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Frenemies: Why Competition is Good for your Startup

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By Rebecca Woodcock (Co-Founder, Cake Health)

Two weeks ago, my startup co-founder and I launched Cake Health’s private beta on TechCrunch.

Around that time, Cake Health’s competition in the healthcare space led us to have a conversation about why such competition was a good thing.

Learning about a competitor can initially feel like impending doom, but having that competition was the best thing to happen to our startup. Here’s why:

Competition validates your crazy idea.

Not only to you, to everyone else as well. When I was initially pitching my idea for feedback, often the first question I would get was “How come no one else is doing this? There must be a reason, so how are you going to do it?” No competition means you are a bigger risk. Intel does a great job at including competitors to help them move forward. They balance letting enough of their roadmap known so they can help move the entire industry forward, with innovating and trying to maintain a technology advantage. Competitors make it a safer market for customers. If you’re the only game in town, you are a bigger risk for everyone to buy into, whether it’s customers, partners, or investors. Plus, competition says you were right.

Competition makes you step up your game.

“Finding out about the competition was the best thing to happen to us since it forced us to lean forward, accelerating our launch — it forced us to get more creative, and to be more aggressive in our progress.”
– Rebecca Woodcock,
Co-Founder, Cake Health

For a couple of months, my co-founder and I got comfortable. We were progressing, but it was at a comfortable pace. We had time. Then I started getting information about a competitor from many different sources, including launch and fundraising, and we were running out of time. After we became more motivated thanks to healthy competition, we accomplished more in the month prior to launch than we had in the previous few months. Was it painful? Actually, we had more fun than ever before.

Competition heats up the space.

You can use their successes to catapult yours. If you do your homework, you should have some idea as to their business plan, revenue or fundraising stage, so plan around those so you can leverage their announcements to drive attention to you. It shows potential partners and investors that something is happening here, and they need to pay attention. Of course, too much heat can burn your industry out. If you want to build a Groupon clone now, you already missed that train.

Knowing their business model help you define yours.

It can be difficult figuring out your competition’s revenue making plan, especially in the early stages, but they do leave hints around. Once you know, or can make an educated guess, poke holes in it. Figure out why it will be a challenge, then do the reverse and ask why does this model make sense. By doing this, you’ll hone your own direction, and maybe even decide to go down a different route

Points of differentiation could make you potential partners.

Not all competition is created equal. Some you will be going toe-to-toe with for the same market with the same product. Others may have strong overlaps, but may have a different go-to-market strategy or business model. These are the ones that could eventually make great partners (…or acquirers), so take note and make friends. Just don’t give away your trade secrets.

Ultimately, be friendly with the startup competition. Have a good rapport.

Their failure could reflect badly on you and your industry, making investors and potential partners gun-shy, so wish them success. You ultimately will be helping each other, and there could be a great partnership down the road.

Our startup Cake Health simplifies managing your healthcare expenses.

We invite the first 200 Women 2.0 readers to join our private beta here.

Interested in Cake Health? If you want to work for us, check out our jobs page.

About the guest blogger: Rebecca Woodcock is the Co-Founder of Cake Health, helping you manage your healthcare and policies. Prior to Cake Health, Rebecca was a research manager for the technology and media division at Ipsos, a global marketing research consulting firm. She began her career in market research at Tru-Light Biophotonics, a startup developing technologies for cellular regeneration and anti-aging targeting baby boom. Follow her on Twitter at @rebeccawoodcock.

  • http://codercharts.com Agnes Lam

    I couldn’t have said it better! Usually my reaction to discovering a new competitor or their new moves is “sick to my stomach” … but I learn to give it time and let it go gradually. What happens is after that we would come up with fresh new ideas/tactics.

  • http://www.mywahmplan.blogspot.com Linda Kinsman

    Wonderful article! I struggled with this when I first joined the direct sales industry many yrs. ago. It seemed I couldn’t heft my purse back on my shoulder at the local coffee shop without poking another sales rep. Wish I’d known about the frenemy thing back then… naive as I was.
    Now, it’s a different matter with my husband’s carpentry/cabinet business. I’m treading into an entirely different realm and I will keep this article in mind as I bring him online. Thanks.

  • Pingback: Women 2.0 – Founding Startups » Startup Quote: Cake Health Co-Founder Rebecca Woodcock on Competition

  • http://about.me/sincerelygeorge Sincerely George

    When I first entered the startup scene, I wanted to keep everything super private all the way until launch day. I’ve learned that its important to talk to people about the work that you are doing because you can learn about competition you had not thought about and thus improve your product. What a great article about the value of competition.