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Comment by theyoungceo | Hacker News Reader

Some clarification on what this product does... * It requires a physical component beyond desktop computers, one that requires ongoing support and maintenance and precision installation. This isn't like a sales order system or something like that, it might more be called a public works project. * It is a service-based ASP model * Bear in mind that the usual pricetag for organizations of medium to large size is $2M to $30M and we are doing these deals in the $100-200k range so we very much are operating on razor thin margins

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So your smaller competitor is doing to you what you are doing to your more established competitors. Do you think your major competitors initially discounted your ability to prosper? Also from the perspective of your prospects, given that the next nearest major competitor is 20X your price there may not be enough of a difference between you and your lower priced competitor. Why not be just be 1/2 price of your nearest major competitor instead of 5%? Do you have to discount so strongly? Will you significantly enlarge the number of buyers with your price point or just shrink the total spend in the market? You may be being excluded from many more deals because your price is not credible (e.g. are you trying to sell a $10 car, people wonder what's missing or wrong with it).

There are two types of government entities: let's call them "private" and "pseudo private"....then there is a third type that is very public, very well funded, and very demanding. The first two markets were grossly underserved because they couldn't dream of affording the product for the third. A few startups have sprung up in this area, and that's where we got our start. Only the two rolls royces have any substantial market share in the big public market, and we're going to be the first company of the little guys poised to make the jump into the big one. We're trying to figure out how we're going to multiply our price by 20x, and it is probably going to mean we fork the product development into two separate lines for the smaller ones and the bigger ones even though the cost structure is more or less the same. The big big guys have been enjoying OBSCENE margins (think 5000%) in the big market for a long time due to the barrier to entry of "establishment" there.

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