> Another way to put it: If the market is really that small that one small startup can take away business from another small startup, then you don't have much of a market at all, and you should find a larger market.
This is true but not the entire picture.
It is extremely common for the VC community to de facto agree on a leader of a space. Markets are frequently interpreted as winner takes all, despite the reality that almost none are. Once a winner has been agreed to it can be extremely difficult to raise funding in the same space.
Really? There's equally valid conventional wisdom that's just the opposite - that it's easier to get funding if you do a slightly-improved knockoff of an existing popular startup (consider all the Groupon knockoffs).
This is true but not the entire picture.
It is extremely common for the VC community to de facto agree on a leader of a space. Markets are frequently interpreted as winner takes all, despite the reality that almost none are. Once a winner has been agreed to it can be extremely difficult to raise funding in the same space.