How to Disrupt a Giant Incumbent

Every startup feels like a David going up against a Goliath. But, in particular, you have to be onto something big to take on a proven, gigantic market that’s been led by the same incumbent for over 20 years.

Attio is doing just that with the CRM market and it seems to be working.

On the back of a $23.5 million Series A led by Redpoint earlier this year, they’re growing rapidly in the US. They crossed $1 million ARR even before emerging publicly launching in March. They’ve grown from 2,000 to 10,000 customers since then, including OpenAI.

Their bet is that users will pay for a CRM that combines an extremely powerful data model with a modern UX you’d only find in Linear, Notion, or Airtable. They’re doing this by starting a CRM from first principles and including native data enrichment, real time data availability, and a focus on building full tools rather than just features.

I sat down with founder and CEO Nicolas Sharp this week to break down how they’ve been able to disrupt such an entrenched market and what other founders can take away from their journey 👇

How to Disrupt a Giant Incumbent

The CRM Market

Let’s first break down the CRM market: it’s split between legacy players and challenger CRMs.

Legacy CRMs are the big names you likely know: Salesforce, Hubspot, etc. They’re built on powerful data models but are expensive, complicated and clunky to work with, and time consuming to get started with.

Challenger CRMs are upstarts who have tried to solve the user experience problem created by the legacy CRMs — they are, by nature, reactions to the big players who were created 20 years ago and dominate the enterprise market. Challengers are cheaper, more straightforward, and users can get typically started more quickly. Sometimes they even target a specific vertical (i.e. a CRM for dentists).

The problem is that challengers are so focused on solving the user experience issues of legacy CRMs that they forget to compete on the attribute that matters most to CRM users: does it have a powerful enough data model to support my business and scale with my startup as it grows?

It’s a market ripe to be won by a product that can do both.

Why Not Go After an Easier Market?

Attio’s first product fell victim to this trap as well. Their v1 was a CRM for investors called Fundstack.

It was actually successful. It generated steady revenue and the team had plans to expand into other verticals. But Nicolas and his co-founder realized that, to genuinely change the CRM market.

At the time, they were stuck in a race to build features for users who, despite working in the same vertical, still had different needs. It became clear that, to really solve user needs and compete in the CRM market the product they needed to build was an extremely powerful one, just like the incumbents, but it had to modern, fast, and user friendly.

That’s a lot easier said than done. For example, Salesforce has 80,000 employees. And they’re still growing by 17% per year after over 20 years:

I asked Nicolas straight up — why go after behemoths like Salesforce and Hubspot? He said he’d shared this tweet in his team’s Slack as a way to get them excited about the size of the market they were tackling.

Building a startup is really hard, no matter what problem you’re solving. You may as well use your energy to build something that can make a big impact.

What Nicolas learned from building Fundstack was that the most impactful problems they needed to solve for a verticalized CRM to be valuable enough for users to switch over at a high enough rate were actually the same generalizable problems that plagued the broader CRM market.

As a result they scrapped a successful product and decided to go all-in on taking on the Goliaths. Nicolas said there was some necessary naivety here — they weren’t letting themselves get bogged down by thinking about the monumental challenge ahead of them, and that let them focus on building a great product that people actually wanted.

The (Counterintuitive) Right Approach

What do Figma, Airtable, OpenAI, and Notion have in common?

They ignored traditional startup wisdom and didn’t publicly launch their core product until it was largely fully formed. For example Figma’s beta closed in 2015 but Dylan Field had been building it since 2012.

Sam Altman has said that the success of ChatGPT, and OpenAI more broadly, has made him rethink all of the startup advice he gave to founders when he was the President of Y Combinator (for what it’s worth, here’s some of his best).

Attio has found success by following the same playbook. After deciding to focus on the broader CRM market, Nicolas and his team went heads down for 3 years. They weren’t “in stealth” but they also weren’t doing marketing.

During that time, they were building a data model from scratch that would allow them to build extremely powerful features that up until that point only the Goliaths could deliver, and working closely with early customers to get it right.

As a result, they can now churn out extremely powerful features that normally take years and only incumbents have at a rapid pace. For example, Attio has been public for 7 months and already has custom objects, a feature that makes your CRM work with any business model and is only capable via enterprise solutions today.

Their approach during this time is worth studying, because it lets founders get high-signal information from passionate early users and filters out the noise:

1. Start from first principles — what would a great CRM be able to do if you started it in 2023 instead of 1999? Rather than bolting new features that users want onto a product that was built 20 years ago, build a beautiful and enjoyable product that includes those tools in its DNA. For example, Attio doesn’t require users to struggle with leveraging custom fields in the traditional sense since all fields are treated natively (both custom or out-of-the-box).

2. Let in a few early users who would provide useful feedback in a beta and share very MVP-level features with them only. During this time they were only able to sync email info and it took 3.5 days to sync (now it happens in seconds). That’s how early it was.

3. As those users start to love the product, let word of mouth spread but set up a waitlist to capture intent. Then strategically let people off of the waitlist as you launch new features to your beta group and want to get opinions from fresh users. It’s like a water tap you can turn on or off.

When to Go on the Attack

At some point though any startup needs to start doing marketing. Attio used a few simple heuristics to recognize when this time had come for them:

1. The product foundations were live and set in stone. If they’d made a mistake and misunderstood what their users wanted it was too late to change course now without entirely abandoning the codebase.

2. They’d begun to expand their internal thinking beyond new parts of the product to also include developing the brand of the product. Meetings weren’t just about engineering anymore.

3. The market was becoming more competitive with new entrants joining. Nicolas recognized correctly that being a leader of a new trend is how you can accelerate growth organically. You can’t just build the best product, you also need to win the market.

Critically Nicolas recognized that even though Attio was going after an established market, the market was shifting. Attio’s beta users were proving every day that key features like being built on real-time data would quickly become the norm.

Expected Adjustments

Attio’s approach has led to considerable early success. They’re growing rapidly in the US and continue to grow in Europe (where they started) and elsewhere as well.

They’re not naive to the fact that as they become more successful, existing players will try to fight back and newer entrants will emerge to compete.

But Nicolas is confident. He told me that CRMs built on the old paradigm of user-imported record and manual tasks will have a tough time adapting to the new paradigm within the CRM market. The main challenge with legacy players is less about the product and more about having a strong go-to-market motion that keeps you in potential customers’ minds.

Interestingly, the challenger products that are on Nicolas’s radar are not the ones already building CRMs — they’re still trying to solve the problem legacy CRMs created, without being able to compete with regard to their data model and pure performance.

Instead he’s looking at products that may not be considered CRMs at all today but could become them in the near future as the new market paradigm evolves and becomes more widely understood. These are products that may be working on CRM-adjacent problems that will eventually see a bigger opportunity in CRM.

I love this insight — founders should always be healthily paranoid and looking in unexpected places for competition. It keeps you on your toes and skating to where the puck is going.

What Comes Next?

The primary risk your startup faces changes over time. Here’s one way to think about the 7 stages of startup risk:

1. Can you get smart people together?

2. Can those people build something?

3. Does that thing work?

4. Do people want to use it?

5. Will those people pay for it?

6. Can you repeatedly sell it?

7. Do the economics work out?

Nicolas says Attio has gone through those stages already. Now they need to repeatedly increase the capacity of the machine and prove that the economics work and the product can handle increasing levels of scale.

The problems you face at each order of magnitude of scale are dramatically different than the prior level but the common thread is that you need to consistently remove layers of complexity so that users can solve their problems faster and cheaper.

Attio is positioned well to be the first major challenger in the CRM space in quite a while, as they’re able to leverage advances in both technology and user expectations without sacrificing the pure data model performance that the CRM market requires.

As a result they can solve core user problems legitimately better than incumbents can.

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