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Why Entrepreneurs Are Bad At Finding Their Competition (berserkia.com)
94 points by bsirkia 1274 days ago | hide | past | web | 45 comments | favorite

Because sometimes investors run the following algorithm:

Q) Do you have many successful competitors?

A1) No -- then why isn't anyone succeeding in this space? Maybe it is too ahead of its time but most likely there's a reason no one can make it work. In any case, I'm out.

A2) Yes -- in this case look at how much competition you have, it's too hard to break in now. It's a very crowded space and you won't be able to differentiate yourself. I'm out!

Proceeds to invest a couple months later based on liking the team and seeing who else is investing...

You answered your own concern here.

>> based on liking the team

We all know that the idea without an execution is not worth much. It's easier to halt everything by saying the idea sucks rather than saying that he doesn't believe in the founder.

>>seeing who else is investing

Social proof is a huge factor and touches many aspects of every day life. And at the end of the day, investors are humans.

It's wiser to adopt the view that it's not really about "entrepreneurs", "business models", and "venture capitalists". If it ever were that, it sure ain't anymore.

Instead the dynamic is closer to student-apprentice applicants and admission committees.[1]

[1]: "Entrepreneurs Are The New Labor" by Venkatesh Rao: http://www.forbes.com/sites/venkateshrao/2012/09/03/entrepre...

Yes, in my experience, leveraging existing relationships and capturing the investor's imagination are much more widely successful strategies for raising a round than actually having a product or revenue. At the end of the day, a lot of this has to do more with social dynamics than fundamentals of the business strategy. That can explain how companies like Color can raise huge seed rounds on unproven ideas and then fail quickly.

Every single startup I've worked for, the founders admitted that there wasn't a ton of interest until one of the big ones was interested and then EVERYONE was. While its fine to just point to this as an example of social proof, you have to wonder how good these guys are at their jobs if they get much less information from their time with you than they do in finding out if someone else invested in you...

I agree in general (so many people, myself included, avoid finding competitors because it's like asking for bad news.)

That being said, it shouldn't take 20-30 hours. If you're looking for it but can't find it, there's something missing with the existing companies (execution, marketing, etc).

But make sure you know everything. Literally nothing kills a pitch or talk quite like not being able to answer the question "So it's like ____?", even if the mentioned startup turns out to be only tangentially related.

To understand any given market space, even the suggested 20-30 hours is far less than enough. Unless after several hours of searching, no competition is found to begin with.

If someone is unwilling to perform a thorough search for competition, there is a good chance that the person does not yet understand the problem he is solving or has a wrong idea about what the real problem is.

Part of the reason why it takes long to understand competitive landscape is that search engines are still not perfect, and companies often do not do a good job of explaining on their websites what exactly they do.

If a company exists that is solving the problem and yet you cannot find it, you may call it a problem with their execution, or a problem that you may soon have too -- discoverability/SEO and gaining traction.

They say, ideas are dime a dozen. My understanding is that ideas are dime a dozen only before you apply the filters - product-market fit, competition analysis, etc. If something passes through and correctly so, it is worth a lot more. I bet investors die to see something that has actually passed through.

One of the points raised in the article is to understand why you can't immediately find a good competitor. 20-30 hours of search helps you cover your bases by finding the languishing or dead competitors; IMO learning what they have done to die out helps you avoid those pitfalls in the future. This could be part of your point about "knowing everything". Being prepared is paramount.

I think that sometimes you have to find out what are specific terms used in that field, it might not be initially obvious for a new comer in a field.

Definitely, it's not always easy knowing what to search for and it can take awhile to narrow that down.

Right, I had a hard time figuring out exactly how long to put there time-wise. I think the amount of time you put in actually looking into what they're doing (figuring out what they're doing well, not well, their traction) can vary it quite a bit.

You're right about the pitch-killing. A few times I've seen investors pull out their iPad during a pitch and google potential competitors. Then they ask the entrepreneur about them if they weren't included.

I think it's fair though to spend 20-30 hours deeply analyzing the competition. What was their go-to market, their pricing structures, key focus, team size/background, economics, channels, partnerships, stated reasons for failing, what were they hiring for, etc. etc. Those all holistically give you a great view into lots of learning.

I have done this type of research recently and I can say that it helps immensely when you invariably get the "So it's like ___?" question. :) It really forces you to think about how you are going to answer that question ahead of time.

> "All ideas are second-hand, consciously and unconsciously drawn from a million outside sources, and daily used by the garnerer with a pride and satisfaction born of the superstition that he originated them." -Mark Twain

Of course someone already built your idea. You'll find 30 versions of it just be searching for suitable domain names. Take advantage of that. Your first 30 iterations and pivots are done before you even started!

If you go beyond the Yes/No of instantdomainsearch.com and actually look at what's hosted on the unavailable domain names. Click around the website. Become a customer. This is more useful "market research" than blasting out hundreds of SurveyMonkey surveys or asking people if they'd use your product!

> One of the most exciting times of being an entrepreneur is the very early days after having the idea. You discovered a pain point, created an awesome solution, and now you have a whole world of potential ahead of you.

Having an idea and building a solution is innovation, not entrepreneurship. "Entrepreneurs" are business people who take what someone else built and compete with other business people to sell it to the greatest market at the highest margins, then flog the business itself to some sucker just before it tanks. Someone who imagines and builds needs to be quite profound, whereas someone who takes and sells needs to be quite petty, so rarely do you find innovation and "entrepreneurship" in the same individual.

So I would say innovators are bad at finding their competition, which is the "entrepreneurs". Innovators often get a shock at how vicious "entrepreneurs" turn out to be when the product's almost ready. Even before there's a solution built, many "entrepreneurs" roam around looking for innovator victims who happily advertise what they're doing or even posting their software samples online. "Business is war" to the entrepreneur. Anyone in business who's building and trusting instead of stealing and fighting won't last long.

Hm, disagree. Innovation is an essential element of entrepreneurship, just as persistence, boldness, business-acumen, if not the most essential one.

If you're not an innovator you also can't really be an "entrepreneur" since you won't be able to build new features for your product, nor scale your company.

What you're describing is more of an executive/corporate CEO that was hired into the company after a few years down the track I would say.

An example that comes to mind is Eric Schmidt. He's not an entrepreneur at all, he never invented something or created something new. However, he is a full-on CEO. He probably can scale up your company from $10,000 rev to $100M rev like no one else.

Imho entrepreneurs normally aren't good CEOs. They like to create new things, work on the product and usually don't want to bother talking with investors, hiring people or talking to the media.

That's a fairly bleak view of entrepreneurs simply as "takers" from innovators. Do you not feel they can be the same person?

> I would google "Rideshare OR Carpool + Service OR Startup OR App"

How many of those search modifiers still work with Google, and does it give the parsing he expects? I haven't seen anyone do a search like that in a decade. I notice that removing the plus gives the exact same SERPs for example.

I still do it, though you might be right that it's deprecated and just doing "rideshare carpool service startup app" would be the exact same.

EDIT: Just tried it, and it does return different results. The search modifier OR seems to work, but the + might not be doing much. I definitely find the search with the modifiers to return more relevant results.

Putting a single word in quotes is the same as using a plus used to be.

+searchterm has been replaced by "searchterm"

In general, you should do a competitive analysis before even thinking about problems or solutions. If you want to be an entrepreneur, pick an area that interests you and dig very deep in all the players and what they provide. Then learn about the problems (usually by using their solutions) and look for pain points that are missed and that you are well suited to solve.

At that point your brain will veer away from solutions that are already well covered and will naturally focus on the fuzzy areas that are being missed. But you know at least that you are dealing in an area that a) you enjoy (this is the most important) and b) your market is validated.

The key point you have to look out for at this phase, is your solution just a feature of some bigger product? In which case, you'll want channel partners / look for acquisition exits. Which, TBH, nowadays is often the easiest and fastest way to exit.

Depending on the market, 20-30 hours seems really low for thorough market research. Often times, when a market is super crowded, that means that there is a great opportunity because there really isn't a winner. Doing thorough research on tens or hundreds of companies, especially in opaque markets can be a big waste of time compared to focusing on what you are doing that is working.

Referencing AngelList and CrunchBase leads me to believe that this article is applying only to startups that compete with other startups but it is ignoring the bigger opportunity of changing existing markets.

I agree, the amount of time you spend can really vary. If you're going after a space with major incumbents, it should be much longer, because you really need to drill into the strengths, weaknesses, and opportunities of your competitors.

I reference CrunchBase and AngelList not because it's only startup-startup competition, but it's a great place to look for new entrants that you often won't find through Google alone. If there are major incumbents in your space, you should find them with that initial google search.

I found this particularly insightful: "Startups are all about learning and iterating and failing fast, so competitors are a bunch of experiments that have already been done."

I'm trying hard to learn to getting to know the competition and appreciate it but it can be very discouraging to find out that your killer app is just another player in a saturated market. Nevertheless, I feel that I'm more honest with myself if I do a competitive analysis very early on; even one that takes a few minutes is incredibly useful.

I definitely know what you mean, it can be incredibly discouraging. But, hopefully you can copy what they have done well and improve what they haven't.

Just because a competitor does a certain feature or something a certain way doesn't mean they iterated quickly, perfected it and you should copy. It could also be that they simply have enough customers they are scared to change anything for even the better and are stuck. At my last company we got to a point where the executives were happy making zero product changes to make life easier on our support team and not make customers mad due to re-training and causing new bugs.

Some others may be nimble enough to add whatever your killer feature is. But their management team or investors may want to keep with what works and not vary from that path.

Point is some companies are in different points of their life cycle. I think it is good to know who the players are but to use your own product vision to guide you. If you have no product vision and your goal is to just copy, well good luck with that. Why a product is built a certain way isn't something you can always figure out.

I agree on 20-30 hours estimate but in general, you just cannot sit down in a few days straight and find out all competitors. The reason is very simple: most of the time, you don't know the right keyword to search. This happened to me. I spent days searching for competitors. Then I thought I had a pretty good idea and started on coding. During that time, my head started to pop out with "alternative" keywords, not necessarily direct competitor keywords. Those are dangerous because again, most of the time, people already have a way to do certain things (i.e. alternative solution). So that 20-30 hours is just the tip of the iceberg. After you start reading blogs and talking to people, what you ended up having is a way better list of keywords to search for. By the way, don't forget to get ideas from Google Keyword Tool itself.

Every time someone approaches me about starting a company with a "brilliant" idea, I run a quick Google search and ask them, well have you heard of ___ or ___? 99 percent of the time they give up after that.

>An investor or friend shouldn't be the first one to tell an entrepreneur about someone new in their space.

This line resonated with me. I know the stomach-dropping feeling of someone mentioning a potential competitor that I've never heard of. I usually play it off and say, "Thanks, I'll definitely check it out" and then immediately Google it on my iPhone as soon as possible. Luckily, in my research I haven't found anything all that similar to what I'm working on.

This brings up a corollary question: Assuming I have a pretty well-informed view of the competitive landscape and I can't seem to find anything that solves the problem in a similar fashion, how do I sufficiently answer the inevitable question from investors about my competition? I've often heard people write and say that business ideas ALWAYS have competition, the tricky thing is that the competition isn't always immediately obvious. Answering that a startup doesn't have direct competition leads to skepticism, therefore creating distrust right off the bat when it may not be warranted.

That's a great question. I think the only thing you can do is address who your competition is, even if they're only tangentially related. I usually follow a pattern of "X competitor is doing Y, which helps our target customer solve A and B need but not C and D".

I think it's worth finding the closest competitor no matter how far away they are, even just to signal that you've done the research.

I think it's better to mention the tangential ones than to omit them because it shows that you've really thought through the competitive landscape.

Competition is also not a bad thing. If there are a few startups vying for attention in a certain space, it means there's obviously value there. You have to prove to investors and customers that you're going to do it better and ultimately win the lion share of the space.

If you did your research seriously, i believe sharing the results(indirect competitors) and maybe the process(keywords searched, etc) could help build trust .

You usually need to prove one of the following:

1) How you'll beat the competition

2) Why people will want your product

Are you sure you shouldn't be focusing on 2?

The situation I provided was hypothetical, but one I've thought of previously. I would agree that #2 should be the focus, for sure.

As a quick tip for new entrepreneurs is simply to hire someone to do it on elance. For as low as 150-500$ you can get a very good summary of the market, the competitors, the market-size. You can ask to have it in a excel spreadsheet sorted by features, money raised, etc.

Definitely a good idea. I'm thinking about writing a post at some point about how valuable outsourcing certain facets of the process can be, provided you have some cash.

You should! I've learned to use elance (and when not to use it too!), very very useful. Especially when starting out without employees. You can't do everything yourself, and it's stupid to try to do it.. but that's exactly what most people do when they start (and what I did). Market research is a very good example of a boring task that's very hard to do for entrepreneurs because it can totally destroy their problem/idea..

You should know who your competitors are, but focusing on them is a waste of time.

"The last thing you want is to find out that hundreds of other people have already thought of it and Andreesen just backed three of them."

This is a pretty naive point of view. Who cares if they are all startups.

Spend the time and energy this post recommends spending on your competitors and direct it towards your own customers instead.

Also see #4 here: http://paulgraham.com/startuplessons.html

I once listened to Alexis give a lecture on the founding of Reddit. One of the more memorable points he made was recalling when they found "Digg". They were still in development, and someone had sent them a link. They spent 30 seconds looking at it, then said "cool", and kept on working.

My own thoughts is that the competition turned out not about features, but community. One might have thought Digg had a big leg up, because they basically had Kevin Rose using his role on Tech TV to promote it. However that was also a disadvantage. Eternal September is the death of most online communities, and they brought it on themselves. Reddit fortunately had pivoted to a platform for communities (sub-reddits) so as they picked up steam, the bad network effects were mostly concentrated to the default subs.

"You should know who your competitors are, but focusing on them is a waste of time." I agree. The point of this post is that entrepreneurs very rarely actually know who all their competitors are and this is a way to get a complete picture. As I say at the end, then it's time to move on and get going.

I agree. If a company is not actually delivering value to your customer segment, then they're not a competitor. Just another wannabe and irrelevant IMO.

This is an interesting POV. There's this school of thought in business/marketing that continuous positioning is absolutely crucial for the success of any business because it allows you to offer better value to your customers. Not sure if I completely agree but most companies have to react when the competition changes a major part of their business model or does minor biz dev like dumping their prices.

Possibly for startups that are past product/market fit (not many seed stage investments). Pre-product/market fit focusing on competition is a waste of time.

I don't think "entrepreneurs are bad at finding their competition" as the OP suggests.

In my experience, "We don't have any competition" usually translates to "We are so differentiated from the competition that it effectively isn't competition." That's more often than not an unrealistic conclusion, but the reasons an entrepreneur might favor such a conclusion are fairly obvious.

Isn't this a just-so story? I don't see any reason to believe that more good companies do things this way than don't.

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