How Atlassian began in a niche📍
Getting niches right beyond serving small segments, integrating LLMs, and differentiating in the most competitive of SaaS categories.
Welcome to the 84th edition of The SaaS Baton.
A fortnightly newsletter that brings you hand-curated pieces of advice drawn from the thoughtful founder-to-founder exchanges and interviews taking place on Relay (curated with 💛 at Chargebee for Startups) and the interwebz. So, stay tuned! And thanks for reading!
In this edition, you’ll find the following instructive and inspiring pickings:
#1: Released’s co-founder, Jens Schumacher, having spent almost two decades (15+ years at Atlassian) building products, lists five essential heuristics for approaching the enduring gains of niches.
#2: Gamma’s co-founder, Jon Noronha, shares notes on how they introduced AI into their product to address a persistent activation problem, the exciting GTM realizations it has led to, and the operating cadence and structure it stemmed from.
#3: Customer.io’s founder and CEO, Colin Nederkoorn, highlights how clarity in messaging has informed their (counter) positioning and their pricing.
Finding these discerning founder takes valuable? Please consider sharing this edition with an ever-curious teammate or a much-cherished SaaS friend. 🙂 New readers can sign up here.
🗞 Recently on Relay:
➡️ Heuristics and Hunches (October 20th) — How Selling 3K AppSumo Deals Proved Foundational, Not Niching Down, and Other Reflections on Scaling a Bootstrapped SaaS with Paperform’s Co-Founder, Dean McPherson
— Launching big with AppSumo (and what people often get wrong about it)
— Staying horizontal and solving for JTBD over customer personas
— Working through the challenges of growing a team as first-time founders
— Mapping the defining moments across Paperform’s path
➡️ Heuristics and Hunches (October 13th) — How Atlassian Began in a Niche, Laddering to Scale, and Lessons from 2 Decades of Building for Development Teams with Released’s Co-Founder, Jens Schumacher
— Starting out after 17 years of product leadership
— Five heuristics for niches (and how Atlassian started in one)
— Pursuing sequential growth with laddering
— Building for developers and adjacent roles at once
— Selling dev tools (then and now)
#1: How Atlassian began in a niche 📍
(From: Released’s Jens Schumacher) (Source: Relay)
It’s worth noting that Atlassian also started in a niche.
Jira began as a tool for developers to track tasks and bugs.
We deeply understood the developer’s world and crafted a solution that resonated with that audience. Over time, we expanded to different markets and personas, but our roots in that niche gave us a solid foundation to build upon.
A niche isn’t just about catering to a small segment of the market.
It’s about deeply understanding a specific problem and tailoring a solution that addresses it in the best possible way. It is about recognizing that while you can’t be everything to everyone, you can be the absolute best for someone.
Validating a niche’s potential for expansion is a blend of art, science, and a bit of gut instinct.
Here’s how I approach it:
1) Deep dive into the problem:
You need to ensure you’re solving a genuine problem, marked by repeated complaints from diverse customer groups. The deeper and more painful the problem, the more likely there’s room for growth. If you’re addressing a surface-level issue, the niche might be too shallow.
For Released, it started with my own painful experience of writing release notes, and frankly not being able to do it as consistently as I should have. When talking to other product managers and founders, that pain point quickly emerged as a pattern.
2) Engage with your users:
Your users are a goldmine of information. Engage with them regularly. Understand their pain points, workflows, and what other tools they use. They’ll often lead you to areas of potential expansion you hadn’t considered.
3) Look for adjacent needs:
Once you’ve identified and addressed a specific problem, look around it. Are there adjacent problems or needs that your solution could naturally extend to? Look for unexpected ways or hacks with which your customers solved a problem or processes that are extremely inefficient.
4) Market Size and Trends:
While niches are, by definition, smaller segments, it’s essential to gauge the overall market size. Is the niche growing? Are there emerging trends that could make it more relevant in the future?
In the case of release notes, aside from the continuous growth of the software industry, more and more teams are looking to better communicate their progress and plans with their customers.
Right now, great customer communication is still a differentiator, but, in the future, customers will expect better communication from every company.
5) Competitive Landscape:
A niche with no competition might sound ideal, but it could also indicate a lack of demand. On the other hand, a niche with some competition suggests there’s a market, but you’ll need to differentiate yourself.
While expansion is a worthy goal, it’s essential to ensure you’re serving your niche effectively first. Once you’ve established a strong foothold, the paths to broader horizons often become clearer.
Related Relay reading:
Butter’s co-founder, Jakob Knutzen, on beachhead markets (“If you try to do everything for everyone, you’re going to fail. With Butter, we were trying to take on Zoom. A formidable opponent given their scale and reach. So we knew that we had to focus from the beginning.”)
#2: “[GenAI]… totally transformed our funnel” 🔑
(From: Gamma’s Jon Noronha) (Source: Allison Pickens’ Newsletter)
We actually originally launched our product on Product Hunt in August of 2022. That's how we got our first sign-ups. It's all been product-led from the beginning, but the product could only lead so far.
Before it had AI, we would take you through a quick onboarding that had a couple of videos when you signed up. It was all free to sign up and then we would drop you into a blank presentation deck and say, ‘Good luck. See you soon.’
As you can probably imagine with that blank page problem, most people didn't make it through that funnel. Our activation rate was quite low because they both had to learn this new product that was different in various ways from tools they might know like Google Slides and PowerPoint. But they also just had to make something to see the value.
If you didn't actually make a presentation, then you weren't going to see the value at the end at all. You would see a couple features and maybe think it’s interesting. Maybe you'd poke around our templates. But there was a high bar to cross.
The actual first reason we introduced generative AI was to solve that onboarding and activation problem. Our goal was to figure out how to show every new user some really concrete value in the first five minutes that they use the product.
So, we focused on letting generative AI be generative and having you build a full presentation in Gamma in your first few minutes in the product.
So, we focused everything on asking you a series of targeted questions. What are you trying to create? What format do you want? One interesting thing about our approach is that we've tried to create this hybrid between presentation document and webpage.
It’s something that's presentable like slides, but something you can just write from top to bottom like a document. Also there are interactive bits like a webpage, so that's a cool concept, but previously it was hard to actually show people what that meant. But now we just ask you, so you want to make a presentation about the rainforest? Sure. Click three buttons and we'll generate it for you.
Our goal was to actually have a presentation appear before your eyes.
Generative AI let us do that. It lets us take any topic someone has and then provide examples that fit their context, their role, even their language.
(As a side note, this actually let us go to market internationally much quicker than most companies could because it let us generate a presentation in Spanish, Hebrew, traditional Chinese, or another language.)
So we could take someone through a whole onboarding and deliver that “a-ha” moment in the first five minutes. That totally transformed our funnel.
…
We found it really helpful to have a strong culture of prototyping. With LLMs, compared to other kinds of software development, you don't really know how it works until you build it. That's just because AI is fundamentally something you have to run to test out.
On the way to our successful AI launch, we had at least 10 different product ideas that we tried out at small scale to see if they would do it. And they mostly sucked. Some of them had promise, but they just weren't good enough. Either the AI itself wasn't good enough or the ways we were joining that AI with our data and our models wasn't magical.
We drew a lot of ideas on the way to getting there. Generally, startups are good at this, but the larger your organization gets, the harder it is to maintain that culture of prototyping.
Certainly having worked in product at mid-size and large companies, there's often this feature factory quality where they decide to make one big bet, they're going to push it all the way down to the finish line and then hope that it works.
That model cannot work with LLMs. It doesn't really work with anything, but it especially doesn't work with AI and the way that it's evolving now.
Another tip. There's this misconception that to compete in this AI market, you need a lot of machine learning engineers—people who are experts at training these models. Actually, the opposite is mostly true. The foundation models are already so good that what people really need are ways to apply those to their use case.
For us, the skillset we think best applies to that is a UX designer. Relative to a lot of teams out there, we are heavy on UX design. We're a team of 12 people right now, and four of those are UX designers.
Having a third of your team be designers is pretty much unheard of even in small startups. But we do it because we've found that so much of the value here comes from applying new technology, putting it into a workflow, and rapid prototyping.
#3: “…we’re nothing like Mailchimp” ≠
(From: Customer.io’s Colin Nederkoorn) (Source: Searching for SaaS)
I think one of the hardest things in the email space is trying to figure out the differences between products. And one of the things that we deliberately did in the beginning was basically saying, ‘hey, if you’re just trying to upload a list, this is probably not the product for you.’
‘And if you really want to do that here’s an API, you can iterate over your list, your CSV, you can build a little script, you can upload these people into our product.’ But for someone who just wanted to upload a list, not a product for them.
That was beneficial because it eliminated a ton of spammers or people who were purchasing lists or whatever. Because you can get really distracted with this type of product, trying to fight fires.
So it kicked the can down the road on that issue quite a bit and it also was a way to say, when someone said and the question early on was how are you different from Mailchimp.
It gave us this really easy way to create this differentiation rather than saying, ‘well, we can do everything that Mailchimp can do, too, but we also do this.’
We were able to say: ‘we’re nothing like Mailchimp, with Mailchimp you upload a list, with us you take a javascript snippet, you integrate us with your website, then when people are logged in that data is streaming into our product and you can see all of your people. And you can send messages to them based on what they’re doing once they’ve logged into your product.’
And that was our wedge and obviously today that’s a really core use case for us. But you can upload a list. You can connect it with a database. It’s a very flexible product.
But I don’t think that we would have ever been able to carve out a niche in the market if we had just gone broad and said, ‘oh, everything that Mailchimp can do, you can do with us, except we’re just for product companies.’
…
The way that I think about pricing is not so we as a business can extract the most we can from customers. I think it’s so that people are really clear. And so there’s an offering that really speaks to them.
If there’s four different things you can buy, there’s one which is clearly for you, there’s nothing in that feature set where you’re like, ‘is this really for me?’
And you’re questioning it for some super advanced feature that we’re throwing in there. I think there’s a decision we made in the past. A somewhat contentious one. SSO. Single Sign-On. We don’t feature-gate today for SSO.
A lot of companies do that. ‘You want to use Okta as your authentication provider? You have to use our enterprise plan.’
We don’t do that, today. But I think if you do that with too many things and your basic self-service plan has like advanced user permissions where you have 30 user roles that a small business just doesn’t need. Then that small business will look at that plan and be like, ‘is this really meant for me?’
That’s the risk if you don’t do a good job of pricing and packaging segmentation. We’ve kind of under-optimised it. I kind of want us to a little bit more especially as our product gets more sophisticated, we’ve got to make it easy for people to understand which is the thing that they should be buying.
Related Relay reading:
Slite’s co-founder, Christophe Pasquier, on evolving the many-sided levers of positioning and expansion (“For the longest time, we had been passive on the differentiation front, because being the only product in the category, it was all being done for us. Now, we had to proactively convey our particular stance.”)
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Thanks for reading! 🌻
Team Relay (Chargebee for Startups)