Years ago I created a company called KISSmetrics. When I was at the company (I no longer work there) we raised around 15 to 20 million dollars.
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We created a new type of product for our category that helped companies optimize their lifetime value of each customer and we were growing fast.
A startup called MixPanel ended up launching after us, they raised little to no money, they copied our product features, and they even copied our design.
At one point MixPanel was worth 800 million dollars according to TechCrunch and we weren’t even worth 100 million, even though we had more traffic than them.
How is this possible? Well, they decided to go the freemium route. In which they gave away a lot of our product for free to customers. And in exchange, websites had to promote MixPanel by placing a badge on their site.
This caused them to grow fast. It doesn’t matter if your product is better or worse, people love free.
If you are competing with large companies, you don’t have to have a bigger budget or a better product/service… you can beat them by undercutting their price and offering a lot of their paid services for free.