Love your competitors

Here are three arguments for why you, as an early-stage startup, should love your competitors just a bit more:
  1. The presence of competition is often a positive signal about the market
  1. Competition is often positive-sum for involved companies
  1. Your competitors are aiming to bring about the same change as you

1. Competition is a positive market signal

You’re considering entering a market but aren’t sure if there’s a viable business there.
The existence of competition should often make you more optimistic about the market, as other smart people have measured the market as viable.
This holds even moreso for companies that are well-funded. You’ve got some signal that others have been able to get initial traction and convince investors that a market exists.
This is helped by two findings:
  1. Markets are often not winner take all: Even if your competitors have a head-start, its hard to capture all potential customers.
  1. Companies often fail sans competition: Companies may fail to thrive for many reasons, it’s not a sure thing that your competitors will make it.
This may break down if your competitors have an insurmountable advantage though.

2. Competition can be positive-sum

Classically, if a company A manufactures a product, and a new competitor B arises, you should expect that A loses revenue.
This may happen in a zero-sum manner where some of A’s revenue goes to B instead. Or even in a negative-sum manner, where both A & B unproductively spend more money on advertising, and some of A’s revenue goes to B regardless.
This is the likely outcome for large companies at a plateau, where the product is solved and the market is entirely captured.
However, for companies at the earlier stages, there are mechanisms for positive sum-competition, where you implicitly pool resources with your competitors.

a. Pooled marketing

Sales & marketing tends to convince a customer of two things:
  1. Education: the problem is real, and this is the right way to solve it
  1. Sales: you should buy the solution from my company
In the early stages, when very little of the potential market is aware of the problem, most of the gains are from education.
Your competitors are working together with you on this, as their marketing team is also trying to convince more users that this problem is worth solving. It’s very plausible that they educate customers about the problem, who ultimately end up buying your product.
You are on a shared mission of bringing legitimacy to your new product category.
Of course, once everyone understands the problem, and you’re just spending marketing to grab a bigger share of a fixed pie, this no longer holds.

b. Pooled R&D

There are many potential product paths to follow. You don’t have the resources to try them all out.
Building out all possible features is also just a bad idea. Teams are not hydras, and it’s best to move in a single cohesive direction. But that direction might turn out to be wrong.
This is where your competitors help. They might either figure out new tricks that accelerate your path, or prove that an altogether different path is the right one. You can then switch over to that path.
It’s very possible that you’re in a market where the problem is real, but your solution just isn’t good enough. Your competitors can help you figure out what changes are needed for a workable solution. Learn from them.

3. Competitors are aligned with your goals

Why are you working on this problem?
There are two broad categories of reasons:
  • You want to build a successful business
  • You want to solve a problem
Your motivations should be a mix of both - you have obligations to your team that you will fail if you don’t build a successful business.
But, to the extent that you’re driven by a love of your users, that should imply love for your competitors. They shed sweat working on serving the same ends as you.
If you fail due to your competitor serving your users far better than you could, a part of you should still rejoice.
If you’re a lab working on a new cure for a fatal disease, and you get beaten to the punch by a competitor, you might be bummed. But you should be grateful too: they’ve saved people you couldn’t.

Build shoulders to stand on

Many failed startups still create immense value by providing others with shoulders to stand on. You pave the way, and show what is, and isn’t possible.
In academia, you’d by default have a more positive attitude towards this - knowledge & technology are accretive. One team might make the breakthrough and capture all the fame, but they stand on the shoulders of many many others.
You should be proud of this. Even when you fail, you show others the way forward. If they take your ideas and win by improving on them, part of you should mourn your loss, but part of you should be pleased to know that you were integral to the solution.
Imitation is attestation that you indeed produced something valuable.

Praxis

Do I mean to say you should give your competitors all your inventions and then lay flat?
No, not really. Competition still is competition. The market is made efficient by your will to compete. Your behavior should not change that much and you should try hard to win.
But ultimately, you should consider having a backstop of love & respect for your competitors.
It just so happens that fierce competition is the best way to attain your common goals - but remember that you’re on the same team. Don’t transmute the heat of competition into hatred.
 

Love your competitors

Here are three arguments for why you, as an early-stage startup, should love your competitors just a bit more:
  1. The presence of competition is often a positive signal about the market
  1. Competition is often positive-sum for involved companies
  1. Your competitors are aiming to bring about the same change as you

1. Competition is a positive market signal

You’re considering entering a market but aren’t sure if there’s a viable business there.
The existence of competition should often make you more optimistic about the market, as other smart people have measured the market as viable.
This holds even moreso for companies that are well-funded. You’ve got some signal that others have been able to get initial traction and convince investors that a market exists.
This is helped by two findings:
  1. Markets are often not winner take all: Even if your competitors have a head-start, its hard to capture all potential customers.
  1. Companies often fail sans competition: Companies may fail to thrive for many reasons, it’s not a sure thing that your competitors will make it.
This may break down if your competitors have an insurmountable advantage though.

2. Competition can be positive-sum

Classically, if a company A manufactures a product, and a new competitor B arises, you should expect that A loses revenue.
This may happen in a zero-sum manner where some of A’s revenue goes to B instead. Or even in a negative-sum manner, where both A & B unproductively spend more money on advertising, and some of A’s revenue goes to B regardless.
This is the likely outcome for large companies at a plateau, where the product is solved and the market is entirely captured.
However, for companies at the earlier stages, there are mechanisms for positive sum-competition, where you implicitly pool resources with your competitors.

a. Pooled marketing

Sales & marketing tends to convince a customer of two things:
  1. Education: the problem is real, and this is the right way to solve it
  1. Sales: you should buy the solution from my company
In the early stages, when very little of the potential market is aware of the problem, most of the gains are from education.
Your competitors are working together with you on this, as their marketing team is also trying to convince more users that this problem is worth solving. It’s very plausible that they educate customers about the problem, who ultimately end up buying your product.
You are on a shared mission of bringing legitimacy to your new product category.
Of course, once everyone understands the problem, and you’re just spending marketing to grab a bigger share of a fixed pie, this no longer holds.

b. Pooled R&D

There are many potential product paths to follow. You don’t have the resources to try them all out.
Building out all possible features is also just a bad idea. Teams are not hydras, and it’s best to move in a single cohesive direction. But that direction might turn out to be wrong.
This is where your competitors help. They might either figure out new tricks that accelerate your path, or prove that an altogether different path is the right one. You can then switch over to that path.
It’s very possible that you’re in a market where the problem is real, but your solution just isn’t good enough. Your competitors can help you figure out what changes are needed for a workable solution. Learn from them.

3. Competitors are aligned with your goals

Why are you working on this problem?
There are two broad categories of reasons:
  • You want to build a successful business
  • You want to solve a problem
Your motivations should be a mix of both - you have obligations to your team that you will fail if you don’t build a successful business.
But, to the extent that you’re driven by a love of your users, that should imply love for your competitors. They shed sweat working on serving the same ends as you.
If you fail due to your competitor serving your users far better than you could, a part of you should still rejoice.
If you’re a lab working on a new cure for a fatal disease, and you get beaten to the punch by a competitor, you might be bummed. But you should be grateful too: they’ve saved people you couldn’t.

Build shoulders to stand on

Many failed startups still create immense value by providing others with shoulders to stand on. You pave the way, and show what is, and isn’t possible.
In academia, you’d by default have a more positive attitude towards this - knowledge & technology are accretive. One team might make the breakthrough and capture all the fame, but they stand on the shoulders of many many others.
You should be proud of this. Even when you fail, you show others the way forward. If they take your ideas and win by improving on them, part of you should mourn your loss, but part of you should be pleased to know that you were integral to the solution.
Imitation is attestation that you indeed produced something valuable.

Praxis

Do I mean to say you should give your competitors all your inventions and then lay flat?
No, not really. Competition still is competition. The market is made efficient by your will to compete. Your behavior should not change that much and you should try hard to win.
But ultimately, you should consider having a backstop of love & respect for your competitors.
It just so happens that fierce competition is the best way to attain your common goals - but remember that you’re on the same team. Don’t transmute the heat of competition into hatred.