

When startups compete, no one wins - ataussig
http://ataussig.com/post/25505974229/when-startups-compete-no-one-wins

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JumpCrisscross
Even assuming that all startups involved can agree their value propositions
are roughly identical, a Herculean prerequisite to forming a union of equals,
there are good reasons given by game theory to advise against this move.

An "alliance" would be tentative as it would be a moving game of prisoner's
dilemma. Further, this "union startup" would be reduced to committee
behaviour, sacrificing a large portion of a startup's cultural firepower.

Our economy is healthier diversified across independent bets. Even if a me-
too's only differentiating factor is that it operates in a different geography
than its parent that is differentiation enough to turn a profit.

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drharris
Have to disagree with this sentiment. I understand where it's coming from, but
it simply doesn't play out that way in reality. Competition is important to
determine which service is going to last. If there are 80 startups in the
exact same space, how would I (as a potential user) know which to pick? It'd
be a guess at best. Let's say a year later only 5 are left, and 4 of those
have slightly pivoted into other niches. Now it becomes very easy to decide
which service to use. Had they not been competing against each other, none of
them would have found their niche market. I'd consider THAT the "no one wins"
proposition.

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anon808
'how would I (as a potential user) know which to pick?' How about which one
serves you the best?

So you're saying if one of the services with the shittiest product raised
$100MM more than the others, gave their product away for free and outlasted
all of the others, you would let that 'competition' decided which was the best
service for you to use?

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tg3
It doesn't generally play out that way. Buying the market is a short-term
play, and isn't sustainable. PayPal beat the other payment services because
they figured out the fraud problem. Google beat other search engines because
they brought more relevant results.

The market, meaning the aggregated mass of consumers, chooses which product is
best by using (and usually paying for) the product. That product is the
winner. Competition is what drives the individual players to improve their
product in response to the market. Without that you have a command economy or
a monopoly, both of which are notoriously inefficient and un-innovative.

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ataussig
Appreciate a lot of the comments here. Let me add a few of my own.

To start, I'm as big a capitalist as anyone. Competition is generally good,
especially from the customer's standpoint. Startups should compete hard to
create and distribute the right product.

My point here is that I've seen a few startups waste a lot of time and energy
beating the crap out of each other, often to no avail. I don't expect these
guys to get together and hold hands. I do expect them to take the high road
and welcome others into an industry they are also trying to change, especially
when you are going against an incumbent who really can beat the crap out of
you.

I'm not advocating calling up your buddy at a competitor and saying, "Hey
let's band together." That's probably a bit much. I'm referring to the
situations like the following:

Say you are RelayRides. A reporter asks you, "Don't you think Getaround does
X, Y, or Z better than you?" A great answer to that question is, "We love what
Getaround is doing and support anyone getting car sharing into the masses. We
hope you choose to use RelayRides because we think it's the best service in
the industry, but as long as you're choosing to car share instead of buying a
new car we think you are making a step in the right direction."

Hope that clarifies a bit of the discussion here. Thanks for the enthusiastic
response.

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jpastika
I'm having a difficult time getting past the image that the author wants
startups to sit around a campfire and hold hands chanting "we're all in this
together". That is not the reality of business. Today it seems that the
entrepreneurial spirit is being watered down, because it is considered "ok" to
create a service with no monetization strategy or goal and simply hope for an
acquisition. I believe competition breeds innovation as well as better
businesses. It isn't about startup vs startup, it's about business vs
business. Personally, I'm not building a company to see how many "friends" I
can make (and subsequently share random thoughts and photos with). That being
said, I do agree with the author's sentiment that in business relationships,
just as in personal relationships, we have the opportunity/choice to do the
right thing even when it doesn't necessarily make the most business sense.

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woohoo
What matters is who your prospects position you against. If they are
evaluating your offering versus another you have to position against that.
Unless your prospects are comparing you to another startup, why would you? And
just because you are both in the same market space does NOT mean you should
necessarily partner in my opinion.

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j_baker
I get this line of thinking, I really do. It's just not what our system was
built for. The fundamental idea behind capitalism is that competition is good
and cooperation is bad between businesses. We can agree or disagree with that
idea, but you can't ignore it.

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anon808
No one 'built' this system . . . there was no master architect or group of
engineers. The 'system' is just how things are RIGHT NOW, doesn't mean they
can't change. Nothing says i have to go along with it, I can do my own thing.

I personally think competition is a distraction. Focus on doing what you do
best, and make it better because that's what you control. Who gives a shit
what the other guy's doing. The only competition that makes sense is the
competition against greatness, an ideal. If you compete against someone else
you're letting them set the bar (what you value), since all you have to do to
succeed is just beat them.

Capitalism just means resources (capital) is privately owned, how we deal with
the other folks that also own capital is purely up to us. No rules around
that.

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j_baker
_Nothing says i have to go along with it, I can do my own thing._

 _Capitalism just means resources (capital) is privately owned, how we deal
with the other folks that also own capital is purely up to us. No rules around
that._

I'm sorry, but you're just flat out wrong. I get your logic. It's just that it
doesn't work that way. There are plenty of laws around cooperation between
businesses, for better or worse. Flaunting them so you can do your own thing
is a good way to wind up with a big fine. This blog post is stopping just
short of advocating cartels, which _are_ illegal in the US.

~~~
anon808
I'm not advocating cooperation or cartels, i'm advocating not caring about
competition (or cooperation), ignore both.

I believe in an open market, and cooperation and cartels destroy that.
Focusing on competition is a distraction. I'm saying be indifferent to
competition.

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sek
I wonder why there are so few fusions, think about PayPal. Was there another
big one after that?

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JumpCrisscross
Fusion = merger. If neither player is outsizedly profitable nor has garnered
sizeable market share, the only guiding reason for the merger is to eliminate
competition. If your competition thinks it is stronger than you it will balk
(you're both startups) - thus, you in the best case is teaming up with someone
as good as you.

Startups should be focused on building value, not wiping out local
competition. That behaviour only makes sense once one has reached maturity.

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jonnymkramer
So Facebook didn't win over ConnectU?

