David Cummings on Startups

Thinking About Startups and Competitors

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David Cummings

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One area that I don’t spend too much time worrying about is competitors. Most markets are not winner take all or winner take most such that there’s the opportunity for several successful companies to emerge. Email marketing is a great example of a market without winner take all/most (see email marketing companies with 100+ employees). Instead of worrying about competitors, I do think it’s worth tracking them for a few reasons:

  • Having competitors is important to validate that other people believe in the idea
  • Competitors provide a proxy for the level of market development (look on LinkedIn to see how many employees they have to get approximate company size)
  • Investors in competitors show the venture firms that care about certain markets, and provide third-party validation
  • Analysts that cover competitors can also provide reports and insight as well as segmentation

Competitors are a necessary part of the startup world but should not be obsessed over. The best thing to do is to stay close to your customers and provide a great solution.

What else? What are your thoughts on startups and competitors?

Comments

3 responses to “Thinking About Startups and Competitors”

  1. Adam Avatar
    Adam

    Startups have no control over competitors. I recommend a quarterly check in with the competition to ensure your business remains differentiated. Startups are better served focusing on customers.

    Reply
  2. Ryan Davison Avatar
    Ryan Davison

    Really good piece. As I was absorbing the content I got to thinking that without competitors, it would be really tough to pick your own niche space in a market that you want to get penetration into. Thanks for blogging it!

    Reply
  3. sleicest Avatar
    sleicest

    Nice article & responses. I agree with the final advice.

    For what it’s worth, a few additional points as follows:.
    Firstly co-opetition can happen – organisations collaborating (but not actively fixing the market -, it’s a fine line I know) to grow the pie before competing to share the pieces. Research-led universities are a prime example of this as are energy companies, commodity producers etc.

    Secondly, as many established companies discover, their competitors change (by competitor type, by brand name & by what they compete on) as market boundaries and market needs shift. Therefore, as a start-up, even if you remain vigilant, it’s going to be quite hard to track competitive threats over the medium term.

    Lastly, in some ways competitors tell you more about markets than customers do! To elaborate, competitors put more ‘skin in the game’ whereas customers are fickle, invest little in your sector and have complex needs. Direct competitors invest scarce resources, incur fixed costs, hire staff and spend loads of effort planning all aspects of serving the customer group(s). Therefore after all that planning, if they appear to remain as competitors, they must believe the market is attractive (either to harvest, grow or maintain a static level of service provision).

    Reply

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