Last week one of the startup competitors we watch closely was acquired. A larger company in the industry bought them for an “undisclosed amount.” Of course, we couldn’t help but read the press release closely, dig into their LinkedIn employee count, read Glassdoor reviews, and scroll into the 13th page of Google results for some clue as to whether this was a strategic exit or more of an acquihire. Such is the life of a startup founder, judging your company’s progress by the peers around you.
I’ve always found “competitiveness” should be added to the list of Big Five personality traits that are studied by psychologists—along with extroversion, agreeableness, openness, conscientiousness, and neuroticism. If tracked, I’d guarantee startup founders have an extra dose. Salespeople, attorneys, and politicians would score high here, too. In these cases and more, your success often comes from beating one or more competitors to the position, verdict, sale, or acquisition.
But the longer I’ve been in the tech startup game, the more I see that obsessing about competition is a distraction—and that we can be more successful by partnering.
The Pinterest Playoff
It’s Fall 2014, and I’m in a fancy conference room in midtown New York City. One of the largest advertising agency holding companies invited me—along with two other direct competitors—to pitch our solutions for Pinterest marketing.
It’s been nearly two years since we launched our company, a Pinterest optimization platform—a mix of software and service aimed at helping large brands take advantage of the most promising, fastest-growing social media company since Facebook exploded on the scene. We founded the company because of our belief in content marketing and the value of Pinterest in accelerating it. Our plan was to be one of a handful of official Pinterest partners and, from this group, emerge as the leader.
The biggest threat was these two other companies with similar plans. But they launched nearly a year before we did. They also raised more money and were getting more media attention thanks to their locations in San Francisco and New York City. So from the beginning, we felt like the underdogs and were obsessed with innovating faster and winning more clients.
So I jump at the chance to represent our firm at this agency event. But I’m wary that I’m about to pitch our solution with our competitors sitting in the room with us. Will they target our clients? Will they take our ideas? Such open “bake-offs” almost never happen in the business world today. But we need more visibility, and I forge on.
We competitors are all nice to each other. No one bashes anyone in front of the clients. We even trade business cards and suggest we “compare notes” sometime. Fat chance, I think to myself. I head back to the airport and write up my notes from hearing the others pitch. There are a few nuggets of interest, but mainly we’re solving the opportunity in different ways. There was nothing I would copy from them, and I’m glad to see they haven’t caught on to our approach.
Troubles Arise
Flash forward about a year, and our business is struggling. We’re way behind on our sales goals, clients are not renewing at the rate we need, and we’re burning far too much cash.
Pinterest has barely budged in staffing up its team. Its paid product is months away. And while the company created a partner program—which we and our two main competitors were invited to join—it sure hasn’t resulted in a flood of business our way…
Sitting at my desk one day, stressing about what to try next, I get a message from a friend who has heard that one of these competitors has started a Going Out of Business Sale. For real. The company, which had raised $11 million, could no longer continue. I got the number of its CEO in San Francisco and call him.
I learn on the call that they, too, were burning too much money and saw too little opportunity to grow with Pinterest. They had tried to pivot to work across Facebook and Instagram, but it was too late. He was in the process of liquidating assets for as much as they could get for them. His offer of brand introductions and contacts for $25,000 was interesting, and I said we’d consider it.
I hang up the phone and sigh. I’m competitive as hell, but 0% of me felt good about hearing we outlasted this company. It’s never, ever fun to hear that a fellow founder has had to pull the plug. And hearing this competitor’s struggles was a big, fat data point to suggest we could be next to fall. Any victory over this company was Pyrrhic.
I thought our biggest risk was the competition—but I finally realized that our biggest risk was pinning our hopes on Pinterest itself. And I think we may have had a better chance to win by closely coordinating with our competition. We could have compared notes, presented a united front, and asked for more cooperation from the Pinterest leadership team.
Later that day, I send a LinkedIn message to the CEO of our remaining competitor—suggesting that given the other’s demise, it might be smart to compare notes.
He never replied.
This was one of the final straws in our decision to move away from Pinterest. Thankfully we found a new path through Influencer Marketing and succeeded wildly. Our remaining competitor pivoted to a visual e-commerce solution. They, too, turned things around.
It worked out in the end, but I wish I were less competitive and more cooperative.
We’re All Combing the Mountain
In addition to your natural competitive juices, other startup pressures can get to you. Investors love to send you articles about your competitors’ fundraises or new product launches in an effort to be helpful. Clients dutifully ask how your solution compares to others. And the Yelp-like sales teams at G2 and Forrester are eager to frighten you into paying them to get better reviews.
The reality is that we’re all usually struggling.
Everyone has tough clients, close-the-gap plans, investor pressure, and changing positioning. Those competitors that have raised five times more than you have 50 times more pressure to grow.
We can’t stop our entire strategy and copy the others. We think our path is the right one.
And we are all trying like hell to get customers to change their habits and take risks in a new category of solutions. The big companies we innovators compete with seem to have a lock on clients’ budgets and brains.
The best analogy to me is that all startup teams are scaling a mountain. Sometimes its easy. Usually, it’s hard, but there’s plenty of room for many to make it to the top, from different approaches. And it’s much more important to look ahead on your path than to worry about some other climber coming up from behind you.
Watch Their Steps
You can learn a lot by watching the competition—as long as you remove the feelings of emotional rivalry and focus on learning from them. Glance over at those fellow hikers on the trail. Look at the decisions they make and try to understand what’s behind them.
Look at their website positioning and dig into the words they use to describe themselves. Especially analyze any changes over time. What clients do they mention? What benchmarks or KPIs do they share? What positions are open on LinkedIn? And what senior executives have joined or left recently.
It’s also a good idea to have your team on the lookout for competitive insights. We’ve always created #competition channels on Slack for sharing insights and info. Your sales team is especially good at hearing from clients and partners. And you often learn the most by losing a contract. Capture that data!
I probably spend 30 minutes a month looking at data like this. And I keep it above board with public info. I personally think it’s sketchy to do things like interview their employees to unearth insights or ask your investors to share their pitch decks.
Lean Forward to Build Relationships
More importantly, take the time to get to know fellow founders in your space personally. Seek them out for coffee at industry events, and reach out if you’re mentioned in PR or leader lists together.
Have the confidence in your business to know that one conversation isn’t going to give away all your goodies. You never know what could come out of these meetings. There are countless ways to cooperate around a mutual benefit, such as the growth of your emerging category. Remember, winning the highest market share in a tiny category means little. Teaming up somehow might raise all the boats.
Maybe they will buy your company someday—or you’ll buy there’s. Maybe ten years from now, you’ll start a company together!
At the end of the day, business is just a game. When major league sports professionals finish a match, they almost stay on the court or field to high-five and hug it out. Everyone is all smiles, and if the final score wasn’t superimposed on the screen, you wouldn’t know who won and who lost.
That’s because Pros are happy to have played together, to have given their all to the game and tested themselves against the best. They know—or hope—that there are many more games to be played. And they never know when they might be on the same team. Be a Pro.
Bob Gilbreath is a 2x-exit entrepreneur and co-founder of Hearty, a curated matchmaking service that combines top software developers with early-stage, venture-backed startups.