Category Contenders

Category economics tells us that 76% of the market cap goes to one company in an established category.

Simply put, if you play by the rules set by an incumbent, you’re fighting over table scraps.

In our always-on world where we receive thousands of messages every day, owning why you’re different and defining a new category is more important than ever.

Impressive growth! Beats the NASDAQ by a healthy margin.

Our research also provided another hint. Acceleration in growth happens during the transition from the define to develop phase of the category lifecycle.

Additionally, we established that companies going public between 6 and 10 years of age create the vast majority of the post-IPO value.

We had a hunch that somewhere in this time frame something magical happens. So we rewound the clock for our Category King cohort to the moment before they tackled the divide.

And something magical sure did happen.

The combined market cap of our cohort at 5 years of age was a total of $88 billion. This grew to a total of $465 billion by the end of 2014, an increase of 528% over an average of 3.7 years.

A CAGR of 52.82%. That’s 2.5 times the growth rate compared to the 2014-2021 period!

What opportunities could we unlock if we could identify these would-be kings, or what we’re calling Category Contenders, early in their life and improve the likelihood of success? It’s not only a dream for a category designer, but for their customers, employees, investors and the planet.

Now, seven year later, we’re back with a whole new data set from our friends at PitchBook, searching for the latest generation of Category Contenders.

We went looking for companies who are in this ultra-competitive phase of category creation with a special interest in those rising to prominence during this critical time.

Typically, they are problem centric thought leaders, have an established product/market fit with customers across a number of verticals or use cases, sales and marketing motions driving demand, and powerful investors who are helping them scale.

Using our new database, and thousands of hours of interviews, we’re excited to announce that we’ve identified our first cohort of Category Contenders.

The image you are looking at contains 200 companies that meet our Category Contender criteria (for companies with headquarters in the USA). They are companies we believe have the opportunity to make the leap to King. If you would like to explore this graph in more detail go here.

Our thesis is that Category Contenders evolve into either category leaders or category followers.

It’s a choice their leadership teams make. Do they want 76% of a new category or do they want to join an existing category and fight over 24%?

It’s not a decision to be taken lightly and category creation is not for everyone.

But no matter who you are, you have to make this choice: Will you try to be different OR will you try to be better?

As category designers we focus on those companies who want to create a new, different world. We believe these companies change the world we live in.

As of December 31, 2021, our category contender cohort is valued at $698 billion. They have an average age of 7.3 years with an average market cap of $3.5 billion. If this category contender cohort behaves anything like our category king cohort, we can expect this value to increase significantly over the next decade. Not all of them will make it. We’ll study them over the next decade and provide updates on their progress as well as lessons learned while refining our selection algorithm.

If you’re a Category Contender and we missed you, or would like a chance to be featured in our upcoming Category Contender series, contact us.

If you’re interested in joining our ongoing category design research, please fill out a category assessment.

CATEGORY CONTENDERS

Keynote // Investing in Category Contenders. Capturing the Problem-Mindshare Advantage