Should your startup create or conquer a category?

Startups love to talk about category creation. It sounds bold, visionary, and world-changing, but most companies don’t need to create a category to succeed. 

In fact, many try but end up wasting time and capital educating a market that wasn’t ready.

For most founders, the smarter path is to enter an existing category with sharper positioning, a clearer angle, and a story that cuts through the noise.

In this article, we’ll break down the pros and cons of category creation vs. category entry, as well as practical ways to decide which path fits your startup.

1. The myth of category creation

Category creation is seductive. Get it right, and you’re forever remembered as the pioneer. Salesforce didn’t just sell software, it created the category of ‘cloud CRM.’ 

HubSpot didn't just market software, it coined the term ‘inbound marketing.’

Those are exceptions, not the rule. Most companies that try to create a category burn through capital with little to show for it. 

This is because category creation requires more than just innovation. It demands reshaping how people think about problems and solutions. 

That can take years of market education and relentless storytelling.

Take Segway as an example. Launched in 2001, it tried to create a new category of personal transport. 

Despite hype and heavy investment, it failed to gain traction because customers didn’t know what problems it solved. 

In contrast, Uber entered an existing category but offered a radically better experience through mobile. Uber didn’t need to convince people they wanted transport, they just made it easier, faster, and more reliable.

“Category creation is like writing a new word into the dictionary. Most companies don’t have the time, money, or audience attention span to pull it off.” - Andy Raskin, Strategic Narrative Consultant

Category creation is not the default path. It’s a high-risk, high-reward bet.

2. The case for entering an existing category

Category entry often gets less attention because it seems less glamorous, but it’s usually the smarter play for early-stage companies.

This is because existing categories already have:

• Educated buyers. Customers know the problem and understand the type of solution they need.
• Proven demand. The budget is already allocated so you don’t have to justify the problem.
• Established benchmarks. You can position yourself clearly against known players.

For example, video conferencing wasn’t a new thing, with companies like Skype, WebEx, and GoToMeeting dominating the market.  

However, those tools were clunky and unreliable.

Zoom was able to win by obsessing over speed, simplicity, and call quality. By focusing on fundamentals, it took huge market share without needing to invent a new category.

Another example is Canva. When it launched, design software was already a crowded market led by Adobe. 

Canva carved out its own niche of providing design tools for non-designers. 

By focusing on accessibility and collaboration, Canva became a $40bn company while Adobe remained the enterprise standard.

Conquering an existing category isn’t boring. It’s practical, faster to scale, and often more profitable.

3. The hidden costs of category creation

If you’re set on creating a category, you need to understand the price tag.

Education burden

You’re not just selling a product, you’re selling a new way of thinking. 

That takes years of content, and thought leadership. HubSpot, for example, spent millions producing blogs, ebooks, and training programmes before ‘inbound marketing’ stuck.

Investor scepticism

Investors often prefer clear TAMs (total addressable markets). If you’re creating a category, the numbers look fuzzy. Unless you’re an exceptional storyteller, it can be harder to raise capital.

Slow adoption

Buyers are cautious. If no one else in their industry is adopting your new thing, they’ll hesitate. 

Geoffrey Moore’s Crossing the Chasm warns about this very trap. Innovators may love your product, but mainstream buyers wait for proof.

Positioning pitfalls

Without anchoring against something familiar, you risk confusing prospects. 

For instance, Juicero tried to market a new category of connected juicers,  but when people realised it was just a $400 machine to squeeze pre-bagged juice, the lack of clear positioning killed it.

“If you tell customers you have no competition, they don’t think, ‘Wow, amazing.’ They think, ‘That’s suspicious.’” - April Dunford, author of Obviously Awesome

4. Create or conquer?

So how do you know which path is right for your startup? Ask yourself:

• Is the problem already understood?
  If yes, category entry is usually best. If not, prepare for years of market education.
• Do you have the resources to educate the market?
  Category creation often takes a decade of sustained effort and capital. If you’re not well-funded, think twice.
• Can you anchor your story to something familiar?
  Even category creators use comparisons. Salesforce positioned itself against on-premise CRM before cloud was mainstream.
• Is there a wedge to exploit in the current category?
  Look for underserved customers, broken experiences, or areas incumbents ignore.

Gainsight, which pioneered ‘customer success’ is a successful example of category creation. It sold its software by elevating the discipline itself. It took years of evangelism, but today the category is recognised.

In contrast, Notion entered an existing category. It didn’t invent productivity tools. It entered a crowded market but differentiated with flexibility, community-driven templates, and elegant design.

5. Practical tips for sharper positioning

Whether you’re creating or entering, success comes down to positioning. It’s how you frame your value so customers see you as the obvious choice.

• Name the enemy. HubSpot’s enemy was outbound marketing. Superhuman’s enemy is slow, cluttered email. Who are you positioning against?
• Pick your wedge. Be the best at one thing for one audience. Slack didn’t try to beat email everywhere, it started by replacing messy team chats.
• Tell a bigger story. Don’t just sell features. Sell change. Drift reframed chatbots into a new category called conversational marketing.
• Anchor in familiarity. Use ‘X for Y’ framing early (e.g. ‘the Uber for freight’) to reduce buyer confusion.
• Test and refine. Positioning isn’t static. Keep testing messages with prospects until one consistently lands.

Positioning makes both category entry and category creation work. Without it, even the best product won’t resonate.

Summary

Category creation gets the headlines, but it’s not the only way to win. For most startups, sharper positioning in an existing category beats burning cash trying to rewrite the market.

If you’re considering which path to take, remember the following:

• Category creation is high-risk, high-reward. It can also require deep pockets.
• Category entry takes advantage of proven demand and rewards clear differentiation.
• Positioning, not categories, is what ultimately drives growth.

The smartest founders don’t obsess over labels. They obsess over clarity, alignment, and telling a story customers can believe in.

At Vestd, we help founders build equity schemes that align teams around a bigger story where everyone has a stake in the company’s impact. 

If you’re defining your category or carving your niche, make sure your people are motivated to bring that vision to life. Book a call today.