How Startups Beat the Competition by Joining Them

Joe Procopio
Jun 20 · 6 min read

As entrepreneurs, if we want to be the best at what we do, we need to know what our competition is up to. So how do we keep a closer eye on them?

The answer is actually a lot simpler than you might think.

Look, entrepreneurs are known for being crazy laser-focused on our own company, product, and strategy, especially during the growth stage. This is part of what makes us great at what we do, but it also means we tend to operate in a vacuum way more often than we should.

One of the ways this hyper-focus plays out is that we end up just paying lip service to competitive analysis. We know who our competition is, maybe we keep a few stats on them, but we have a lot of blind spots. This is a problem. Blind spots lead to surprises, surprises lead to losses.

If we’re going to spend time on competitive analysis — and mind you, lack of competitive awareness is one of the top reasons investors reject growth stage startups — we might as well go all in.

Here’s how to do just that.

There’s a big difference between:

  1. Browsing knowledge in order to regurgitate it back out and:
  2. Absorbing knowledge in order to take action on what we’ve learned.

The former is what we do when we’re preparing to report to boards and investors, the latter is what we do to maintain a competitive edge. To get out of our vacuum, we can’t just read about our industry, our market, and our competition. We need to get in and get our hands dirty.

We all probably use our own product. But how much do we (still) participate in the industry we’re trying to disrupt? How closely are we following advancements, technical or otherwise, in our industry? Do we use our competitor’s product?

To truly understand our competition, we need to go beyond just visiting their website, following their Instagram feed, setting up a news alert, or keeping a spreadsheet of their known customers.

We need to get to know them.

Over the last 20 years in startup, one of the great things I’ve discovered about most of the players is a willingness to share information, much more so than in the corporate world. Despite conventional wisdom, this also applies to competitors and rivals. We don’t attend each other’s barbecues or anything, but we do talk.

In startup, this has a lot to do with survival. In some sense, we need our competition and they need us. It’s hard enough convincing the world of our startup’s reasons to exist, so having another company in our space to compare ourselves against, if not several competitors, justifies the need for the solution we’re all providing. Then we just have to prove that we’re the best provider of that solution.

Many years ago, when my startup was having a particularly bad stretch of what I’d call “negative traction,” I happened to bump into a fellow founder of a direct competitor during a convention where we were both speaking. We wound up getting a few drinks and soon he admitted he was winding down his company. The reason — he had started seeing our name everywhere and he realized we were way too far ahead of him.

Here’s the thing. We weren’t. Before our conversation, especially right at that shitty moment in my company’s lifecycle, I would have said we were on even footing. This taught me two things. One: If we’re not talking to our competition, we won’t have the right sense of our place in the market. Two: If we make the wrong assumptions about our place in the market, there’s a good chance that we’ll make the wrong decisions.

Since then, I’ve tried to establish at least tacit relationships with the competition. Some of those have led to offers to sell me their company. Others have been eye-opening in the sense of how little of a threat we were assumed to be in their eyes. Let them think that, by the way, it can only help.

Whether we’ve established a relationship or not, we should be a customer of every product or service that we compete against or aspire to be. We should even become customers of those companies that aren’t direct competition but are similar to us.

I’m not saying every company within our sphere of influence will be open to us poking around in their system, I’m just saying we don’t always have to ask permission first. These are public-facing companies selling publicly accessible products. The only barriers are those that we impose ourselves.

Of course, asking permission helps. In fact, the best way this exercise has worked for me has been with those competitors with whom I’d already established a relationship. Being able to ask why they did things a certain way, being able to compare notes, being able to be honest and open about why we’re there in the first place, that will pay extra dividends than if we’re just lurking around pretending to be someone we’re not.

Just keep in mind they’ll be protective of trade secrets and intellectual property and so should you.

Worst case, they’ll lock us out. I’ve locked competitors out before, although I’m not sure how much it helped. If that happens, we should at least be on our competition’s mailing list. Just don’t use your company email to sign up.

Another reason why startups are more open to sharing information is because it’s usually unlikely that two startups are trying to accomplish the exact same thing.

This happens for a couple reasons. One, the market we’re making isn’t mature enough to have one single player who can do everything the market needs. Two, as long as we’re in the startup stage of the growth cycle, we’re probably focused on one niche element while our competition is focused on another.

I mean, I shouldn’t have to say don’t steal from your competition. The main reason I analyze competition is not to discover how they’re better than me, but to discover how they’re different from me, which makes me different from them, which is a strength I need to be playing up. We both have a “secret sauce,” and if I abandon mine to copy theirs then I’m just putting them that much farther ahead of me.

On the other side, if we’re worried about our competition stealing from us, again, we should keep all trade secrets and intellectual property to ourselves. But I’ve had companies steal and copy our entire website, including our offering, including our copy, including our damn slogan. We had no relationship with them, we’d never talked to them, we didn’t even know who they were. They just did it. So we sent them a cease and desist.

Incumbents and competition are two different things, but make no mistake, incumbents are our competition.

On one hand, we need to be going after incumbents with extreme prejudice — their faults are the very reason we will be successful. But obviously, it’s even more important to establish a relationship with this type of competition — their faults are the very reason they might invest in us or acquire us outright.

This is a tough line to walk.

We shouldn’t just walk into an incumbent and announce we’re coming after their customers. At the same time, we can’t just expect to be fast friends either. An incumbent is the kind of competition that can take us out, both positively and negatively, and how we interact can be the difference between the two.

Each industry and each player is going to be different, but I’ve always found incumbents to be either be completely generous in their dealings with me or completely crappy in their dealings with me or a sort of schizophrenic Jekyll and Hyde combination of both.

In any case, while establishing a relationship and a rapport with this type of competition in necessary, it’s even much more critical to be on our guard when dealing with them. If one of our same-size competitors gets hold of some of our magic, they can cause trouble for us. An incumbent can wipe us out, and believe me, even if they don’t, and even if they’re the completely generous kind, they’re still incentivized to keep our value low enough to buy us more cheaply than we’d like.

Dealing with competition can be stressful, even when the competitor is a known commodity. But like with a lot of things startup, unless we suffer some discomfort we’re not going to make exponential gains.

The closer we get to our competition, the more we reach out, communicate, embed ourselves, and truly understand what we’re up against, the better chance we’ll have against them. And then it’s game on.

Joe Procopio

Written by

I’m a multi-exit, multi-failure entrepreneur. Building Spiffy, sold Automated Insights, sold ExitEvent, built Intrepid Media. More about me at joeprocopio.com