One of the advantages of being an investor is that we get to see hundreds of startups a year. While an entrepreneur is focusing on a specific sector or even a specific part of the value chain in that sector, we often see at least a few, if not tens of startups doing the same. There are some highly technical areas with few competitors but that’s the exception, not the norm.
Since we have exposure to so many different startups which, at the surface, are doing the same thing, we need to go a level deeper in order to develop an informed hypothesis about which startup will win. This is why I ask startup founders what they’re doing differently than competition. Are you a me too startup, or do you know something that others don’t know, or are you doing something that others aren’t doing, that makes you uniquely positioned to win?
Although founders naturally don’t agree, most startups are me too startups. The reason for this is that every startup with a unique insight and therefore a unique approach to a problem produces many more copycats. Depending on the size of the market and the availability of capital, you can be pretty certain that you’ll get anywhere from 5 to 20 directly competing startups that, at the surface, may appear to have a chance of winning the market.
Part of our job as investors is to parse through the answers to this question to see which answers represent real insights and which are simply verbiage in the guise of insights.
Also published on Medium.