Tuesday, June 23, 2015

The "we have no competitors" startup myth

I recently met an early-stage startup in a meetup for entrepreneurs in Dublin. They were working on an e-commerce solution for SMEs, and they already had a quite impressive working prototype. I am not going to question whether this is or is not lean.

When I asked the founder about their competitors, I got the worst possible answer: "We have no competitors" - with a big smile. Every time I hear that I think about four different possibilities:

1) They didn't even bother to do a proper search on Google, which is bad because they didn't do their homework. Anything or anyone between their startup and the money is a competitor.

2) They don't know what market are they in, which is even worse because they are building a solution without a problem or potential customers. The "this product is for everyone" simply doesn't work.

3) They don't have any competitors because it is not an attractive market at all, which is catastrophic for a startup.

4) They are an innovative solution that is creating a brand new market, which might be the worst scenario for a startup without enough resources to attract customers to this new market. There is no doubt that it is the most profitable scenario in the long run, but it requires a huge budget to educate their potential customers (think about the first-ever social network). Resegmenting an existing market is a much more comfortable position for an early-stage startup.

Remember that having competitors is a sign that there is a profitable business opportunity there. You just need to be faster, or cheaper, or better, or niche-oriented, or just another fish in a big-enough pond.