Startups are often a land grab, where the winner really takes it all. Being first to market can mean life or death when you build a global marketplace like Airbnb’s or Uber’s, because once someone signs up early adopters, the new entrants will have a much harder time to reach customers.
This is why it’s such a painful thing to learn about somebody else working on the same idea. Even worse, you usually find out about the other team from press releases: when they already released the product, or landed a massive investment. That cold, sinking feeling in the stomach is something many founders know all too well.
But, before you get caught up in jealously and become paralyzed by fear, look at the facts rationally. Competition is often not even a bad thing.
Competition might be an opportunity
As a startup without product-market fit, your number one goal is to reach product-market fit. You need to build a real business, and everything that gets you there faster may be a good thing.
In the end of the day, was it a bad thing for Facebook to have Friendster and MySpace on the market? Or, was it rather an opportunity?
Maybe you started out without any competition whatsoever, and suddenly saw new companies enter the market. Then at least these three things happened at once:
- Now you know that there’s at least one person (and their team, and their investors) who think that the idea has legs. Not only that, but they are willing to spend a crazy amount of time, money and resources to make that idea happen. Talk about idea validation!
- There’s a team that you can watch and learn from. Maybe they come up with ideas that you haven’t even thought of, and now they will build it, test it – all you need to do is learn from their successes and mistakes. Research and development doesn’t get much cheaper than that.
- In one of the worst case scenarios, when you’re about to go down, competitors are usually the first candidate for potential buyer. They would likely hire your team for their highly relevant experience.
There’s only one thing that’s better than finding about a team that’s working on the same idea. To find about them before you even get started.
How do I know who my competitors are?
Some of your competitors will be more obvious than others. Direct competition will come from businesses which offer products or services very much like your own. You must also be aware of those companies which provide viable substitutes.
It is helpful to first compile a list of your top ten competitors, and perform a thorough analysis of their company structure and activities.
What should I look for?
There are a few key areas to look out for when carrying out an effective competitor analysis. The most important aspects of your analysis will focus on the areas where your businesses overlap and directly compete, but a successful analysis should cover all areas of the company.
Let’s take a quick look at some of the key questions:
- What products and services do they offer? Which ones are similar to yours, which are complementary or substitute products? Do they offer something that you don’t?
- What’s their core message? Look at their branding, headlines, colors: do they seem to target the same group as you do?
- Can you find any of their adverts online? Look for visible SEO keywords, banners, ads in magazines and social media activity.
Is it a good thing to have lots of competitors?
Competition can be immensely helpful when it drives companies to excel, but it also poses a real threat. The more competitors there are in your particular industry, the more likely it is you are selling a product people are already looking for. However, it’s important to differentiate yourself from the others, to ensure customers go to you, rather than to someone else.
Identifying the strengths and weaknesses of your competitors will help you gain a crucial competitive edge. Keeping a close watch in your competitors will help you stay at the forefront of new developments and ultimately, allows you to remain ahead of the pack.