Stop stressing about startup competitors

Attribution Noncommercial Some rights reserved by Dan T Townsend

A couple weeks ago I tossed and turned for hours, unable to sleep because of a TechCrunch article announcing the launch of a potential competitor. This happens once every month or two, and I’m sure everyone can relate.. This occasion was particularly annoying. A friend forwarded the techcrunch article to me which I opened while settling into bed for the evening. An hour of research on my iPhone later, I’m back downstairs coffee in hand, still doing research.

The funny thing is that the logical part of me realizes that startups worrying about other startups is irrational. But yet I can’t help myself from trying to find chinks in their armour and points of differentiation.

The good news is that I’ve gotten good at waking up the next day and realizing that a startup worrying about another startup competitor is like a 2 year old worrying about another 2 year old making the deans list instead of them.

It’s a war, not a battle, and chances are, both startups will evolve in a way that makes them no longer competitive. Some will be competing for the deans list. Some will be competing for the track team, but most will have dropped out.

But still … in my last startup, I can’t tell you how many hours of sleep I lost mulling over Xobni, Dropbox, Threadsy, reMail, ClearContext and others. With the exception of Dropbox and maybe Xobni, have you heard of these others? Probably not. In hindsight, they’re actually really good examples of why you shouldn’t worry that much about startup competitors.

1. They’re guessing … just like you

We were scared of Xobni, largely because of their uber connected and super alented team. Specifically Jeff Bonforte. But everyone’s guessing in Startups. Everyone. Including Jeff. Cofounders backgrounds, vanity metrics, and techcrunch articles mean nothing. Xobni was iterating like crazy at the same time we were. In the end, it looks like they might be acquired by Yahoo in a deal that doesn’t represent a huge win for investors. Everyone’s guessing.

2. Some pivot

Threadsy was building an all one one messaging system – combining facebook, twitter, email, etc. We thought it was genius … so much so that we were doing the same thing. Turns out Threadsy (like us) couldn’t make a business out of it, started building social graph analytics, and eventually were acquired by Facebook. Most times your competitor won’t be building what they’re currently building in another 6 months. Most times, you won’t either.

3. A lot die

Most competitors will die before they hit product market fit. A lot of times, that has nothing to do with the product and everything to do with cofounder squabbles, life getting in the way, bad investors, and the million and one other things that can go wrong.

4. Some acquired and stop innovating

We thought reMail and Gabor Cselle were onto something. They were former google / former YC, so easily intimidated us. We were building something similar called All My Mail and had visions of making the iPhone’s mail app not suck Google eventually acquired reMail but didn’t exactly use the technology to innovate and several years later, it’s mailbox that’s innovating the mobile mail experience.

5. Markets can support multiple players

Dropbox scared us. Former YC (again), great founding team, great investors. But our product (and I’d bet a half dozen others) was ahead of theirs. But we got scared and pivoted away. In hindsight, that market is massive, able to support more than one player. Box.net has obviously proven that..

Competition in startups is an interesting thing. It’s something we can’t help but stress about. But it’s illogical. Because in startups, there really are no Goliaths. We’re all Davids, and the real fight that we have is with convincing users to change their existing habits. Back in the day, our biggest competitor wasn’t dropbox. It was email, and the people that used it to share documents, too lazy to change their habits. That’s the case for most all startups.

Startup Marketing: Does the Competition Matter?

Editor’s note: This is a guest post by serial entrepreneur and marketing executive April Dunford who is currently the head of Enterprise Market Strategy for Huawei. April specializes in brining new products to market including messaging, positioning, market strategy, go-to-market planning and lead generation. She is one of the leading B2B/enterprise marketers in the world and we’re really lucky to be able to share here content with you. Follow her on Twitter @aprildunford or RocketWatcher.com. This post was originally published in April 12, 2012 on RocketWatcher.com.

Some rights reserved by Paolo Camera

I have heard people make the argument that startups shouldn’t think about their competitors. I agree that many spend too much time worrying about how their feature set stacks up against another offering’s feature set. On the other hand, prospects are evaluating your solution against alternatives (which may not be products) and communicating how you are better than those alternatives is a key part of great startup marketing. Simply put – you should care about competitive alternatives if your prospects do.

Startups are not Big Companies

I very rarely see useful competitive analysis done by startup marketers, mainly because they are trying to do it like big companies do it. The big companies I’ve worked for have had departments dedicated to creating large detailed check mark matrices that showed how our feature set compared to competitive offerings. These matrices almost never included any feedback from customers. Needless to say, the products and their markets were very mature.

This approach completely falls apart within the context of a startup. Your competitors, from a customer point of view are almost never so easily defined. For startups, your offering is often competing with “do nothing”, “hire someone to do it”, use spreadsheets/documents/paper, or some other solution that might be completely unsuited to the task but is free/easy/what has always been used. Comparing features of one of these alternatives to your startup’s offering to makes absolutely no sense in this context.

A More Customer-Centric Approach

In the context of a startup the only competitive analysis that makes sense is the one that is happening in side the heads of your prospects. The more you understand about that, the more you can use that knowledge to improve your marketing.

Instead of the traditional competitive comparison matrix, a more useful competitive alternatives snapshot for a startup would look at what customers perceive to be the major benefits of the alternative, what risks they see that might stop them from choosing your solution and how you might address these issues in your messaging.

An Example

Here’s an example for CRMster, a fictional solution aimed at mid-sized consulting businesses to help them manage their customer information. The points here are just to give you some ideas about how this might look:

Competitive Alternative	Benefit customers perceive	Risk in selecting your offering	Value of your offering	Proof points
Do nothing – we don’t use a CRM tool and that’s fine by us	Free Zero effort required	Budget spent on this will mean less money for other thingsConsultants will have to learn the tool and record data they don’t today	More accurately predict future workloads so you can budget/staff accordingly and increase your profitability.Gives consultants access to more complete customer information making it easier to do their jobs.	3^rdparty data: Research shows companies using CRM are X% more profitable.Customer data: CRMster customers have x% average increase in revenue/profitabilityEnd user quote “CRMster makes collaborating easy. I want to marry it! ”Customer case studies
Manage customer data in spreadsheets	FreeEveryone knows how to use a spreadsheet	Budget spent on this will mean less money for other thingsConsultants will have to learn the tool	Eliminate the need to consolidate spreadsheets – a process that is time consuming and introduces errorsEasier, more effective team collaboration means projects are delivered on time, on budget.	Customer quote: “Consolidating spreadheets was a pain and our data stank. CRMster lets us accurately forecast our business.”Customer quote: “CRMster got our teams working together better so we could deliver projects on budget”End user quote: “So fun to use I gave up playing Angry Birds at work!”Analyst opinion: “Folks using spreadsheets are big losers”
Use CRMFree, a free CRM tool	Free	Budget spent on this will mean less money for other things	Expert customer supportProvides features for consulting companies that generic CRM tools don’t have.	Analyst data: X% of CRM deployments fail because end-users don’t get good support.Customer quote: “Their support is so great we send them chocolates on valentine’s day”Press quote: “If you are a consulting company you are an idiot if you buy anything else”Customer logos, case studies
Use BigWig CRM, a CRM tool for mid-sized businesses of any type	A safe bet: an established brand	CRMster might go out of businessThe software might be unproven, buggy crap	CRMster is way cheaper.Provides features for consulting companies that generic CRM tools don’t have.	Pricing and guarantees.Screen shots, product demosTeam bios – emphasizing successes and background in this market.Investor profiles, investment announcementsCustomer logos, case studies

For this example, only the last couple of rows get into any discussion of product features and even there those aren’t the only considerations. The other thing to notice is that the feature discussion can happen as part of a higher-level theme (we’re better because we are cheaper, more targeted to this market, or a more elegant solution) rather than a checklist of niggley esoteric features like you would for mature products in a mature market. If you are going head to head with an established player in the market you’re doing it because you have something radically different.

The Output: Better Messaging

The next step is to look at the themes and develop key messages that highlight your differentiated value while addressing the potential big concerns. I’ve written about messaginghere and here and I’ll talk more about how you would take the next step and construct messaging upcoming post.

2011 CIX Top 20 Nominations

We’ve written about the work that CIX is doing in building Canadian Technology Accelerator with ties to the US. They continue to build a showcase for Canadian startups in a variety of emerging fields. They have recently announced the nomination process for companies to the Top 20 competition for 2011.

Robert Montgomery (LinkedIn), Mark Greenspan (LinkedIn, @markgreenspan) and the team at Achilles Media has been working hard to deliver value to the startups that participate in CIX. And we’re seeing a number of past winners have success, traction and exits. Cognovision, the 2009 winner, was acquired by Intel. The 2010 winners included:

Digital Media: gShift Labs (Barrie, ON)
Information and Communications Technology: BlueCat Networks (Toronto, ON)

It’s a great opportunity to get access to some of the movers and shakers in digital media and ICT in Canada. And hey, the press coverage doesn’t hurt either. The 2010 short list of 20 companies included an impressive set of digital media and software (ICT in larger player lingo), including:

Chango (Toronto)
Chaordix (Calgary, AB)
Ethoca (Toronto)
GestureTek Inc. (Toronto)
Kobo Books Inc. (Toronto)
Locationary (Toronto)
Social Game Universe (Toronto)
Tungle Corp. (Montreal, QC)
Xtreme Labs (Toronto)

Hopefully the entrants for the 2011 cohort will be just as impressive. If you are a Canadian startup working in Digital Media or Technology and have less than Cdn$10MM in revenue, you should consider applying.