The New SaaS Paradigm: Beyond the Inverted U

It turns out, the old economics paradigm of an inverted U doesn’t really apply to modern-day SaaS.

What’s happened with software today is that the ability to build an equivalent product has become increasingly commoditized.

In other words, it’s cheap to build a “me too” solution.

90% of people can build a product that has 80% the same functionality.

The real difference is being in those top 10% of products that have exquisite craftsmanship.

These come in two flavors:

Flavor 1 — The Design-led Challenger

Think:

1. Arc
2. Linear
3. Notion

These companies present products that have top 10% craftsmanship.

And that’s how they’ve won a devout and loyal following.

And this allows them to charge higher rates.

Flavor 2— The Functionally Superior

But you don’t only need to compete on being design-led. You could also just be more functional.

Think:

1. Oracle
2. Docusign
3. Salesforce

They just have superior functionality for enterprises. This brings them into the top 10%.

If you want to learn more, Enzo Avigo (june.so) and I explain everything in the deep dive.

The Result? Quantity and Price Both Go Up

What matters is: these top 10% of positioned products can charge much more, and they still get the majority of the quantity.

There’s a bunch of commoditized competition which experiences the inverted U.

But these premium products?

They live in a different reality.

One where they can charge a higher price and get most of the quantity.