When startups compete, no one wins

5 Notes

Two types of competitors exist for startups: big companies and other startups.

It’s a good strategy for small companies to frame their vision around beating a big company. Salesforce was the anti-Oracle. Apple was the anti-IBM. WePay has been known to punk PayPal on occasion. Why? First off, everyone likes to bet on the underdog. But second, drawing into your territory a big company with significant market mindshare will garner you tons of free awareness. Every time a blogger or reporter mentions that big company, ideally, you get a mention as well if you’re a credible threat to them. Finally, there’s something to be said for having a common enemy to rally folks around a cause (although that certainly shouldn’t define the ethos of your company).

A worse strategy is to actively position yourself against a startup your own size. As one investor I bumped into today put it, “it’s not like I’m Pepsi and you’re Coke. It’s like I’m Joe’s Sugary Soda Water of Wichita and you’re Bob’s Delicious Drinky Juice of Boise.” Simply put, no one has ever heard of either of you…so stop bickering!

In fact, a better strategy is to team up with your competitors and make a noise that’s collectively larger. Or, even better, team up on the really big guy and, as previously mentioned, start to ride on its mindshare in the market.

Startups have a heck of a lot more to gain by cooperating than competing, especially early on. If you must pick an enemy, make it a big one.