, and position your offering as the solution.

    • "Users would go to YouTube, watch a 5-minute video on Python, and then realize they needed more. They'd see a $10 Udemy course on Python and receive the exact antidote to the problem created by YouTube."

    • "YouTube never offered our exact product because it was 'too small'."

  • Capitalizing on Market Opportunities:

    • Point: Recognize that the market for your offering may be larger than initially anticipated, and capitalize on the demand created by larger competitors.

    • "The market for online learning was bigger than anyone expected."

    • "Today, Udemy does $300M of sales of courses that are essentially just 50 YouTube-style videos put together into a thoughtful course."

  • Differentiating Your Offering:

    • Point: Differentiate your offering by providing a specialized, structured, and comprehensive solution that addresses the limitations of larger competitors.

    • "Udemy became the place you went when YouTube failed."

    • "Udemy gave structured learning that YouTube lacked."

  • Embracing a Coopetition Strategy:

    • Point: Adopt a coopetition strategy, where you compete with larger players in some areas while cooperating or benefiting from their presence in others.

    • "You can both compete and cooperate with the big players in some ways. Use what helps you; avoid what doesn't."

  • Continuous Improvement and Adaptation:

    • Point: Continuously improve and adapt your offering to stay ahead of the competition and meet evolving market needs.

    • "Most importantly, execute well. Constantly make your offering better than theirs for your targeted needs. Stay nimble as the market changes."

The Role of M&A Teams and How to Leverage Them

Why Read:

  • Critical insights for startup founders on how to effectively engage with large tech companies for potential acquisitions.

Featuring:

  • Jason M. Lemkin (@jasonlk), Founder at  SaaStr

Link: 

Key Concepts and Tactics:

  • Understanding the Role of the M&A Team:

    • Point: Recognize that in most tech companies, the M&A team does not drive acquisitions but rather implements them.

    • "Probably the most important thing to understand is that in 95%+ of tech companies, the "M&A team" does not drive M&A. Instead, they implement it."

  • Identifying the Key Decision Makers:

    • Point: Focus on building relationships with CEOs and relevant SVPs who drive acquisitions in their functional areas.

    • "M&A is usually driven by either the CEO, for game-changing acquisitions, or a functional SVP, to accelerate something in her functional area."

    • "So instead, build relationships with the CEOs and relevant SVPs at the BigCos that are relevant to what you are doing. They are the ones that will step up, if the time and place are right."

  • Engaging with Corporate Development:

    • Point: While not the primary decision makers, corporate development can provide valuable insights into a company's M&A thinking.

    • "Don't waste too much time with corporate development. Take the meetings, be polite, but don't expect much."

    • "Having said, there is still value in building relationships with Corp Dev. They will often give you the insider scoop on how a BigCo is thinking about M&A. They just aren't the ones making the decisions."

  • Understanding the Role of Business Sponsors:

    • Point: Nearly every acquisition requires a "business sponsor" from within the acquiring company to drive the deal.

    • "In fact, basically every acquisition requires the M&A/corp dev team to have a "business sponsor" who is driving the deal. Even almost every corporate investment."

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