It’s one of the most frequent questions an entrepreneur gets asked:

“So, who’s your competition?” 

The responses that usually follow are answers that, unfortunately, are just as frequent.

The most common variations run from “Currently, we don’t have any competition.” to ”We are the first company doing this.” all the way to my personal favorite:

“There is nobody doing this, in the exact way that we’re doing it.” (yikes!)

If one of the above (or some variation of it) is your answer to that question then you need to change that. Today.

The truth of the matter is you have plenty of competition and that competition stretches across more areas than you can imagine.

For starters, most companies have two different types of competition: Direct Competition vs. Indirect Competition. 

You could write a pretty lengthy essay comparing and contrasting these two types, but heres a quick overview:

Direct Competition: In which you are competing for the same market of people by offering virtually the same type of product.

Indirect Competition: In which you are competing for the same market with a different type of product.  

For example, Burger King and McDonalds are direct competitors. They both offer burgers, fries, shakes, and a similar dining experience to the same market of people. 

On the other hand, McDonalds and Subway are indirect competitors. They are both fast food companies competing for the same market (people looking for cheap food, fast.) but their product offerings are very different. 

The thing entrepreneurs don’t usually think about is that not only are these competitors competing with each other because of the similar overlaps for product/market fit but they are competing with every other restaurant, dining option, and consumer behavior available to their potential customers. 

People staying home and cooking more? That activity is competition. 

Organic and low-carb diet trends? That activity is competition. 

The above consumer behaviors are in one way or another cutting into their bottom line and entrepreneurs building web-based business have to think similarly. Essentially, you can (and should) view anything as competition that’s taking time and money away from your product. Each individual consumer has only so much time and money to spend using web-based products on any given day. Those are the constraints every business has and it’s the arena we all have to play within.

If your target customer is spending their time online using Facebook and Twitter instead of using your product, then indirectly Facebook and Twitter are competing against you. 

It’s a simple concept, but not a lot of entrepreneurs think of it that way.

So here’s the basic truth: you have competition. Lots of it.

It doesn’t matter if it’s direct or indirect. It’s there and it’s a huge, important part of the journey.

Aaron Levie, CEO of Box said it best:

With that in mind, never (EVER!) get discouraged because you face competition. Instead, embrace it. It’s one of the best things in the world for your business. It will keep you sharp, ambitious, and in the long run will help you build a better product off of active consumer/market data.

When I first started LiveNinja, I used to feel discouraged when I came across a competitor building a similar (or even sometimes the very same) product.  I used to think it was a disadvantage for us when we were raising money, acquiring customers, and marketing our product. Turns out this is a terrible way to view things because even though that’s what our initial emotions tell us, none of that is even remotely true.

When Drew Houston of Dropbox applied to Y Combinator he didn’t hold anything back when talking about the competitors he was about to face off against. Here’s the answer straight off of his YC application:

YC: Who are your competitors, and who might become competitors? Who do you fear most?  

DH: Carbonite and Mozy do a good job with hassle-free backup, and a move into sync would make sense. Sharpcast (venture funded) announced a similar app called Hummingbird, but according to (redacted) they’re taking an extraordinarily difficult approach involving NT kernel drivers. Google’s coming out with GDrive at some point. Microsoft’s Groove does sync and is part of Office 2007, but is very heavyweight and doesn’t include any of the web stuff or backup. There are apps like Omnidrive and Titanize but the implementations are buggy or have bad UIs.

 

Now, I don’t know Paul Graham personally, but I’m pretty sure he came away impressed by this response. Drew didn’t shy away from admitting he wanted to enter a crowded space filled with powerful players (freakin’ Microsoft and Google!) that were (and still are) actively pursuing a piece of the market he was after. That’s the type of heads on, could-give-a-fuck-less-what-others-are-doing mentality that played a huge role in leading Dropbox to where they are now. 

Like Drew’s example above, if you’re building something for a particular market of people then chances are you’re extremely passionate about it. Because of that, the next time you see a competitor in your space be excited that other people are just as bullish on the concept as you are. It means you’re onto something great. It’s further proof that both your initial assumptions and hypothesis are correct: there’s a big opportunity here. Drew didn’t view his competitor’s desire to enter his space as a detriment.  He viewed it is an indicator that the opportunity was enormous. 

Do the same for your space.

Have a competitor that just raised a ton of money from really smart investors? That’s more validation for the market you and your product are after. Other investors (well, at least the ones you’d want to work with) will see that activity as such and it will help validate your pitch. 

Worried about acquiring new users? An active competitor in your space can give you valuable data to what’s working and what’s not. It can give you insight into how others are thinking and approaching your market. It gives you a pool of people to talk to, to ask questions, and to get their views on why they are using (or not using) your product vs your competitor. This is a huge advantage. Treat it as such.

The next time you talk or think about your competition keep a few of those things in mind. Think of the word “competition” as a good thing. Think of it as something that’s going to keep your company’s lights on, rather than shut them off. The best entrepreneurs are competitive by nature. They embrace competition because they know that those who love to compete are the ones that win. 

 

“I have been up against tough competition all my life. I wouldn’t know how to get along without it.”

-Walt Disney