Category Creation vs. Category Entry: Which Strategy is Right for You?

The VP of Marketing walked into the boardroom with confidence. "We're not competing in project management," she announced. "We're creating a new category: work orchestration."

The board leaned in. This sounded ambitious. Visionary, even. Like what Salesforce did with SaaS or HubSpot did with inbound marketing.

What she didn't say: category creation would burn $15 million annually for three to five years minimum, require evangelical market education with no guaranteed payoff, and statistically fail more often than it succeeded. Eighteen months later, when they'd spent $22 million and still couldn't get analysts to recognize "work orchestration" as a category, the board was less enthusiastic.

Here's the uncomfortable truth most product marketers learn eventually: category creation is phenomenally expensive, takes years to payoff, and fails more often than it succeeds. Most companies should enter an existing category with strong differentiation, not create a new one. But VCs and founders are addicted to the category creation narrative because it sounds more ambitious than "we're competing in an existing market with a better product."

Let me give you the framework for making this decision based on market reality, not ego.

What Category Creation Actually Means (Not Just Clever Naming)

Most "category creation" attempts are just rebranding existing categories with clever names. That's not category creation—it's positioning confusion.

Category creation isn't inventing a clever name for your product where you call project management "work orchestration" or CRM "revenue acceleration platform." It's not combining two existing categories with an "and" like "CRM plus marketing automation." And it's not describing your unique approach as "the first AI-powered X" when AI is a feature, not a category.

Real category creation is defining a new problem that existing categories fundamentally don't address. It's educating buyers that this problem exists and is urgent enough to act on. It's building a market where none existed before. It's becoming the definitive answer when people think of that category.

True category creation means you're spending millions—sometimes tens of millions—to educate buyers about a problem they don't know they have yet. Salesforce didn't just compete with on-premise CRM. They educated an entire market that "software as a service" was a fundamentally better model than traditional enterprise software. That took billions in marketing spend and a decade to become mainstream.

The Four Conditions Where Category Creation Makes Sense (All Must Be True)

Category creation only makes sense if all four conditions are true. Not three out of four. All four.

Condition 1: Existing Categories Fundamentally Can't Solve the Problem

Your product addresses a job-to-be-done that existing categories weren't architecturally designed for. Not "we do it better"—existing approaches are fundamentally unable to solve this problem no matter how much they evolve.

Snowflake created the cloud data warehouse category because traditional data warehouses from Oracle and Teradata were designed for on-premise deployment. They couldn't take advantage of cloud economics, elastic scalability, and separation of compute from storage. It wasn't "we're better at data warehousing"—it was "data warehousing needs to be completely rearchitected for cloud infrastructure."

Contrast that with companies claiming to create "AI-powered CRM" as a category. CRM exists. Buyers know they need CRM. AI is a feature that makes CRM better, not a new category. You're competing in CRM with AI as differentiation, which is smart positioning but not category creation.

Condition 2: You Have Massive Funding to Educate the Market (Think $10M+ Annually)

Category creation requires educating buyers about a problem they don't currently recognize. That means content at scale, events, analyst relations, PR campaigns—all sustained over years, not quarters.

Budget threshold: if you can't invest $10 million or more annually in market education for three to five years, you literally cannot afford category creation. Most Series A and B startups can't, no matter how much they want to.

HubSpot spent approximately $100 million educating the market on "inbound marketing" before it became a recognized category. They didn't just market their product—they created certifications, published hundreds of blog posts, ran conferences, and taught buyers why inbound was fundamentally better than outbound. If your marketing budget is $2 million annually, you're entering a category with differentiation, not creating one.

Condition 3: You're First or Very Early, With Significant Lead Time (18-24 Months Minimum)

Category creation only works if you can establish yourself as the category leader before meaningful competition emerges. If five companies are all claiming to create the same category simultaneously, none of you are creating it—you're just competing in an emerging market.

Timing matters enormously. You need 18 to 24 months of clear market leadership before competitors catch up. If competitors are six months behind you, you don't have enough time to educate the market before it becomes competitive and buyers start comparison shopping.

Slack entered workplace messaging when the category barely existed in 2014. They had two-plus years of clear leadership to define what "team collaboration platform" meant before Microsoft Teams, Google Chat, and others entered the market at scale in 2016-2017. That head start let them shape buyer expectations.

Contrast that with 15 companies all claiming to create the "AI agent" category in 2024. Nobody's creating a category—they're all competing in an emerging market where buyers are already comparison shopping and no single vendor can define the category unilaterally.

Condition 4: The TAM Is Large Enough to Justify the Investment ($1B+ Minimum)

If you're going to spend $50 million or more educating a market, that market needs to be worth billions, not millions. Otherwise the math doesn't work.

TAM requirement: $1 billion-plus addressable market minimum. If the total addressable market is $200 million, you cannot justify the investment required to create and own the category.

Cloud data warehouse with Snowflake is a multi-billion dollar market. Worth creating. The investment payoff justified the risk.

But "AI-powered meeting notes for nonprofit organizations" might solve a real problem. The TAM is too small to justify category creation economics. You're better off entering "meeting productivity tools" and targeting nonprofits as a segment within that existing category.

When to Enter an Existing Category Instead (Usually the Right Answer)

If you fail any—not all, just any—of the four conditions above, enter an existing category with strong, defensible differentiation.

What this positioning looks like in practice: "We're a CRM built specifically for commercial real estate." "We're project management designed for creative agencies." "We're the enterprise-grade alternative to X that teams outgrow."

This isn't admitting defeat or lacking ambition. It's smart positioning grounded in market reality. Existing categories have buyers who already know they have the problem and are actively looking for solutions. They have budget allocated—IT departments already have line items for "CRM" or "project management" in their annual budgets. They have established purchasing processes so buyers know how to evaluate and buy. They have existing alternatives you can position against, which makes differentiation clearer.

You spend zero dollars educating buyers that the category exists. You spend 100% of your budget explaining why you're better than alternatives for a specific segment or use case. That's often the faster, cheaper path to $100 million ARR.

The Hybrid Strategy: Subcategory Creation (The Middle Path)

There's a middle ground between creating an entirely new category and entering an established one: create a subcategory within an existing category.

What this looks like: "Vertical SaaS for insurance" as a subcategory of vertical SaaS. "Headless CMS" as a subcategory of content management systems. "Observability platform" as an evolution of APM and monitoring.

Why it works: you leverage existing buyer awareness of the parent category but differentiate on a specific approach, technology architecture, or buyer segment. Buyers already understand the general problem space. You're just educating them on why your specific approach is better for their needs.

Cost: roughly 10 to 30% of full category creation cost. You're educating buyers on why this approach is superior, not educating them that the problem exists in the first place.

Datadog entered "monitoring," which was already an established category with incumbents like New Relic and AppDynamics. But they helped define "observability" as a subcategory—a modern approach to monitoring that unified metrics, traces, and logs. Buyers already knew they needed monitoring. Datadog just educated them on why observability was the modern architecture for cloud-native applications.

The Decision Framework (How to Actually Choose)

Use this decision tree to determine your strategy. Be honest about your answers.

Question 1: Do existing categories fundamentally solve your customer's problem? If yes, enter the existing category with strong differentiation. You're done. If no, continue to question 2.

Question 2: Can you invest $10 million-plus per year for three to five years in market education? If no, enter the existing category. You literally can't afford category creation. If yes, continue to question 3.

Question 3: Do you have 18 to 24 months of clear market leadership before meaningful competitors emerge? If no, enter the existing category or create a subcategory. The window is too narrow. If yes, continue to question 4.

Question 4: Is your total addressable market $1 billion or larger? If no, enter the existing category. The market isn't big enough to justify the investment. If yes, category creation is viable—but still risky and expensive.

If you make it through all four questions with "yes" answers, category creation might make sense strategically. But you should still ask yourself: "Is the upside worth the risk, or would we grow faster by dominating a segment of an existing category?"

The Uncomfortable Truth About Category Creation (Most Attempts Fail)

Most "category creation" strategies are expensive ways to avoid admitting you're competing in an existing market.

Founders and VCs love category creation narratives for predictable reasons. They sound more ambitious than "we're a better CRM." They justify premium valuations with the pitch "we're creating a new market, not competing in an existing one." They avoid the harder strategic question: "How do we beat the incumbent with superior product and GTM execution?"

But the graveyard of startups is full of companies that tried to create categories they couldn't afford to build. They spent millions educating buyers about a problem, then watched well-funded incumbents swoop in and capture the market they'd painstakingly created.

Failed category creation attempts litter recent history. Dozens of companies tried to create "conversational commerce" between 2015 and 2017. The category never materialized because buyers didn't care enough to adopt. "Social CRM" sounded revolutionary between 2010 and 2013. Every vendor claimed to be creating it. The category dissolved back into CRM with social features because it wasn't fundamentally different. "iPaaS" (integration platform as a service) had 20-plus companies claiming to create the category. Most failed. The winners were the ones who eventually said "we're integration tools for specific use cases" and stopped trying to own a category.

The successes are memorable precisely because they're rare. Snowflake created cloud data warehouse. HubSpot created inbound marketing. Slack created team collaboration platform. Segment created customer data platform.

Notice the pattern: the successes had massive funding (hundreds of millions), clear market leadership (18-plus months ahead of competition), and three-to-five-year runways before meaningful competition emerged. The failures had $10 million in the bank and hoped viral growth or word-of-mouth would create the category for them.

What to Do Instead (The Faster Path)

I've watched too many startups burn through their Series A talking about creating categories they can't afford to build. Here's the playbook that actually works when you're honest about your resources.

First, enter an existing category with strong, defensible differentiation. Don't apologize for this choice. It's not lacking ambition—it's strategic clarity. You're competing where buyers already have budget allocated, where they understand they have a problem, and where they're actively searching for solutions.

Second, target a specific wedge of that category you can realistically dominate. Not everyone. Not "all project management users." A narrow segment you can own completely through superior product fit and focused messaging. This is where most companies fail—they try to be everything to everyone instead of being the obvious choice for a specific someone.

Third, build deep product and GTM capabilities specifically for that wedge. Every integration, feature, and content piece should make you the obvious choice for that segment. When an engineering leader at a Series B SaaS company searches for project management tools, they should find five pieces of content, three customer stories, and a demo environment that looks exactly like their workflow.

Fourth, once you genuinely dominate that wedge—not just claim to, but actually win 60% of deals in that segment—expand to adjacent segments from a position of strength, revenue, and customer proof.

I've seen this work repeatedly. A company enters "project management," an established category with clear buyer demand. They target "engineering teams at Series B SaaS companies" specifically—not all engineering teams, but engineering teams at that specific growth stage. They build deep workflow integrations with GitHub, Jira, and Linear. They create content about sprint planning at scale. They showcase customer stories from companies at that exact stage. Within 18 months, they're the default choice for that segment. Then they expand to Series C companies, then product teams, then design teams—each time leveraging proof from the previous segment.

This is how most successful companies actually grow. They enter existing categories with a wedge strategy, dominate that wedge through superior product and maniacal focus, then expand from strength.

They call it category creation in the Series D press release when Andreessen writes the check. But the early GTM reality was category entry with disciplined focus and superior execution in a specific segment. That's not a secret to hide. It's a strategy to embrace.

The Real Question to Ask

Don't ask "should we create a category?" That's ego-driven strategic planning.

Ask: "Given our resources, competition, and market position, what's the most efficient path to $100 million ARR?"

Sometimes—rarely—that path is category creation. Usually it's category entry with strong differentiation, disciplined segment focus, and superior product execution.

Both can build great companies worth billions. But only one is honest about the resources required, the timeline to payoff, and the statistical odds of success. Choose wisely.