Getting outfunded in your own category

When we started in 2018, SMS for ecommerce was a small category with a handful of people in it. It is now a funded category with companies holding tens of millions of dollars, and we are one of very few operating at any scale without outside investment.

I've spent two years watching what that money does. It doesn't do what I expected, in either direction.

What the money clearly buys#

Category definition. The funded companies get to decide what SMS marketing means. They set the vocabulary, the benchmarks, the expected feature set. By the time a merchant talks to us, they've already been taught what this category is by someone else's marketing, and we're being evaluated against a definition we didn't write.

That's the most expensive thing I've lost and it's almost invisible. It doesn't show up as a lost deal. It shows up as a conversation that starts three steps into someone else's frame.

Presence. Conferences, podcasts, agency relationships, the partner ecosystem. When a merchant asks their agency what to use for SMS, the agency names the companies who've been in the room. We're often not in the room, because being in the room is a full-time spend.

Feature velocity. They ship faster. Not always better, but faster, and there are things on their roadmaps we simply cannot fund.

The ability to buy customers at a loss. This is the one that's structurally unanswerable. A company with $40 million can acquire merchants at a price that doesn't work, for years, on the theory that it works later. We can't match that and there's no clever response. You can't out-execute a subsidy.

What it doesn't buy#

Our specific product. Real humans having conversations doesn't scale the way software does, which is exactly why nobody with a venture-scale mandate wants to build it. The funded companies are all building automated broadcast SMS, because that's the thing with the margin structure their investors need. There is a real product sitting in the space their capital structure forbids them from occupying.

That's the whole reason we still exist, and it wasn't strategy. It was the thing we could afford, and it happened to be defensible for a reason that only became clear later.

Merchant results. Nobody's cart recovers better because their vendor raised a Series B. In a market where the buyer can see the number on their own dashboard within thirty days, money doesn't survive contact with the product.

Freedom about the ending. This is the one I've come to appreciate most and it's the least discussed. They have a required outcome. There's a number below which selling isn't allowed, a timeline that isn't theirs, and a board with its own model. We have none of that. If someone wants to buy this company, the conversation is between the people who own it about whether it's a good deal for them.

I didn't understand that as an advantage for the first two years. I understand it now.

Where this actually leaves us#

Not comfortable, exactly. Every quarter I can see things we should be doing that we can't fund, and the gap doesn't close on its own.

But the framing I started with — we're the underfunded ones in a funded category, therefore we're losing — turns out to be wrong in a specific way. We're not in the same category. We're in an adjacent one that looks identical from outside, serving merchants who want the thing that requires people, at a scale that would embarrass a venture-backed cap table and works fine for ours.

The strategic question isn't how to compete with $40 million. It's whether the segment that wants our version is big enough to be a real company, and durable enough not to get automated away.

I think the answer is yes and I hold it loosely. What I'm confident about is that trying to be a cheaper version of them would have killed us by now.