You Gotta Have Competition

I always chuckle when I hear a presentation by a new or prospective startup that “has no competition.”  It’s an amazingly ignorant thing to state because it’s almost impossible to be true.  In the most basic case, inertia and manual processes represent real competition.  In the more likely case, if the idea has any merit at all, there are others trying to grab their more-than-fair share of the applicable market.

To me, the more important point is why would you even want to be in a situation where you have no competition.  While it may seem like having no competition is an advantage, in reality, there are far greater advantages to having competition than not.  Just like Gordon Gekko’s “greed is good” proclamation in the movie Wall Street, competition is good.

So, what’s so good about having competition?  I’ll give you two reasons:

1. When you’re looking for money, multiple players fighting for market share is an implicit validation of the market for potential investors.  If you’re out there all alone, even good ideas can be a scary proposition to investors.  There’s nothing like having multiple, recently funded potential competitors in the market to increase an investor’s drive to do a deal.  For one, they don’t want to be left out and, two, they assume that their due diligence is supported by those who have already made similar investments.
   • A corollary to this is that if you’re fortunate enough to have multiple investors interested in your deal, the competitive nature of your potential investors will likely drive up your valuation.  Like I said, competition is good.
2. There’s nothing like competitive juices poking you with a stick to keep you innovating and having a sense of urgency about everything you do.  Competing is part of people’s nature.  We all want to win.  When there’s no competition, we either get complacent or we lose focus.  Competition keeps us on our toes and guarantees that we will continue to try to improve and attempt to stay ahead in every important metric (sales, market share, customer engagements, ads, whatever).

Competition changes most people’s behavior.  In business, it generally changes it for the better.  It actually opens up opportunities instead of shutting them down, as most people suspect.  None of this is to say that you should try to enter markets where there is an obscene amount of competition.  But, don’t let a little competition scare you away, either.  It could be one of the best tools in your entrepreneurial quiver.

Related posts:

1. 2007 Camry – Tough Competition
2. Cannibalize Yourself
3. Does Porsche Finally Have Some Competition?