In the recent past, I was talking to an acquaintance who happened to be a startup CEO and we were talking about the technology that her team had built.
"Oh, it's the best. No one can touch it. I don't see how anyone could be better than us on this."
She wasn't a close friend, so I didn't challenge her. Plus, I didn't know much about the industry she was in, but her claim felt full of hubris. Perhaps she was just blowing smoke, but later, when I was reflecting on the day, it actually reminded me of two key insights.
Insight One: Only The Paranoid Survive
In Andy Grove's book, Only the Paranoid Survive, he goes into detail around many of the key examples in his industry and those related to it why inflection points can either be exploited (by those who remain vigilant and paranoid) or put you out of business. If you're interested in business or technology or both, this book is a must-read. A startup CEO must be vigilant that someone has found a way to build better tech, build a better engineering team, build a better sales team, etc. Or, a business could lose product/market fit along the way as well. Many people incorrectly think that they should be worried about a giant company stepping into their game, but how often does that actually happen? Most failed startups of which I'm familiar spun themselves out of business because they missed a competitive startup, a consumer change, etc.
Insight Two: You Have Competition. Period.
Almost everyone has a moment or two of delusion that when they come up with a startup idea, it's so brilliant, that no one else has thought of it. Your delusion may even lead you to protect that idea, fearful of telling anyone in case they steal it.
I had the fortune of spending some time with one of the leading venture capitalists out in Silicon Valley. He was explaining that one of his favorite questions to ask a founder during a pitch meeting is: "Who is your competition?"
Sometimes the founder will bring up giant companies like Google or Facebook. Of course, they're the obvious ones, but he presses, "Who else?"
He told me that the worst answer (which, unfortunately, he hears more often than he wants) is "No one. We're the first to market on this. No one else is doing this."
The reason why this is a terrible answer is for two reasons: a) You're still in your startup idea delusion. b) You didn't do your homework. Of course you have competition. Here's why:
- You may be smart, but there are lots of smart people out there. The chances that you're somehow the first to market is very unlikely. You're either early, middle, or late to the market. And, if you are first to this supposedly underserved market, it's because it's so niche, no one else has bothered. (Of course, there are exceptions to this, like if you were to invent cold fusion.)
- Competition comes in many flavors. Maybe no one else has come up with the idea of building your particular widget, but is there already a way to solve a customer's problem that exists in the market? That's a substitute. Maybe you've come up with a better mouse trap than what's currently in the market, but is your product so substantially better that you'll overcome switching costs or other barriers to entry?
Conclusion: Survival/Winning Requires Paranoid Optimism
Of course, you should believe you're going to win, but believing that your product is infallibly the best is really foolish. Competition, changes in customer needs/desires, and even the waking of a lumbering giant could all change your world, quickly. So, make sure you're awake so you can do something about it when it happens.