The startup world is like the Hunger Games. You, the entrepreneur, are Katniss Everdeen, placed with a daunting task – to compete with others players in order to survive and win. In the battle of revenues, user acquisition, and growth, analyzing your competitive landscape is absolutely crucial.
“By failing to prepare, you are preparing to fail.”
— Benjamin Franklin
It’s one of the key driving forces behind startup success or failure. It’s the understanding that it’s you against the world. It’s the desire to prove yourself against all odds. You’re on your own and you are given a daunting mission: to persuade masses to believe you and in what you’re building, to raise an army to help you, to fight the competition, to protect your dream, and to grow a kingdom of loyal customers – all while others constantly doubt you, fight you, and try their best to take everything you have.
“Work like there is someone working twenty-four hours a day to take it all away from you, and play like it’s your last chance to play.”
— Mark Cuban, How to Win at the Sport of Business
If you haven’t read Cuban’s book: “How to Win at the Sport of Business,” I highly recommend it. It’s a must read for every entrepreneur, manager, and CEO. Cuban concocts a juicy cocktail of personal experiences and life lessons with real life examples of building yourself and your company in the context of competition.
Competition is one of the dynamic agents that helps facilitate the fast-paced innovative atmosphere of the startup world, and understanding your competition is absolutely crucial in developing a competitive strategy. There’s nothing to be gained from laziness. No one has ever been successful in the startup world without having an active radar on their competition. It is simply the largest non-fundraising mistake any startup can make.
With that being said, how do you go about analyzing the startup competitive landscape? Let’s start from the beginning.
What is Competition?
- Your competition shares the same end customer spending the same dollars
- Tangential enterprise that will need to pivot
- Opportunities for the same mind share or eyeballs
How do I find the Competition?
- Ask your friends what they use or have used to solve the problem today
- Ask customers of the startup what they used before
- Ask other investors
- Listen to other pitches and use your intuition
Your work doesn’t end here. I’ve heard too many startups who don’t take it one step closer and have a conversation with other startups; including the ones that had failed previously within the space.
We’ve all heard the saying, “keep your friends close and your enemies closer.” Well that definitely applies here.
Once you find the competition and gather your knowledge and resources regarding them on the internet, walk the extra mile and engage with them.
Hustle. Pick up the phone and call them, tweet them, find someone who can recommend you. Offer to buy them a drink. Find a way to get 10 minutes with them and ask them intelligent questions about how they started, what they thought made them successful, what were their go-to market strategies, what differentiated them, how did they generate users or customers? If they failed, this is even better for you. Ask them why they think they failed. What could they have done? What mistakes did they make? What did they learn?
Back when Luxury Lites and Zafaré, of which I’m Director of Marketing and CEO respectively, was in its infancy, my partner and I took the time out to engage with other players in the space.
We attended trade shows and met with founders individually. We cold called our competitors as “students asking to gain information for a project” (you’ll be surprised as to how much information you will gain using this tactic) and after speaking to everyone, we would gather the thoughts and information gained from these key conversations and search for patterns. Armed with these patterns and loads of insight, we were more readily prepared to tackle the true problems in the industry and execute on our plan.
What Happens When a Startup Doesn’t Understand the Competitive Landscape
- They don’t really understand the real opportunity
- They aren’t thinking big enough
- They will make poor strategic decisions
- Almost always ends in failure
- Again, simply put, the largest non-fundraising mistake any startup will make
Not taking the time to assess the competitive landscape can be fatal to your success. Dedicate the quality time your startup deserves to have an excellent understanding of who the other market players are.
In my previous post, “How to conduct Startup Due Diligence” we discussed how your answer to: “Who are your competitors?” should never be: “We have none.”
I don’t care how “revolutionary” your product or startup may be, there are always competitors. And by accumulating the knowledge of what your competitors are doing, you can better strategize the direction you’d like to take that is best for the startup.
Here is how I would frame a competitor analysis
Take every company in the competitive landscape, and obtain information over the following:
- Name of the startup
- Who are their founders
- What’s their background?
- When were they founded?
- Product/service portfolio
- Have they raised money?
- If so, how much?
- By who?
- If so, by who?
- Venture capital?
- If so, by who?
- Total revenue to date
- Last twelve months revenue
- Total users/customers to date
- Last twelve months users/customers
- Growth rates per year or Compounded Annual Growth Rates (CAGR)
- Other key industry metrics for your space
- Go-to market strategy
- How did they break into the market?
- What were the strategies they employed?
- How did they break into the market?
- Do they have any intellectual property rights?
- How many employees?
- Twitter account
- Follow their twitter to be up-to-date on their news
- How many followers do they have?
- If they failed before:
- What were their mistakes?
Once you have this (As a bare minimum)
- Draft up a visual that easily displays all the startups so that they can be easily compared with one another
- Then with your team, pin point where your company would compete or fall within the entire competitive landscape
This is the diligence I along with many other startup founders employed to gain a fresh understanding of our respective competition.
As you and your team start to prepare to go to battle and compete, I’d highly recommend you all read: Sun Tzu’s the Art of War. It definitely helped me get a general’s perspective on how to lead your team (startup) into battle and what elements you should take advantage of when dealing with opponents (competitors).
Over twenty-five hundred years ago, Sun Tzu wrote this classic book of military strategy based on Chinese warfare and military thought. Since that time, all levels of military have used teachings of Sun Tzu for warfare, and civilization has adapted these teachings for use in politics, business and everyday life. The Art of War is a book which should be used to gain advantage of opponents in the boardroom and battlefield alike.
Translated by Lionel Giles and just a price of $2.49 on paperback, this is a must have. When Evan Spiegel, Co-Founder of SnapChat was threatened by Mark Zuckerberg from Facebook of a competing product called Poke, Spiegel gave each employee a copy of the “Art of War” to his team. Poke went on to debut on December 21, but only briefly ruled the charts in Apple’s App Store before Snapchat was once again in the lead. Check out the story here from Business Insider.
Image credit: CC by Rodrigo_Soldon