Is Competition a Good Thing for Your Startup?

“Who are your competitors?”

This question inevitably surfaces when you describe your solution to investors, customers, and analysts. Many startups I work with confidently say, "We don't have real competitors." This statement often raises red flags, because it suggests either a lack of a need for your product or an absence of a real market. The reality is that customers must be addressing the problem you're solving somehow, even if through less obvious means.

Let's take a look at potential types of competition and how to select the appropriate answer for each situation:

• Status Quo ?aka ‘Continuing to do what we've always done’ – this is perhaps the most formidable competitor to any new product or solution. This inertia is a manifestation of the "9x problem" – a phenomenon where people tend to overstate the value of their current methods by 3X while underestimating the value of your offering by 3X. Consequently, your solution needs to be perceived as at least 9X better to warrant attention.
• Alternative Approaches – Many products can solve multiple problems, so solutions you might not consider direct replacements are often viewed by customers as viable alternatives. Check in with customers to see who they think your competitors are. You might be surprised that they are using tools you would consider inappropriate. ?Understanding why they consider this a viable solution helps you better position your product. It also allows you to explain its value and unique benefits.

Example: Project management tools are a good example. Companies like Asana, Trello and Monday.com are all competitors in this space, but many organizations manage projects with general-purpose tools like spreadsheets or simple tasks lists to manage tasks.

• Direct Competitors: Ignoring head-to-head competitors indicates a lack of market understanding or a disrespect for your rivals – neither of which impresses your stakeholders who are probably familiar with those companies anyway.? On the other hand, acknowledging competitors might prompt your discussion partner to explore alternative solutions that they didn’t previously consider. So, should you mention them or not? Here are some practical tips:

1. Prepare and articulate a Clear Value Proposition: For example, "While competitor X offers similar functionality, our approach differs <specify how>, resulting in 50% faster project completion times.” Make sure that your points are valid and demonstrable so that your discussion partner won’t discount them off the bat, damaging your credibility.
2. Justify Your Solution's Superiority: Even if your offering is truly novel, explain why it’s better. Focus on tangible benefits such as cost savings, new revenue streams, error reduction, or market expansion. Vague promises like "increased productivity" or "user-friendly interface" almost never move the needle to get users to try something new.

Example: when Zoom entered the video conferencing market, which had many competitors, they didn't just claim to be "easier to use." They emphasized specific advantages like “no client install,” "one-click meetings" and "consistent high-quality video across devices," directly addressing pain points in existing solutions.

When addressing the competition question, consider this approach: "Yes, we have competitors; they are X, Y, and Z, and here's why we're different/better." It's generally advisable to acknowledge competitors proactively, as interested parties will either know about them or find them independently. ?It's preferable to shape the narrative yourself rather than allowing competitors to define your position in the market.? One important caveat: be careful when mentioning small, unproven companies to avoid inadvertently promoting them at your expense.

The Bottom Line

The question about competitors is an opportunity to project confidence in your understanding of the market space and articulate clearly why your product is unique. Demonstrating expertise about the problem domain and potential solutions not only showcases your market knowledge but also establishes you as a trusted authority for those seeking genuine solutions to their challenges.

Of course, the most powerful endorsement comes not from your own words, but from your customers. Having design partners, early adopters, or existing clients validate your competitive positioning through testimonials, case studies, or public endorsements is the ultimate proof of your market fit and competitive edge.

In conclusion, embracing and clearly articulating your competitive landscape demonstrates market awareness, confidence in your solution, and respect for your potential customers' intelligence. It's not about whether competition exists – it's about how you position yourself within that competitive ecosystem to showcase your unique value.

Next Steps

Ready to position your startup for success? To learn more about getting started on the right foot and navigating the competitive landscape effectively, check out our practical guides on 'Startup Strategies: Doing It Right the First Time.’ We value your insights – share your thoughts, experiences, or questions about startup competition in the comments below. Your feedback helps us continue providing relevant content to support your entrepreneurial journey.