Recently, in a discussion, an investor said we should watch out for a potential competitor of a startup as a major concern (both startups are very early-stage, barely having a product) and this got me triggered to write this text.
Based on what i saw in my work with startups, very rarely a startup dies (or even challenged) because of direct competitors. There are dozens of reasons related to team, business model, market need, product etc. which have a much much higher chance to kill a startup.
While analysing 100+ venture-backed (so theoretically not very early-stage) startups post-mortems, CBInsights made a study / statistic of “Top 20 Reasons Startups Fail” and competition was not even listed among those 20 top reasons.
I remember that, at my first startup, we were constantly watching the competitors (around 7 other startups spread around Europe) and putting emphasis on differentiation points. But two years later all of these startups were dead or zombies without even being influenced by the existence of the others.
Actual competition (= two startups get to clash on the same potential clients) happens later in the game when both have product-market fit, when they are targeting the same users.
Until then it’s good to watch competitors, learn from their actions; but it’s more of an imaginary threat compared with the other potential causes of failure.
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