EVERY startup has three forms of competition
Competition NOT Competitors
The #1 thing investors care about is your market size!
When you only look at direct competitors, you are telling investors your market is small, and they know how hard it is to displace an established competitor.
Focus instead on the three ways your ICP is solving the problem today – this is your competition.
Do Nothing is NOT Your Competition.
Identifying Your 'Competition'
Ask the question 'What' is my Competition NOT 'Who' are my competitors.
Three Forms of Competition
Every ICP is solving the problem in some way today.
If they are doing nothing about the problem in some way today, then they are not in your ICP.
The three forms of compeition are:
- Direct — Another company selling roughly the same kind of solution. This is the obvious one. Easy to research, hard to displace if your ICP already trusts them.
- Most Commonly Used — Whatever the largest share of your ICP is using right now, whether or not it looks like a competitor to you. Could be a spreadsheet. Could be a tool from a different category. Could be a manual process. If most of your ICP solves the problem this way, this is the largest market to look for those to displace.
- Most Expensive — Whichever option is costing your ICP the most in time, money, effort, resources, or opportunity. Could be hiring a consultant. Could be enterprise software they’re stuck with. Could be the runaway cost of letting the problem compound. This is where the pain is sharpest and where your value pitch lands hardest.
3 Common Mistakes
- Claiming you have no competition. If the problem exists, the ICP is solving it somehow. “We have no competitors” really means “I haven’t asked my customers what they’re doing today.” Investors and customers both read it as naivety.
- Trying to be cheaper than a direct competitor and ignoring the other two. Founders obsess over the named rival in their category and miss that the actual market leader is a spreadsheet, or a consultant, or whatever the most commonly used option happens to be. You can win the head-to-head and still lose the market.
- Differentiating on what you find interesting instead of what your ICP cares about. Founders pick the axis they’re proud of — usually features or architecture — and pitch that. The ICP doesn’t care. Pick the lever that matters most to them, and lead with that.
What’s Next
Download the fillable Traction Canvas template
Work on Box #4 – Seven Second Sale. The three forms of competition that every startup has.