Reverse Gravity in Software
"In software, there's what I call reverse gravity. Over time, the market will always pull you up. Because what ends up happening is that smart founders will look at the numbers and say, 'As it turns out, our bigger customers stay longer, pay us more, often have higher NPS.' And because of this reverse gravity, almost every successful software company ends up being an enterprise software company." - Dharmesh Shah
What It Is
Reverse Gravity is the phenomenon where software markets naturally pull companies upmarket toward enterprise customers over time. Larger customers retain better, pay more, and often have higher satisfaction scores—creating a gravitational pull that smart management teams find hard to resist.
The consequence: almost every successful software company eventually becomes an enterprise software company, leaving the SMB market perpetually underserved and creating sustainable competitive advantage for those willing to fight the gravity.
How It Works
The Pull Upmarket
Smart founders and management teams see the data:
- Larger customers have lower churn
- They pay higher prices with better unit economics
- They often have higher NPS
- Sales cycles may be longer but lifetime value is higher
The rational response is to pursue these customers. Over time, this creates a predictable pattern:
- Company starts SMB → sees enterprise opportunity → adds enterprise motion → focuses more on enterprise → becomes enterprise company
The Competitive Implication
Because reverse gravity is nearly universal, the SMB market has a unique characteristic: you're only competing with companies "stupid enough" to resist the pull. Fewer competitors stay focused there, creating sustainable differentiation for those who do.
HubSpot's Contrarian Bet
HubSpot made SMB focus a high-conviction, low-consensus bet—not a go-to-market strategy, not a stepping stone. For 18 years, they resisted the pull despite investor pressure on every IPO roadshow: "Yes, we get that you've focused on SMB, but what's the path to enterprise?"
How to Apply It
Know the pull exists - Don't be surprised when your data shows enterprise looks attractive. That's reverse gravity working.
Make a deliberate choice - Either:
- Accept the gravity and plan your upmarket journey
- Resist it deliberately with high conviction (like HubSpot)
If staying SMB, build for the physics - SMB requires:
- Freemium or low-touch sales (can't afford enterprise sales cycles)
- Product simplicity (users can't be trained extensively)
- Self-service everything (support costs must be minimal)
Use low competition as advantage - If you're one of few companies serving a market, you can sustain longer without constant competitive pressure.
Accept the trade-offs - SMB means no revenue concentration risk and full roadmap control, but also limits on deal size and a requirement for massive volume.
When to Use It
- Market positioning decisions
- Evaluating whether to pursue larger customers
- Understanding why your market segment is (or isn't) crowded
- Building investment theses around market dynamics
- Defending unconventional market focus to investors
The Case for SMB
Despite conventional wisdom, SMB has structural advantages:
| Enterprise Pain | SMB Advantage |
|---|---|
| Long sales cycles | Short feedback loops |
| Revenue concentration | No single customer controls your roadmap |
| At mercy of VC market sentiment | Incrementally measurable progress |
| Bi-modal outcomes (consumer) | Sustainable, measurable growth |
| Competing with everyone | Competing with few willing to stay |
Source
- Guest: Dharmesh Shah
- Episode: "Zigging vs. zagging: How HubSpot built a $30B company"
- Key Discussion: (00:45:58) - Full explanation of reverse gravity and the SMB strategy
- YouTube: Watch on YouTube
Related Frameworks
- Bowling Pin Strategy - Taking over markets one niche at a time