Startups: Your Competitors Aren’t “Lucky”

Photo Credit: Mike Mozart

By Gaurav Jain

Venture capitalists are used to hearing bad news, but few things are more frustrating than hearing a CEO denigrating or dismissing their competition — especially the rival that has a major lead.

Creating an us versus them culture can be good. It’s helpful to identify an opponent to compete with, if only privately. But competitors need to be respected — feared in some cases.

Luck is Real, Don’t Laugh it Off

Often, founders will say that their competitors “got lucky.” Maybe they did. Perhaps a few key influencers found the rival’s platform first and helped it to take off. Or they launched first and the founders believe the head start will evaporate over time.

Luck is real, but it rarely persists. If a startup is being beaten in the market they must internalize. Externalizing failure doesn’t lead to billion dollar exits. If a founder can’t dispassionately explain why a competitor is eating their lunch, without attributing it to luck, the biggest problem is probably with them, not their competitor.

Learn to be Lucky

“The harder I work, the luckier I get” is good advice. Often when I hear a CEO ascribe a rival’s success to luck, it is really a matter of faster learning. Maybe the founders attracted those KOLs that gave them the lead because they had studied the market more carefully. Or they launched earlier because they found they actually needed less product to satisfy the customers.

Don’t Overvalue Your Specialty

This is common with product-focused founders. It’s quite possible to build a better mousetrap, but that’s no guarantee of success. Pricing, marketing, service—even inertia—all play a huge role in success.

In the early days of the web it was possible to build something amazing and have it spread like wildfire based on its sheer novelty. Today, a product needs to be 10X better and paired with a clever customer acquisition strategy to you have a prayer of surviving. Saying “our competitor’s product sucks” is rarely going to convince a VC to invest.

It’s Ok to be Confident, But Only After Careful Planning

There are times when founders really are ahead of the curve and see oncoming changes that will tilt the landscape in their favor.

  • An infusion of VC money can supercharge one of your competitors and their progress will falter once the capital dries up. E.g. all the businesses that subsidize customer acquisition unsustainably.
  • Major platform shifts create an opportunity for new entrants. E.g. all the businesses built on mobile.
  • Customer behaviors are changing more rapidly than most can perceive. E.g. the emergence of Esports.

In any case, claims of confidence will resonate more if backed with data rather than a series of blind assertions.

You’re in Competition with More than you Expect

Often times the biggest competitor you’ll face is not a VC-funded startup, but a spreadsheet. If you’re bringing a new product to market, there’s a good chance your customers have already found a way to solve the problem your product promises to with Excel. Don’t assume because you create a CRUD interface and mobile app that people will come running to you. Weight loss apps compete with Nike, NutriSystem, and a huge number of books, not to mention gym memberships. How will you break through?

Respect Works Both Ways

Many giant corporations have been brought low by startups and plenty of startup CEOs failed to respect scrappy upstarts. TripAdvisor is a giant with a market cap measured in the billions, but an upstart made a small, but noticeable dent in its market share by investing in TV ads. Founder Stephen Kaufer had always been skeptical of advertising on TV, but this competitor proved that the platform could work. Kaufer didn’t deny the company’s success — he commissioned ads of his own. It would have been easy for him to dismiss the upstart and point to his other advantages, but why surrender that free learning?

Building a startup is hard, but it becomes nearly impossible if one is blind to the sources of their competitor’s success.

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