Competition Never Killed a Startup

One of the things you often hear from younger entrepreneurs is that they rather keep their ideas a secret from fear of competition. More specifically, the scenarios they describe is they are concerned one of the bigger companies in their space will ‘steal’ their idea. The main problem with this misconception is that it prevents startups from validating, learning and iterating on their ideas.

Suggested experiment to prove the competition myth wrong

If you haven’t read Lean Startup by Eric Ries I highly recommend you do. One of the core principals of this new management theory is to iterate on your MVP through a build-measure-learn loop. Obviously, this requires getting your product out in very early stages which might seem risky to some entrepreneurs. Eric suggests the following experiment to prove that the risk is almost zero:
  • Take one of your less important ideas or one that you are not pursuing
  • Find the big company who will be most likely to steal it
  • Identify the product manager in charge of this product line
  • Try to convince him to pursue your idea
If you actually go through the process or if you spent any time working for a big company you will soon realize that this is impossible. Big companies always have more ideas than resources to pursue them and their appetite for risk is a significantly lower than yours. Moreover, as soon as you will start iterating on your idea, it will change and evolve so much that in 6 months, you wouldn’t even recognize it as the same idea any more. Even if the big company product manager would have pursued your idea, he will never be able to iterate on it as quickly as you can. Try to imagine him explaining to his boss the that the idea he was pursuing was not good and how he learned in the process that there is a new idea that is worth pursuing but most likely this idea will change too in a few months. I can’t imagine a single company who will allow that.

The empirical proof – startups don’t lose to competitors

In boxing, the opponent is your biggest threat and will likely knock you down. In startups however, the risks are far bigger from macro changes and general lack of interest by the market compared to the competition
There is another way to think about it. We can actually analyze what kills startups in the real world. The statistics show that only one out of 10 VC investments succeed but I would argue that 99 out of 100 companies don’t even get VC backed. Y combinator’s acceptance rate in 2011 was 3% and in 2012 it was 2% – can you guess the ratio in 2014? So what really kills startups? Chris Dixon in his blog post – Competition is Overrated argues that it’s mostly indifference and lack of awareness. I find to be very accurate. The world is not waiting for new ideas. Most people think the way they are doing things is just fine and you have to work pretty hard to convince them otherwise. This is yet another reason why testing your value hypothesis early is so important for a startup.

SOOMLA competitors are long gone or pivoted away

When we started out, there were a few companies people named as potential competitors. Some of them ran out of funding and shut down. One big company that made us lose some sleep is Chartboost with their store product. I’m glad to say that both companies realized that the store product was not worth pursuing. Chartboost decided to focus more on their core business which is advertising and SOOMLA pivoted to focus much more on the open source framework and we are actually exploring a potential collaboration these days.
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