Dealing With Competitors: Do Not Play To Play. Play To Win.

By Bilal Zuberi, PhD

All startups have competition. No idea is so unique that nobody else can have the same idea. Or even if your idea was super-unique once, others will follow your lead and try to beat you at your own game. VHS beat Betamax in video format wars, and ipod wasn’t the first mobile digital music device. Almost all early adopters of the ipod likely already owned a mp3 player. Hey, even the crazy hard industry that SpaceX is in now appears to have some competition, if at least on the PR front.

So what to do about competition?

Let me take a particularly narrow, investor view, on it. Investors in your startup will get to learn about and will track your competitors. Other potential investors interested in your space will also learn about and track your competitors. And you won’t just have to compete with those other companies in the market, but you will also be asked frequently about them. How would you answer? Often I get some of the following unsatisfactory answers from founders and CEOs:

1. Oh they suck. Their product is way crappier than us. They make toys while we are building high quality solutions.
2. They are a cheap imitation of us and customers don’t want it. Or they are too expensive and we will always beat them on price.
3. This validates our intuition about how exciting and large this market is. Only makes us look better.
4. We have built years developing our technology. We have a 2 year lead, at least.
5. We have patents and can sue them whenever we feel like it.
6. …

Above answers suggest either you are underestimating your competition, or you think the one asking you the question is relatively dumb. Unfortunately I see startups frequently point to graphics comparing features offered by their own company vs their competition — and almost by God’s will — their company always appears to have more features than their competition. Funny how competition always looks bad when presented by a competitor.

I try to track competitors of my portfolio companies. I get news alerts about them and their announcements, keep tabs on who they are hiring, what customers they are serving, who is investing in them, and what story they are telling the world. And every now and then I email my own portfolio companies about competition and see how they respond. Their answers tell me more than the answerer thinks they do. Are my portfolio companies on top of the happenings in their space? Are they competing and losing deals, or not even getting to compete on those deals? Are they paranoid about competition and using that feeling to make their own teams better or brushing competition aside? Are they nimble on their feet and adjusting for short term strategies while maintaining the long vision for the space?

Great CEOs, and those who have dealt successfully with competitive situations before, take their competition seriously. Instead of brushing competition off, they plan and devise defensive and offensive strategies to deal with the competitive landscape. They are paranoid about the assets they own (including their teams and their customers), and while they talk politely and nicely about competitors, one can easily read they are preparing to, and expect to, squash competition to smithereens. They show a little bit of ‘either you are with us or against us’ mindset.

Here are some tips on how to think about competition (at least from an investor’s point of view):

• Understand your competition and how its evolving. Get to know them well, their strategy and their tactics. Understand their strengths and weaknesses.
• Never underestimate competition. Never speak badly about them, publicly or internally. That never helps. Its OK to point out positive differences but only you can look bad if something you say about the competition turns out to not be entirely true.
• What are your defensive strategies? How would you protect if they tried to poach from your team? What if they are reaching out to your customers already? Have you raised the right amount of capital to be fueled up for the fight to come? Patents, branding etc are also a part of your defensive strategy.
• What are your offensive strategies? Should you try to poach key talent away? Or pitch to their customers? You might hear all the ‘nice’ talk about not worrying about competitors and focusing on your own business — but you have to decide for yourself if you are playing to play or playing to win. Never do anything illegal or unethical — but fight hard.
• Copycats usually don’t have a roadmap or vision for the space. Have you given enough thought to it yourself? Have you communicated this to your team, your investors and your customers? Are people on your team able to track how you are doing against the vision so their confidence builds in your leadership, and how you are nimble on your feet as the landscape around you starts changing. A nice analogy I heard recently is that a Startup’s struggle is not just a game of Chess. It is also a game of Tetris. And you get to play the cards you are dealt with. (who, I just butchered three different games in one sentence!)
• Understand what your customers want and deliver that to them, at the price they will afford. In the face of emergent competition in your category, it is foolish to try to spread your resources thin, add tons of features, and try/or to win on the ‘portfolio’ approach. That makes it easier for your competition to strike at your heart. Focus your efforts, build reinforcements around your core business, and plan careful guerrilla warfare to enter new areas.
• There are some tried and true strategies that have worked in the past to help startups against competition. Use them as applicable in your case:
• Raise significant capital to suck the air out of competition. For example, did you notice what large fundraises by MagicLeap, Uber etc did to the competition?
• Partner with a giant — get a Google, Amazon, Microsoft, Tesla in your corner. Stable, reference-able, customers matter.
• Sometimes a strategic acquisition of a potential competitor can be a great tactic. See a great team assembling to attack your space, or a great product? Acqui-hire them. Join forces and assemble the best team to play on your side. Large companies have the ‘Not Invented Here’ syndrome. Don’t have the NIH. Maybe some players on your team are not so good and need to be upgraded. Maybe some aspects of your product are weak. Maybe the market has moved since you started your journey and you need to find a way to respond faster than the time an internal development effort would take.
• Google or Amazon entering your space is not validation of your idea. Stop saying that because you know even you don’t believe that. It likely means you should expect choppy waters ahead. Your defense lies in exploiting a small company’s ability to be quick, agile, nimble, responsive to customer needs, and to be passionate. Utilize your strengths.
• Don’t let others, not even the journalists and industry analysts, define who you are. Be in front of the story about yourself and your company. Create your own voice and make space for yourself. Guard that space fiercely.

In startup land competition is a fact of life. Entrepreneurs are built to see opportunities and find wedges to drive trucks through. I don’t want to say startup founders and CEOs should only think about competition all the time*, or be defined by their competition, but I want to encourage honesty and aggressiveness in winning against competition. Do not play to play. Play to win.

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*I encourage startup founders to read this essay by Andy Rachleff: When It Comes to Market Leadership, Be the Gorilla.