An Andreessen Horowitz VC's 3-Step Battle Plan to Beat a Bigger Competitor
It’s a startup’s worst nightmare: You’ve spent months (or years) building your business, only to have an 800-pound gorilla of a company decide to compete directly with your product.
It's got a budget that could top that of several small states and a long track record of success that helped it grow to such a scale. You’re just a handful of smart people with an iron work ethic and a passion for your product. Do you stand a chance?
Yup, responded John O’Farrell, a partner at top VC firm Andreessen Horowitz, on question-and-answer site Quora recently. When someone recently turned to Quora looking for help for a hypothetical entrepreneurial quandary in which a massive company releases a competing product, O’Farrell took the time to reassure the questioner that an effective fight back is possible and offer his playbook to win even when you fear you’ve been totally overmatched.
"First, don't panic. Big companies generally take a long time to become effective competitors, especially entering a new market. A cheetah will always outrun a gorilla," he writes before offering this three-pronged approach.
Scan Their Defenses
Being huge isn’t a uniform good; scale creates both advantages and disadvantages for a company. So don’t simply see the size of this new competitor as something to fear. It’s also something to exploit, according to O’Farrell, who lists common weaknesses of big companies, including “inferior products,” “a much slower corporate machine,” salespeople who are spread too thin, and lumbering legal departments that hold up contracts.
Once you identify these chinks in the armor, "fight them on their weaknesses," he advises, laying out several examples of how to do that, such as going head to head on product ("invite bake-offs, benchmarks, pilot projects, industry analyst briefings, anything to demonstrate your product superiority"), getting products and new features out and sold faster, and leveraging the knowledge and agility of your sales and legal departments.
Consider a Strategic Alliance
Sure, the opponent is a gorilla, but maybe you can get a gorilla fighting on your side as well. “Maybe it's time for a distribution deal with their biggest competitor,” suggests O’Farrell. “What other gorilla is the archenemy of the gorilla that just entered your market and wants to strike back? Can you get a deal that allows you to leverage Gorilla #2's PR, marketing, sales, brand, and customer relationships?”
Rally the Troops
Did you ever work at a behemoth of a company back in the day? Probably you did. But you left, right? Why?
As an entrepreneur, you’re no doubt keenly aware of the differences between working on a small, passionate team and slaving away in a corporate machine. One often engenders passion, loyalty, and creativity. The other engenders frustration and flagging motivation. Or to put it another way, your troops are likely to be true believers. Theirs are likely to be fickle mercenaries. Use that fact to your advantage--as warriors have for millennia.
"Use the big competitor's market entry to rally and reenergize the company to win. There's nothing like a clear high-profile enemy to unite and motivate people, and with a good plan and a motivated team, you'll beat a larger competitor," says O’Farrell.
Hungry for more advice on how to tackle your terrifyingly large new competitor? O’Farrell is only one of the folks offering advice on Quora. Check out the post for lots of other tips and suggestions.