As a startup, why you should embrace competition and not fear it?

by | Apr 20, 2019 | Uncategorized | 0 comments

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As a startup, why you should embrace competition and not fear it?

I met several first time founders in the last two years and there seemed to be a common notion of running their startup in stealth mode for several months until they get traction. When asked why would they not come out of the stealth mode immediately, almost 80% of them said they feared competition.

In my opinion, this is a mindset that first time entrepreneurs need to change and should see competition as a necessary evil.

As an investor, I would definitely be interested to look at the competitive landscape in one’s pitch. When entrepreneurs say that they do not have any competition, I rarely take those statements seriously. For one, “an idea can never be unique”. It is difficult for me to believe that an idea was only thought of by one person in a world of 7 billion people. Now assuming that the idea was thought of by others, there could be two possibilities

Either way, I would love to see more competition because it means more opportunity.

“Especially as a first-time entrepreneur, you want potential investors to know about you and to have established rapport long before you need their money. Being in stealth mode may hide you from the competition, but it usually limits your fundraising options as well.

Did you ever think why is there rivalry in every industry you can think of? Here are 10 examples (although I can list 100+ without any trouble):

When one is trying to create a new industry or a new product, competition can actually help build awareness. As I heard one of my mentors say this to a group of entrepreneurs:

Rarely, first time entrepreneurs see competitors as collaborators. For instance, did you know that rivals Toyota and BMW had joined hands in developing an environmentally friendly luxury vehicle which helped them save significant R&D cost and innovate.

While I agree that there are sometimes advantages of being the first-mover in a market, it is not necessarily true in every case. A first-mover advantage being an advantage is circumstantial.

When I argue against the advantages that a first-mover has, people more often than not bring up the example of Amazon being the first online bookstore to enjoy the first-mover advantage and its success. Not many know that Amazon was an imitation of Book Stack Unlimited (books.com) which was founded 4 years before Amazon.

When there is competition, companies tend to be on their toes and continue to make things better and innovate to remain ahead of the game. As a study in Harvard Business Review from 2013 suggested that they found the companies launched in crowded markets had higher odds than others of failing in the first year — but if a company survived during this early period, it had a much greater chance of making it to the three-year mark. A firm’s early exposure to competition appears to have an immunizing effect, in much the same way that a person’s exposure to illness can create antibodies that provide long-term protection. The downfall of Kodak or Nokia could be seen in the same light. These companies had dominated the market for quite long and became complacent and therefore, did not innovate their products and became obsolete.

When a founder announces to the world about their new startup, he/she gets more feedback — be it in form of a positive compliment or a negative comment. Either way, such feedback helps in refining the business model especially in the early stages of a startup. First time entrepreneurs tend to fear that their idea may be copied by someone else.

I believe no one in this world has enough time or enthusiasm for working on someone else’s idea. A true entrepreneur is passionate enough to follow his or her own dreams and ideas.

If you are confident of your idea, product/services and execution, you should not worry about coming out of stealth mode.

In an old blog post by Marc Andreesen, he mentioned — “You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah,” the sales cycle takes too long, and lots of deals never close.”

As a startup, why you should embrace competition and not fear it?

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As a startup, why you should embrace competition and not fear it?

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