It proves your idea has promise.

Read this -

http://www.ribbonfarm.com/2010/08/03/down-with-innovation-up...

Copy their best ideas, do the core things better, and kick their asses. Good luck.

Also, you can take risks that they may be unwilling to take. You don't have group-think to worry about. You can use tools & languages that it's too hard to hire for. As this is a PG site, consider functional systems. I'm a huge haskell fan myself, and holy crap is it faster to develop in, especially early on. In terms of productivity, it can be 10-15x. It's proven as such in my own work. How many devs do they have?

Look at who's funding them, perhaps try to infer some of their movements by the likely advisors they have. Ask around. Check out the founders' resumes. It's easier to get intel about a larger group than the plans of a single man. Check out what technology toolchain they're using, and find someone who's used it before, and/or other public systems that use it now. It may provide a useful source of likely avenues they'll take later (some APIs make some approaches easier), you may be able to predict them before they've even decided. With that in mind, choose your own toolchain and market focus accordingly. Are they going to have any nasty chokepoints later, in terms of necessary features that aren't supported by their toolchain, or performance bottlenecks that'll squash their scalability/skyrocket their costs for a while?

Also, if all else fails, you've got your brain just churning away at the problem domain all day. If you want to play dirty, take out some patents on some inevitabilities in that space. Hobble them early, force them into more expensive routes (some stupid bastards will even think it's an advantage that they can afford to!). In software, it's easy & tempting to go the safer O(N) route when a riskier O(1) will do (in effort -- say writing all your entity types by hand versus an automatic derivation mechanism). A patent threat can certainly push people in different directions early. In terms of productivity, that can be a 30+ scale factor. How many devs do they have?

Put out a blog & control the narrative. The more people they have, the more mistakes they can make at a time, the more datapoints you can pick from to form the narrative your way. The right narrative can help compensate for a lack of a marketing team. Consider reading up on Guerrilla warfare.

Also, you don't have to win the market. You can just stay alive & appear useful long enough to get bought by someone else who wants to compete against your opponent.

Yeah, a good part of this is way over the top, but maybe something will be useful to you :-)

"In terms of productivity, it can be 10-15x."

Any sources on this? Or is it primarily based on your own experience?

I'm curions about this too. Haskell is my hobby language right now, I'm still an uber-noob, but my impression is Haskell code is easily 10-15x more robust, but not necessarily more productive than cool-kid languages (Ruby, Python, Javascript).

The robustness of Haskell is one of the things that improves productivity; less time is spent hunting bugs.

Depends on what you are doing of course. But having an impedance mismatch between the language and the problem domain can make simple problems extraordinarily complex.

My own experience. Haskell's just fantastic that way. The type system, the libraries, and the tools really make you productive.

This is great advice for me to hear, as I'm in a similar position right now. I've been considering obliquely slamming our competitor in a blog post, but I've held off because I don't want us to come off like dicks. Wouldn't I be better off focusing the messaging on how we're doing it right, rather than how they're doing it wrong?

You can define yourself and, through the remaining empty space, end up defining them. If you define yourself as "The simple, no-frills, easy way to Foo," for example, then you're defining your opponents as one or more of: complex, extra frilly, less easy.

Publicly slagging off competitors by name seems to backfire more often than not, unless you're Steve Jobs.

However you can talk about all the ways that X is done wrong without actually mentioning by name the competitors who are doing X wrong. Clearly explain the problems you see in 'the industry' and your solutions to them, but not the other people/companies involved.

Thanks for the advice - it's pretty much what I ended up doing. Snarky enough to be satisfying, but I buried the diss so it wasn't too blatant. :^)

I wouldn't go TOO crazy badmouthing competitors, as you may end up joining forces later on (through acquisition or partnerships).

Totally agree. I'm in a similar situation as the OP, and after the initial despondency found that the existence of a competitor is actually incredibly motivating.

Not only are things moving along faster now I have someone to benchmark myself against, it has really brought into sharp focus the areas I need to concentrate on. I've been able to learn from mistakes that they're making, rather than suffer the cost of making those mistakes myself. Overall the project is absolutely stronger as a consequence.

In fact, I'm probably more excited when they release a new feature than their average customer is.

Thanks for sharing that link. Interesting to learn that imitation (when done well and with some form of twist) is not always a bad thing. We really do overvalue originality.

In VC parlance, someone else launching doing the same thing "validates the space".

Does it really? I always felt like people who I was working with used this to support bad ideas for startups. Do VCs really prefer "validation", or first to market?

good point, my startup is first to market, and do we still need validation ;)

agree on this. be remarkable. most likely you will approach it differently than they do. And boot strapping has its own benefits.

This is great news. Somebody is spending huge amounts of money to help you figure out how to make money. Now your problem is much reduced: instead of doing all of it, you just need to figure out what they are doing and tweak the good parts and ditch the bad parts.

So how is their sales pipeline working? That's the key question. Where are leads coming from, how do they convert them, what are the major selling points.

Seriously, this is great news -- assuming you can get inside their OODA loop and wreak havoc. It's like having a big brother who made all the mistakes so that you don't have to. Requires thinking a bit differently, but you should be able to manage that. Good hunting.

Ahh, OODA. That kept me on top in 2 vs 1 games of AOE2 against my colleagues for a long time. They started beating me when they got better and I just couldn't think fast enough anymore.

For anyone in any kind of competition I would highly recommend checking out the wikipedia article:

http://en.wikipedia.org/wiki/OODA_loop

The exact same thing happened to me a little over a month ago. A few days before the launch of http://limelightapp.com/ , we saw http://app.net/ show up on the front page of HN. Initially, my heart sunk. (You've already felt this, I'm sure.) Thankfully I was sitting next to my wife on the couch, who had the good sense to say: "Go grab a beer." I took her advice.

In the end, I can honestly say that having http://app.net/ launch before us was a blessing in many ways. Many of the ways have already been explained by others (e.g. validation of the idea, etc.) It also seriously motivated us to stop putting it off for another weekend. I buckled down that weekend and got the service as ready to launch as I could. I knew that if we waited too long it would seem like we were just copying their idea, when in fact we had been working on it for a couple months in our nights and weekends already.

We also had the benefit of seeing what features were being requested from people on HN. In many cases, these were features that we built into our initial release. In other cases, I knew that I could knock the feature out in a couple of hours. This allowed us to tune the marketing message that would accompany our release. Our service does many things, but knowing which ones people really wanted was invaluable.

In the end our launch went a lot better than expected. Few people made the connection between our service and the competitor that launched a few days earlier, and when they did we received a favorable comparison. More importantly, that "idea validation" that their launch provided translated into real subscribers as soon as we launched. We've actually exceeded our expectations in terms of paid subscribers up until this point and we haven't even started really marketing the service.

Went and checked out LimeLight, really nice, I think you are addressing a market need that very much exists, so keep at it.

One little suggestion, you should have some example sites right from the homepage. The video is good (thought edit out the publish bug!), but first and foremost I wanted both validation that others are using it, and wanted to be able to see it in action.

Good luck with it!

Last thought, embrace the fact that this happened to you. This is a story I've been able to tell again and again since it happened and it's interesting. It makes the story of your launch interesting. We just read yesterday in an article that made the front page of HN at http://news.ycombinator.com/item?id=2928611 that having an interesting story will really help you get picked up in the media. People love this stuff.

Your landing page is a lot better. I had opened both sites in tabs and forgot about it. Then randomly bumped into the app.net tab, was wondering what it was and remembered "Ah, HN". So I switched to the next tab and there it was: "Create an App Showcase Site in Seconds".

Nice!

Exactly. It's also helpful when you can reference an established player in your space and talk about why your product might be better for them, rather than attempt to both explain WHY they need your product and then WHAT your product does.

Funny, I was about to do the same thing as you at the beginning of the year. I saw unbounce getting in the space and decided to jump ship and do Cilantro instead.

You should stick with it. You should do well.

Every good niche has competition. Being first to market doesn't mean much (remember GeoCities? Six Degrees? Friendster? MySpace? and these guys were in a space where the first mover has an even bigger advantage.) You just don't know who will win.

Killer features aren't usually obvious, except in retrospect. Google didn't know that its algorithm would make it king of search, or they wouldn't have tried to sell so soon, for so little. Facebook didn't know that real names and a clean design would get your grandma to sign up. And you don't know which subtle design edge will make the difference in your niche. Neither do your competitors (those you know about, and those still working on launching), or the VCs.

What you should be doing (launching and getting funding) hasn't changed one bit. I don't know the secret recipe for success, but I can tell you lots of ways you can fail. Not launching would be the easiest.

Look at Duckduckgo they have a competitor who launched years earlier and has a hell lot more funding.

DDG may not be the best example depending on the field you're in - they use their competitors to provide a lot of their service and get their competitors to do it for free it seems. There aren't too many spaces where you can do that.

There's an aphorism that says "the second mouse gets the cheese" which I think means that coming second you can let the forerunner make the mistakes and learn from what they get wrong. This has a lot of mileage IMO.

Anecdote: When my partner and I started in business in a very fine niche, a largely new thing in our country, a competitor opened in our town within a km of us between us securing premises and opening them. Thankfully they determined for personal reasons they couldn't continue and left us with some extra customers ... don't pin your hopes on your competitions CEO getting pregnant though!

Now that brings it home.

You should launch anyways.

In 2004, I was going to do a startup with some friends that would ship a product allowing enterprises to "firewall" the IM protocols, ensuring that private inter-company messages stayed inside the company's 4 walls. We gave up when 3 other companies launched products to do the same thing, including AOL, all well-financed.

Companies launched after we decided we were outgunned ended up doing better than the companies that were there at the beginning. AOL dropped their product entirely.

Every time a friend of mine has built a product in a space that seemed spoken for, they've done well. Look at Marty Roesch with SourceFire; nobody would have predicted green fields for SourceFire when they launched, but Marty and his team IPO'd.

The single toughest part about getting a company off the ground is product/market fit. It's finding the right group of people to talk to and having the right conversations to figure out what the feature/function/benefit should be, how the product should be packaged, and what it should cost. Think of it this way: someone else did the hardest part of the problem for you.

> What should I do?

Compete.

Every startup should expect a well-funded competitor to hit the space, both before and after.

They're not your competitor. They're in the same space but you haven't even begun to fight. In a year they might be your competitor.

Focus on your startup, keep an eye on theirs on sites like HN, Quora and any relevant blogs, but don't be afraid.

Them being funded or better funded is just something you're going to have to get used to, it doesn't mean anything at this point though - money doesn't buy traction, they have a great chance of failing and moving in a new direction or flat out dying.

The TechZing interview with the creator of Nozbe addresses your question exactly, his answer: be persistent, stay positive and move forward.

He was amazed at how many competitors he outlasted and simply had more interest and staying power than.

NOTE: A well-funded competitor has investors that want a big return on their investment, they don't want to stand around doing nothing. So that company is going to need to most fast and big, and if it doesn't hit, depending on the investment they have taken, will die away.

All that being said, if you are shaken by this, enough to have lost confidence in your idea or execution, you may want to move on.

If you are still completely confident in your idea and this hasn't shaken you at all, there is ALWAYS room in the market for multiple competitors, so dig in and go for it.

Well, that is a really hard question. I think you should consider this:

- Do you have any way to make your company different? - Can you contact some respected member of the niche your company is aiming at, and convince him to start using your product, and endorse you?

Usually smaller companies can offer a better service, to a smaller niche of users, so you can focus in a small sub-niche of the customers, and work with them, that can work for you if you manage to stay small, bigger companies can't afford working with small customers, as they can't break the even point of revenue.

Try to stay out of any strategy that involves money, as your competitor has more resources than you. Focus on personalized service, if you can afford that.

Or, start looking for a funding partner.

The Wright Brothers were up against all sorts of commercial and even military competition. Everyone was throwing huge amounts of money and resources at the problem. The Wrights were perceived as amateur-hour kooks playing with toys in a field. The military was downright rude when describing how their success was a forgone conclusion and that the Wrights weren't worth paying attention to.

The other point is that while orgs like Amazon, eBay, PayPal and Craigslist ran with their first mover advantage, lots of other first-movers totally dropped the ball. See Friendster/Facebook for my favourite example. LiveJournal/WordPress/Tumblr is another set of hard lessons.

Launch anyway. Being well funded doesn't necessarily mean successful.

You can also sit back a bit at their launch and observe their mistakes and do something a bit different.

Color, Cuil and others were all outrageously well funded, but failed entirely.

Similar to what people said don't worry the competitor validates your b-model and focus on your product not your competitor

In addition, remember to treat your competitors as frenemies. http://www.bothsidesofthetable.com/2010/12/27/why-you-should... There's much more to learn about your space than you probably think and they've already been in the trenches and might have gone through some pain points you can skip.

Location: If they're national, I'd focus on being local. Look at the way Yelp did things in taking on Zagat, Citysearch, etc by focusing on a core market to build that strong loyal set of powerusers that on average were way more engaged (# of reviews per reviewer).

Lastly, I'd consider trying to figure out the competitors cost model. A lot of times many startups that are well funded get that larger funding round because they're looking to scale which means they're spending extra on marketing or sales. Some startups as such are focused on ramping up a sales team. If that's the case, you'll lose playing the game the way they're playing it (ie: groupon vs a local copycat clone since it might work locally but u'll never scale). Try to figure out different methods to do this, price model, sales model, marketing model (guerilla marketing vs traditional marketing), or whatever that will make you more unique and more cost-effective. Gluck

A startup should be treated like any other business. Almost every business imaginable has competition, and most manage to survive.

Building a product that appeals to 100% of a "target market" is impossible. Carve your niche, target a particular type of person, and start small.

Competition in your space is a really good thing: 1) as others have said, it validates your ideas viability, and 2) you don't need to spend so much time educating people about a new market and why they need your product.

Our main competitor started working on their product about at the same time as us. They raised about 4x as much as we did (basically a series A) and have 4x bigger team as well. They waited to launch. We launched earlier and with a far less polished product.

There's something different happening though, and it primarily has to do with execution. We do crazy shit to get traction, because we're scrappy as hell and aren't going down without a firefight. We're extremely lean and we all code, whereas their organization is far more bloated. The numbers belie the actual fairness of the fight. And moreover, we don't currently need a massive amount of money. Our burn rate is fairly low.

Here are a few things I've learned:

1. More bodies isn't better. More money isn't always better. Traction and happy customers should be your key metrics.

2. You can always raise money later at a great valuation using the argument "Hey, these guys raised money from X VCs and are blowing up."

3. You need to launch. Stop waiting.

4. In the big picture, everything here doesn't matter. Both us and our competitors are going up against a bunch of old-guard corporations who are the current incumbents. It doesn't matter if we have similar products if our overall market share is .001%-- the other 99% is the true competition.

I have encountered a similar situation and here are my thoughts, just for your reference:

1. Is competition really bad? Not necessary. Some times competitions are good. As I was working on a product of a relatively new area. One of the problem was that people were not aware of the importance of the product. Our competitor had done a good marketing job, widely promoting the concept and got reported by several media. After that, we found it much easier for us to convince people of our product.

2. It's good to have a mirror. If you have got a competitor, watch closely what they are doing and try to learn from their experience. The two products might look similar at first but you might be able to differentiate from them after several iterations. If launching a startup is like trying out new clothes, it is much better to have a mirror.

3. You have to share the market anyway. You cannot be the monopoly, or even oligopoly. Sharing the market with your competitors is inevitable. Even if you were the first to launch, there might be strong late-comers. So do not panic when you see competitors coming.

4. Learn to differentiate. Tell the difference between your product and your competitors'. Trust me, there are no identical products in the world. Highlight the (even the smallest) difference and tell people why they should choose your product.

5. Focus on what your competitor might ignore. You should try out your competitor's product and record your experience in details. Then check the flaws you have found to see whether the same can be seen your product. This is an effective way to differentiate your product, especially your competitor is large and strong. If you cannot have more functions, then optimize your user experience.

6. Do not pivot so early. I wouldn't recommend to pivot right away. Even if you plan to pivot, please at least wait for a few months - after you have made sure that you have no chance. After all your team have spent a lot of time on your product. If you give up so easily, it is hard to cheer up your team for your new product. Do not simply give up, face competition and you will never regret your decision.

7. Any chance to cooperate? If you can cooperate with your "competitor", things would be easier. But this might not be a good choice since your competitor is well funded and two teams might not get along with each other. Also you might lose your control of your product.

Don't worry about competition. It's a good thing. It means you picked a good market. Focus on what makes you different and better.

Sounds like you may be a single founder. If so, find a friend or mentor who can help you work through the ups and downs. You're going to be discouraged a lot starting a business.

I went through a similar situation and solicited advice. Lots of people told me "know when to quit." I didn't, and I'm glad I stuck it out.

Put pedal to the metal and get it out there! Mirroring everyone else...well-funded competition means:

1. Your idea has legs. You have less to explain when people ask you about your startup. This is a good thing and saves a lot of time.

2. They've got more fingers in the pot, slower and more consensus-based decision-making. They may hire fast, but all team members may not be as invested in quality/creativity/efficiency as a small, bootstrapped team and may in fact move slower - you may be able to out-execute, and faster.

3. They can afford mainstream advertising and tech press that you may not be able to - but these days, word-of-mouth and viral propagation can be far more effective.

Our startup's in a different situation as our well-funded competitors hit the market after we did, but it's essentially the same. I freaked out a little, but the kick in the pants has been really useful in honing our strategy.

Keep your eye on 'em (and other competitors), follow your gut, and don't get spooked! Good luck!

Focus your product and your market. Take a read of everything Steve Blank has written about re-segmented markets.

What is your competitor weak in? Who are they ignoring? If they have millions in funding, in all likelihood they are targeting a large market, and probably ignoring many under-served ones.

Focus your product on a specific part of the market, both in features and how you market it. This also has the bonus that you may even be able to charge more for it (because it is specialised).

One of my products once faced a much more high-profile competitor, but we concentrated on enterprise (of what was thought to be a 'consumer'/mass-market app) and suspect we made even more profit than the competitor, who eventually changed what they were doing to copy us.

There's a ton of great examples out there, and as someone mentioned earlier, take a look at Duckduckgo. Another great example of a lean company that has now outpaced their well funded competitor is SeatGeek.

Is this a social app? If so, you can win through the culture of the community that uses your app. Today, social is not as much about the technology or product, it is about the people that use it.

For example, I use hackernews not only because it is simple and easy to see others' contributions, but because of the content that people produce and the intelligent conversations the community creates on the site. That aspect of a product is invaluable and more difficult than any technology problem you will encounter.

VC money, a good team, or a great product won't guarantee success. One (or two) factors alone won't ensure success. It's a sum-of-all-the-parts thing. I think an important question to ask yourself is: how committed are you? Not so much: then spent your time, money and energy elsewhere. Very: then do a detailed (honest) analysis on your product and theirs and if it still makes business sense, keep at it. Sometimes it how much pain you're prepared to endure... or is that running? :)

All good points here - I would only add one thing: when I did my first startup right out of college, we were constantly worried about what our "local" competitors were doing - meaning companies targeting the same market and about the same size. What we ignored, and hurt us, was the larger company entering the space. Moral of the story: focus on your start-up vs. looking at local competitors, but keep an eye on larger companies that have the potential to come into the space.

What was your competitive advantage before? If you didn't have a distinct competitive advantage, you were bound to have a strong competitor eventually. The benefit you have now is that you can learn from them. The primary goal of a startup is to learn about your market. Having a well funded competitor can help you see who the actual market is. They'll likely spend a lot of money to do that. You'll have the benefit of seeing how they price, who they target, etc.

Too many times I have stopped making something because well-heeled competitors showed up before I launched, only to see someone else come in later and eat their lunch. Maybe it could have been me eating their lunch, but now I will never know.

If they really are nailing the market then maybe you shouldn't bother, but usually you'll find they are doing an ok job but missing a LOT of things you might do better.

I think you should pitch your product to VCs (Explaining that it's a new market with really few competitors; BUT, still serious enough that there's already a team with million in funding.) Meanwhile, build your awesome team. Then, your competitor will come on HN saying: "Crap, I was first but a guy with a better product and an awesome team just got funded. What should I do?"

If it is a brand-new startup, it's not worth worrying about them because you are both still so far from reaching a point where everyday users know either of you exist.

It's easy to read HN and TechCrunch everyday and become disheartened when closely related products launch, but the reality is that nobody outside Silicon Valley cares until one of their friends tells them about it.

Also, I think when you are building a startup, it is best to largely ignore tech news sites anyway. You can drive yourself crazy reading about others successes and competing products. It helps you keep your product stay original and not easily become distracted when a new feature idea presents itself that makes you go in a totally different direction before your first idea has had a chance to succeed.

Like when TiVo launched and spent millions trying to educate the market on why someone would want to record live TV (i.e., just use a VCR, silly), the main benefit you could get from them entering the space is they spend a lot of their funding on education and you spend your money on customer acquisition. A bit different, granted, but an analogy nonetheless.

Take it as confirmation that your market is there, and make sure you have a clear idea of what your differentiator is going to be.

I would learn from them. I am sure they are going to make as many mistakes as they make great decisions. Having someone out there with funding figuring out the space can be a real advantage if you can learn from what they do and bring your own sense of the marketplace to bear. Look at Wesabe, who launched with funding a year before mint...

I stopped working on a startup as a similar thing happened to me, one year later they've had no traction and could have probably beaten them as I thought we had a much better solution. Don't think about anything other than is your solution better. They are still an early stage startup. Foursquare essentially beat Facebook places.

If they are very successful and generate a lot of buzz, it may actually work in your favor to be the next alternative in line. If there's a lot of hype, their company can only be purchased once, but many may want to.

Of course, it's better to be #1 yourself, if you can manage that. But I don't know how much I would worry about competition.

Hey,

Do you really know the competitor has the new product? Or is it just a press release. Many times, big companies do press releases of something or the other being released in the next quarter. That "next quarter" never arrives.

The important question is "more than the product do you have paying customers?" If so, don't worry. If no, worry!!!

Eric Ries once told us the following: "Just fucking ignore them."

That was the best advice someone could have given me for a situation like that. I'd advise it.

My ancillary advice would be: Use it as fuel to absolutely destroy them in a race of producing incredible product value to your customers.

Our startup competitors have existed 1-2 years before we did.

Hey there,

Firstly, don't be too concerned man. Watch the competitor to see how the market reacts to them. If they succeed, chances are better that you will too.

Keep in mind that lots of VC money does not necessarily mean a successful run.

First to market is a bit of a myth, you can do just fine if you don't get there first - just do it better than the rest.

Best of luck with your venture!

S

If you believe in it still, it's great news. A story that may help... I had a very well-funded dot com in the 90's. A guy went around the valley pitching "this is a big idea because [our investors] invested in it." He got funding and his company, Esurance, recently sold for a billion dollars.

Other companies doing the same thing as you basically shows the market your niche is solid. Go for it!

Why not raise funding ? Given that your competitor has already raised funding, atleast you wouldnt have to convince investors about the viability of the concept.

If you were looking to bootstrap yourself and avoid dilution, perhaps it is time to rethink that strategy.

I think this is good sign that your idea is worth pursuing. Try to see why you wanted to do that and what is your unique strength, which can be if nothing else, eagerness to succeed. Good luck.

P.S. How did you get 1000s of karma points :) I can't seem to get much.

How awesome is their domain name? Could yours sound like the more authoritative player in the space, easier to remember, spell? Or will you come in with an afterthought domain that leads people to assume you're a knock-off?

This sort of thing can have a chilling effect, but keep in mind that if they're "well-funded" they will need to have a profitable business model much sooner than you will. Hang in there!

Re: "What should I do?"

Read Henry Ford's autobiography: http://www.gutenberg.org/ebooks/7213

Stop stealth'ing and start building awareness. Ride their we-were-funded marketing with your own I-am-here-too blitz.

Good for you! Well funded means they will have to pay for rent and employees and stuff. Go and do less, better.

Keep your cost low. A "strong" team implies it's top heavy now. A few millions can be gone very fast.

Hi,I think u should leapfrog. U can study them to learn the extra values u need to add to yours.

Continue working and launch anyway.

Don't sweat it and focus strongly on your strong points and their weaknesses.

So that means your idea is good. If good enough another company may look around for something to compete with your competitor, that might be you. There are worse things in the world than being aquired by a big company (Google, Amazon etc.)