Saddle startups
There’s a category of startups I pay close attention to. I call them “saddle startups.”
And no, these aren’t DTC e-commerce startups selling literal horse saddles to all the Gen Z equestrians in your life.
This idea comes from an analogy Stewart Butterfield popularised in his 2013 internal memo to the Slack team. It’s a must-read if you haven’t already; 100% earned its spot in the pantheon of startup memos.
In this memo, Stewart says that Slack isn’t merely selling “a group chat system,” which is how most people would describe Slack, if they were to judge it purely on the product’s features. At the time, no one is actively shopping for that product. Instead, he reminds his team that they first have to convince customers that they ought to be looking for better ways to communicate internally and make use of valuable corporate archives.
Put another way, you have to sell the customer on horseback riding before you can sell them saddles.
A saddle startup is one that solves a problem in their customers’ work or lives that they don’t yet know they have. By default, their customers aren’t searching for a solution to said “unknown” problem, so the success of a saddle startup hinges on its ability to convince customers they ought to be doing something that they’re not already doing today.
At first inspection, this goes counter to the prevailing startup advice of “solve a problem for your customer” so it’s not entirely surprising that there are disadvantages to building a saddle startup. The main hurdle is BYOD (“bring your own demand”) vs. meeting an existing, known demand. Market sizing a saddle startup ex ante would be a useless exercise, because there is definitionally no clear market. Despite this, Stewart argues that saddle startups can lead to a larger prize for winning:
We have an opportunity to both define the category and push hard for the whole market’s growth. We’d be crazy not to take it, because the best possible way to find product-market fit is to define your own market.
Saddle companies have historically been consumer lifestyle brands, think Lululemon selling yoga (the example Stewart used) or Nike selling running.1 Slack might have been one of the first companies to deliberately take this strategy into the world of software. As Stewart points out, the status quo at the time was that people bought software “to address a need they already know they have or perform some specific task they need to perform.”
In the almost a decade since this memo, we’ve seen many more software saddle startups founded and successfully popularise or outright create new markets for themselves.
No one was out there looking for “personal knowledge management” software until the Roam cult convinced us that we’d all be more prolific if only our insightful notes were bidirectionally linked in our dedicated “second brains.” In the same vein, the broader explosion of productivity software that target power users (think Arc, Cron, Raycast, etc.) required that we buy into the idea that we ought to take knowledge work more seriously and invest the necessary time, effort, and money to optimise these pedestrian daily workflows.
In the world of enterprise software, saddle startups like Lattice sold business leaders on the importance of 360 reviews in creating high-performing organisations. Meanwhile, banking-as-a-service companies ask their SaaS prospects why, in 2022, they’re still not monetising via embedded financial products like loans, cards, or payroll.
Once you understand the concept of saddle startups, you’ll start to see the rationale behind some of the non-obvious, but quite clever things that these startups do.
Being a saddle startup is why, in the early days of Apple, they went through all the trouble to equip K-12 schools with Macs.2 It’s also why it makes sense for a payment processing company to publish obscure, out-of-print books and become thought leaders on “progress studies”.3 They aren’t merely selling you on a way to accept payments on the internet (i.e. the saddle), but rather the belief that economic opportunity is ever increasing and that any self-starter like yourself can benefit from the rising tide (i.e. the horseback riding).
If you’re a founder, it's worth asking yourself if you’re actually building a saddle startup. If yes, what does that mean for things you’ll need to get uniquely good at, who you’ll need to hire, or how you'll speak to your customers?
Before focusing on selling the best “saddle,” are you first of all doing a good job selling “horseback riding”?