One of your startup competitors added you on LinkedIn. Maybe a top investor of a competitor found your email and sent you a cold email. They want to meet you. Crap. What do you do? Should you meet them or not?
This is no doubt a scenario that will inevitably happen to each and every founder who starts getting noticed for the first time, once.
tl;dr — You should know all your competitors and the investors in your space. It’s good to have frenemies. Just be careful about what you say.
The time I learnt to talk to startup competitors
I remember in the early days when we set up Delivery Hero I was shooting the breeze, chatting business with the CEO, Niklas who mentioned he was having meetings with the CEO of Just Eat. I thought it was funny he was doing so. I couldn’t understand why that made sense? He told me it was normal and everyone does it.
After that chat, I started doing the same. I added the founders of all our local competition and set up meetings. I didn’t know WTF I was doing, but it was a learning experience. I recommend doing the same. Only, read this first so you don’t figure everything out yourself.
Who are your startup competitors? I wager the top one is you messing up
I reach out to all competitors, tangential or not. I like people and I love learning. I’m not dumb enough to share ‘special sauce’ but also, even if I did, would that really change anything? Execution is so hard, if you were given the step by step playbook you would probably still fail. Uber has a ‘playbook’ to launch new cities. If I gave it to you, would you beat Uber in a city? No. You don’t have the funding, access to talent, the tech, the brand etc. Taking the resource dependence theory of the firm; you simple don’t have the resources.
Startups are rarely each others competitors
I once reached out to one competitor and he responded to me with a point I really like: “Startups are rarely each others competitors.” It’s concurrently dramatically simple and profound.
In most cases your chief competitors are twofold:
- Your incompetence — You suck and don’t have resources. Startup is hard, I don’t blame you
- Inertia — You are a visionary, but your clients aren’t. You always have competition, so don’t say you don’t in your pitch deck. Doing nothing doesn’t get you fired, it also doesn’t create work
There are also two kinds of company:
- Lifestyle: In rare exceptions, bootstrapping doesn’t result in an Atlassian exit. You don’t really matter in the context of impacting an industry like Microsoft used to, or Snapchat might (who knows). Making a million $ is fricking awesome for you (mad props) but you are a peon in the industry
- VC: You need to impact and warp the minds of everyone to make the returns a VC needs (Read this blog, and this one). To make this happen you are doing things differently. You ‘think different’ by definition. Many may even ridicule you. People may take meetings out of morbid curiosity. You don’t matter till you do. Then it is too late. You can tell them everything and they are still screwed
In any case you can only learn by talking to your startup competitors. You are either too small to matter, or too big to care!
Reasons to meet competition and their investors
I just discussed why you don’t matter and that you have the potential to learn by meeting people. But why exactly is that? Let’s go through the reasons:
- Multiple game — this is unlikely your only rodeo. You might work together in your next venture. So make friends
- Learn- startups are rarely each-others’ competition as I said. Learnings can help you, so long as you don’t say anything really dumb… but frankly, if you gave their CEO your whole dataroom, what would they really learn? Startup is about getting shit done/execution. Talking to smart people might help you think about things differently and get a moment of clarity
- Exit — Acquisitions don’t happen; they are engineered. You should be talking to all of your potential acquirers. As Mark Suster (Who is the #1 person I want to meet, if you can intro) said; “lines not dots.” Interactions with potential acquirers are needed to position yourself for an exit in future. This is a fab op to see if they may be your buyer to get you the fabled exit
- Invest — There are investors who invest in competing companies. Sequoia for example. They don’t care who wins so long as there is a winner- and a big one at that. How info is ‘Chinese Walled’ is a question of course. But needs must. Sure there are dodgy Daves, but at heart most people are good and care about their reputation.
- Competition — “What do you think of zabadabadingo? How are you different?” If you have ever tried to raise funds, this is a question you will have heard before. It doesn’t matter if they sell hotdogs and you burgers, you still need an answer. Not knowing the startup competitors your stakeholders think are your competitors is very dangerous. Meeting with all your competitors allows you to respond to such questions with “sure, met with the CEO 3 weeks ago. They aren’t focused on our space and let me tell you why” instead of, “ummm.” But do you know what, it’s happened to me too. Just hope you are 1/ great at googling fast and 2/ their landing page is informative so you can BS fast ;)
- Pumping up the company — Most company communication sucks. Founders do not share enough with staff. Staff are at a startup, not for big pay, but to kick some ass. Make sure your staff know who’s ass they are kicking! What better way to come into the office and explain to your staff (if you are Gen X) or Slack (if you are Gen Y and don’t like talk anymore) that you just met the competition and you are going to slay them for the following reasons! You are George and you just met the Dragon! Jobs had Apple and Mac fight against eachother, internally, what can you do with an external Northern Star to battle?
- Competition don’t suck — I know you love to say your competitors suck and your rule, but they don’t. They have the same challenges. Don’t believe your own hype. I have my own reality distortion field too, and competitors have kicked my ass (Sales guys have told me after they left and went to competition and see their numbers). Don’t take your competitors for granted. They’re probably much better than you think.
- Motivation — You need to understand your competition to beat them. I love this quote from Ender’s Game on the side. You need to play your own game, don’t do what the competition do or you generate beta not alpha. Don’t belittle your comp, be classy. But be a little paranoid. Just because you are paranoid, doesn’t mean they aren’t out to get you. That company you label as slow may have processes which enable them to deliver to enterprise with bigger tickets. That company that ‘just does retail banking’ may have built a new product targeted at your demographic that took them 6 months to build, only the VCs they are talking to to raise $20m know about.
In the moment when I truly understand my enemy, understand him well enough to defeat him, then in that very moment I also love him. I think it’s impossible to really understand somebody, what they want, what they believe, and not love them the way they love themselves. And then, in that very moment when I love them…. I destroy them.”
― Orson Scott Card, Ender’s Game
Things to note about managing the conversation with startup competitors
So hopefully it makes sense to take meetings and to also instigate them. But what happens once you are there? Here are some tips:
- Give to receive — you are going to be asked questions. You need to find a balance of sharing in order to learn from them (reciprocity). You will not learn anything unless you also share
- Ask questions — this is not a fishing expedition for their benefit. Many people let things happen to them. You can control the conversation to some extent, so do so
- Know what you want to know — he knows why he is meeting you, do you you know why you are meeting him? Make a list of information you would like to learn before hand. Don’t look at the notes during the meeting as that is obvious
- The good stuff comes later- start with easy questions and build up. You don’t try kiss a girl the moment you meet. You start shaking hands. If you want numbers, work your way to get them. People relax over time
- Go to a bar — if you are smart, and you can, go drinking. Drink less than him and over time you can learn ;) No joke. Honestly, I share too much too sometimes. No one is impervious. The key is to build strong rapport
- Be judicious in what you say — Assume anything you say ends up in a memo to the company CEO verbatim.
- Lie — Make up some untrue but believable lies. You can create a narrative that is believable. You can share an untrue story and all those numbers. Maybe you are going to pivot your company, maybe you are in talks to sell…
- Brain raping — I have been in meetings where it has been evidently clear that the only reason there is a meeting is they are trying to extract info for commercial reasons. At that point you call an end, regret how naive you are and move one. Always assume this! Never explain any special sauce with anyone other than lead developers etc. You don’t need to explain to your investors how things work either, and certainly not till they have wired money into your bank account. If the investor does not share anything he doesn’t want posted on TC, then don’t say anything similar. It is ok to share some confidential stuff if you are reciprocated. You can tell you are being brain raped if you ask a question and they hardly answer at all and follow up immediately with another question, like they have a qu list
- Acquisition — if he asks about buying you the best response is “everyone has a price! We believe in our mission to ‘sell carrots to children’ but we want to max our returns to our investors too. There is a lot of value to be made still so it’s not our focus. I wouldn’t be exercising my fiduciary responsibility if I didn’t look at offers. What are you thinking, $200m?”
- You can say no — you do not need to answer questions you are not comfortable with. Better is to start answering the question and change the topic. A bait and switch. It’s like media training. You decide what the question means and what you want to say. This is what politicians are employed for
- Legal aspects — You probably aren’t big enough to care about competition legalities, but if you are, read this for starters.