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Dealing with startup competition

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I'm Julian. I try to write the best guide on every topic I'm interested in:
Build Muscle Grow a Startup

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Why you're stressed

For many founders, starting a startup is the most stressful thing they do in their lifetime. I polled friends to identify the sources of that stress: (1) a lack of growth, (2) work/life balance, and (3) competition.

Competition is the outlier because you could argue it's mostly an illusion. It's therefore the easiest one to dispel in a short blog post.

I've had more than one VC tell me they send this post to their founders because it's an effective therapy session. So hopefully you'll sleep better after reading this 😉

The anxiety of competition

Every startup idea I’ve had has been haunted by these concerns:

Time and time again, these concerns make me seriously question whether a startup is a massive waste of my time. I don’t use the word “massive” lightly. My fear of wasting time is rooted in my sharp awareness of opportunity cost.

So, how can we overcome this anxiety? By understanding the lifecycle of a startup. 

Early stage: You're not unique

In the early stage, your approach to market must not be “We are unique.” That's what founders love to tell themselves — because that's the message they successfully used to secure funding and hire a team.

But it's a toxic mindset that fosters anxiety. Instead, you should think of your startup as merely cloning existing competitors feature by feature. Even if that’s not the case, tell yourself it is in the early stages of your startup.

When you embrace this copycat mindset, you reduce the anxiety of having to finish your MVP before someone beats you to market. You also get the calming luxury of being a laggard. Laggards have a vantage point. They can prioritize growth viability (instead of novelty) by examining how existing competitors acquire users then reflecting those acquisition loops in their MVP. 

(Traction is a must-read book for understanding growth channels.)

Examples of laggards include what Slack is to HipChat, what GitHub is to Atlassian, and what Spotify is to Pandora.

If you cling to the desire to be unique instead of embracing the copycat mindset, your pursuit of novelty masks the truth of startup viability: if you don't have users, it doesn't matter how novel you are. 

♖ There are no original ideas. But there are original executions.

— Luke Wroblewski

Plus, novelty in the software world only exists in the short-term. Everything you do will eventually be copied — and copied better. There is nothing proprietary about bits.

... and that frees your mind

We just covered the practical benefits to not thinking you're unique. But this post is about reducing stress, so we need to cover the abstract benefits as well.

Consider this: Mentally compress the time horizon of your marketplace's competition into a singular moment that your startup forever exists in. In this singularity, every new feature you release is instantly copied by everyone else. That's what it means to "compress the time horizon." 

In other words, no individual product is unique. Consequently, the only momentum your business experiences is the broadening of the marketplace itself. This benefits both you and your competitors. You're are all in this together; you’re along for a ride and you should be grateful you have a ticket.

You ultimately wind up working with these companies to increase the overall demand for your collective offering. So you might as well get to know your neighbors and get comfortable seeing them at your doorstep every morning. In the long-run, they're your friends, not your foes.

Once you’ve adopted this mindset, you cease to look at the startup hustle as a game of one-upping competitors. Instead, you see it as a more relaxed process of maintaining your status as a viable competitor. 

That’s a much easier burden to bear. Because, if you are perceptive of what your competitors are doing and if you have a competent team working on your product, all you have to do is respond to external demand on a reasonable timeline. You don't have to self-impose artificial time pressure to release novel features.

And when all your competitors are veering toward the same feature set, you can stop worrying about quarter-to-quarter fluctuations.

This is how you approach early-stage startup competition. It not only lessens your anxiety, but it redirects your focus into something more productive. This trickles down to everyone in your team.

But what comes after the short-term? What happens when you're in a cut-throat game of live or die, and your funding is drying up? This brings us to our discussion of handling mid-stage stress.

Mid-stage: Focus on retention

When you fear competition, you're actually fearing two things in particular:
(1) thinning margins and (2) losing the customers you already have. That’s it. 

The latter is more important. You can't increase margins on customers you don't have. And since the mid-stage of your startup is the point at which you've acquired healthy customers, let's discuss retention. If we can create a reasonable approach to retention, we can greatly reduce our anxiety of losing customers to competition.

Consider this: Once every soul on the planet is either on Facebook or WhatsApp, what's Facebook's next focus? Retention, of course. Retention is always the final step. 

Remember that user growth is not the ultimate goal of a business — revenue growth is. When your users stick around, you can experiment with new ways to monetize them.

So appreciate the importance of retention early in the lifecycle of your startup.

Retention reality check

It is much easier for most startups to improve retention by 5% (e.g. improve customer support and make features more sticky) than it is to increase user adoption by 5% (e.g. spend money on ad buys and spend time on business development). 

Just saying "ad buy" and "business development" probably makes your stomach churn (no pun intended). You know what a risk they can be. Meanwhile, improving customer support and making your product stickier are very straight-forward if you take the time to educate yourself. And there's near-zero risk in trying it. 

If you aren't focusing on these two things at the mid-stage, you're mismanaging priorities. For a primer, see Lean Analytics, Landing Page Optimization, and Rework.

Not only is a focus on retention less risky, it's also easier: You already have well-defined, observable users who want your product —so  the onus is on you to simply talk with them and react to their concerns appropriately.

If I were to reduce this advice into a quip, it would be:

♖ Effective entrepreneurs aren’t concerned about competition; effective entrepreneurs are concerned about users. They look inward, not outward.

The power of retention

Retention is more important than growth-at-all-costs because a startup with low churn is a startup with brand advocates. Brand advocates are lifetime users who don’t jump ship when a competitor introduces a great feature you haven’t implemented yet.

The greater the percentage of your userbase that consists of brand advocates, the stickier your business is, and the less you have to stress about competition blindsiding you with something novel.

Because when a competitor does release something game-changing, you simply respond with 1) the appropriate engineering resources and 2) open communication with your users about your product roadmap. That’s it. There’s no difficult validation to work through; the competitor already validated demand for you. You can be the laggard who first sees what others did right and wrong.

(Have you realized yet that I'm describing Apple's approach to market?)

If you have a product that users depend on and love, they won’t disappear the instant a competitor one-ups you. Not even 4 weeks later. Not even 3 months later. Maybe 6+ months later if you’ve utterly failed to respond to your changing market. 

But several months is a heck of a lot of leeway. And, if you can’t rise to the occasion, then you’re a slow-moving beast who's either the market’s old guard or the stubborn upstart that will succumb to a slow death.

And that’s a critical concept that entrepreneurs fearing competition fail to realize: Startups don’t die by being blindsided. They die slow deaths. That should be tremendously comforting, because it means you no longer have to be on high alert when you wake up every morning or throughout your weekends and vacations; instead, you just have to ensure you never bury your head in the sand for too long.

Here's the crux of my argument: 

♖ Appreciating that you always have work to do but never work you must do immediately affords you the peace of mind needed to enjoy life while pursuing the startup hustle.

We're almost done. What's left is understanding the power of long-term retention.

Long term: Focus on brand

To focus on your brand is to double down on retention. It's taking retention from the tangible (product improvements) to the abstract (brand affinity).

My favorite quote from Zero to One is, “All companies inherently have monopolies over their brands.” Essentially, Airbnb will forever be the only “Airbnb.” Slack will forever be the only "Slack."

Consequently, whatever you decide to have your brand stand for is not something that competing brands can ever take away from you. They can only copy you, and they will likely fail when they try because users become jaded when they see blatant mimicry.

Building off our discussion on retention, the goal with brand ownership is to hone it until you reach a point where your users would feel miserable if they had to deal with your competitor instead. You want them to feel like they would be replacing a part of their identity: They would cease to be "the guy who constantly wears Nike's" or "the girl who tells everyone to use Slack." 

You need your startup to get to the point where when a competitor adds an amazing feature, your users say, "Damn, that's insanely cool! But... I'm just going to wait until [startup] offers this. Hopefully it's soon, but if they don't, I'll figure out a compromise."

MailChimp is an example of a strong brand. From visual identity to UX, they’ve mastered what it means to be a singular voice in a marketplace. When strong competitors arise, how many of MailChimp’s users do you think are going to jump ship in the short-term? Almost zero.

What you need to remember

♖ Overcome anxiety by focusing on the most pressing aspects of your startup given where it is in its lifecycle.

Appreciate these conclusions then don’t stress yourself over competition again.

I write a new piece every few weeks if you'd like to be given a heads up:

— Julian

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Author

I'm Julian. I try to write the best guide on every topic I'm interested in:
Build Muscle Grow a Startup

Julian Shapiro headshot

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