Competitive Research for Startups

Competitive research is an essential early task in launching any startup. This article will tell you how to do it.

You’ll learn about five web sites that are your best source of competitive insight about new web startups. Chances are, you’ll want to bookmark these sites and add them to your collection of essential resources. But first, let’s consider why competitive research is important to any startup.

Why Do Competitive Research?

Billboard in Cienfuegos, Cuba (credit: Alice Kehoe)

Conventional wisdom suggests that you should do competitive research for two reasons. First, as part of your business plan, to show your investors you’ve considered risks of competition and are justified in anticipating success. Second, by looking at what others are doing, you’ll refine your mission, your market positioning, and your product’s feature set. But there’s a third reason to do competitive research. One that’s more important than the others. A reason that is so important, you must do it as early as possible in your planning.

If you’re going to launch a new business, you need to find similar established businesses. Here’s why.

If you can find an existing business that others know about, it’ll be easier for others to grasp your idea without seeing it fully deployed. Whether investors, business partners, or anyone else, it’s easier to explain what you want to do if you’ve got a common reference point. Are you launching an online auction site for the produce industry? Tell them, “It’s eBay for truckloads of tomatoes.” Find a way to define your objective by describing it in contrast to others.

The best reason for doing competitive research is to make it easier to describe your project to other people.

How Special Are You?

Here’s what’s difficult. Most people want to be special. How about your business concept? Is it totally unique and special? If it is, you’ve got a problem. Either you haven’t done your research to find similar businesses. Or your business concept is truly unique, which means it’s going to be very difficult to explain and market. Ideally, your business concept is sufficiently similar to existing businesses that people will easily recognize it. And unique enough that it is defined by contrast with others. If you can’t find anyone doing something like you, look harder. Or else you might be in trouble.

How To Do Competitive Research

If you’ve already identified a well-known business that is similar to yours, you’ve got a head start. If not, you’ve got to do preliminary research. Start with keyword research. Define your keyword universe (see my article How To Do Keyword Research). Use Google to find related sites. As my article suggests, use SpyFu to see if any companies are advertising with the keywords that relate to your business.

Once you’ve found one or two possibly similar companies, try searching the following databases of startups. These are the sites that provide a definitive index of all the startups that are launched or recently funded (and some that are still in pre-launch, as well!).

CrunchBase

If you’re launching a web startup, get serious and check CrunchBase. It’s a project run under the wings of the TechCrunch blog, which is the closest thing to a trade magazine (or gossip column) for the web startup industry. CrunchBase is not complete (the newest and unfunded startups are not represented) but it’s got great profiles of all the web startups that have received significant venture capital funding.

The best part is the CrunchBase “Competitors” coverage (in the lower left corner of any company profile). Find the profile of any company you know about and you’ll find all the similar companies that have received venture funding. With each CrunchBase profile, you may find a different set of competitors. Browse them all to see how the CrunchBase contributors view the competitive environment.

YouNoodle

Like wine and cheese, CrunchBase and YouNoodle make a good pairing (CrunchBase displays charts taken from YouNoodle but go directly to YouNoodle for a full profile).

Don’t get distracted by the YouNoodle Startup Predictor. It’s just a fun game that claims to evaluate any startup’s chance of success (don’t worry if your startup scores poorly).

The real value is the YouNoodle database of early-stage startups. YouNoodle’s database is the outgrowth of its collaboration with university entrepreneurship clubs and competitions (YouNoodle offers tools to manage business competitions, events, mailing lists and startup community development for various entrepreneurship organizations). It’s a good database of startups that have received support from established funds and mentorship organizations.

YouNoodle is easy to use. Enter your keywords into the YouNoodle “Search” feature to find businesses similar to yours.

ChubbyBrain

ChubbyBrain is a “crowdsourced” database of startups. The project was initiated by a group of analysts at a large financial services company. They’ve said they want “to democratize startup and investor information to make it more widely available.” It relies on the enthusiasm of volunteers, so it’s uneven and can be idiosyncratic. But (as of February 2009) ChubbyBrain claims its user-editable database contains over 13,000 startups and over 900 investors (VCs, angel investment groups, corporate venture groups and individuals).

You can use the ChubbyBrain Advanced Search to search for a company. Or just search by tags (like “music”). You won’t find every startup but you may find some interesting ones you don’t know about, plus commentary by volunteer editors.

TradeVibes

TradeVibes is another “crowdsourced” database of startups. You’ll find spammy and adolescent garbage mixed in with the real companies because TradeVibes relies on volunteer submissions, but the real startups are there and it can be a gold mine for competitive research.

Use the TradeVibes Advanced Search feature to search their tags for your keywords. When you find a company profile, take a look at the “Similar Companies” box (middle of the right sidebar). There’s a link to “View All Similar” that will display “Competitors”, “Related Companies”, and allow you to compare the web traffic of any competitors.

KillerStartups

KillerStartups is a blog that reviews a dozen or more web startups a day. That’s thousands a year (yes, there are that many startups!). Many of the startups are of the unfunded, kitchen-table variety. You’ll see many startups that are failed, abandoned or gathering cobwebs. You might find it depressing to see how many valiant attempts never gained traction. But you may learn something from what’s there.

To do your competitive research using KillerStartups, go to the KillerStartups Tags page and enter your keywords for a tag search.

Dig Deeper

The services described above will help you find similar or related startups. You may want to dig deeper and find the names of people who work for your competitors, their web traffic stats, and what people are saying about them.

There’s always Google. But start with specialized searchable databases such as Domain Tools for domain registration (“whois”) information. LinkedIn for resumes of principals and employees. And check Quantcast, Compete.com, and Alexa for web traffic estimates (or use AttentionMeter.com for an all-in-one view of web traffic estimates). Oh, and don’t forget to search Twitter. It’s your best source for genuine comments and current opinion.

See You Later, Aggregator

You’ll want to know about three services that aim to aggregate all available business information for any web company. These services pull together business profiles, news, financials, web analytics, social footprint, marketing strategies, and other business information from a variety of online databases. Quarkbase was one of the first of this kind. KillerStartups has its Dataopedia, a very similar information aggregator. BizShark is a more recent automated information aggregator. Unlike wiki-style sites that rely on internal databases and human volunteers, Quarkbase, Dataopedia, and Bizshark pull in data from across the web, so some of it is useful and some is downright irrelevant.

These sites are worth a quick check. BizShark prominently displays competitors for any company it knows about. Quarkbase lists “Similar and Related Sites.” And Dataopedia (much like Quarkbase) also lists “Similar and Related Sites.”

What To Do Next?

With the tips offered here, you should have no problem identifying your closest competitors. There’s more to do, though. It’s up to you to analyze the competitive space and see how you will differentiate and innovate. Don’t be arrogant; exercise humility and make the assumption that these competitors are at least as smart as you and that they know what they are doing. Don’t just dismiss them. These are companies that have poured resources into something very similar to what you want to do; make an effort to learn from them.

When you’ve completed your competitive analysis, you’ll be well-prepared to write a business plan, make an investor pitch, and guide your startup to launch.

Want to help others with a suggestion? Or let me know this was useful? Leave a comment. Thanks!

Finding a Technical Partner for Your Startup

Today I received an inquiry from a student at an Ivy League university who wants to launch a web startup. Maybe you’re facing the same challenges as James; he’s got a great idea but doesn’t know where to find a technologist to help build it. And James doesn’t have any money to pay for development. I gave him some advice; maybe you’ll find it useful, too.

Hi Daniel,

I recently ran across your blog. I found your suggestions in the article “Startup Mistakes: The Partnership Gone Sour” especially useful.

I have a related dilemma. I have an interesting project idea, but it requires seasoned programming skills. None of my friends and I are able to do this ourselves.

I’ve managed to contact two serial entrepreneurs by email, give them the pitch, and both of them agreed with me but commented that it would be a challenge to set up. I’ve also contacted my university’s entrepreneurial director who also said it was a feasible and interesting idea. Then, through SCORE (the nonprofit association of volunteer business consultants), I contacted a professor with experience in a related field and he liked it as well.

So you see my dilemma. How can I go about looking for a (very) good programmer willing to do this as sweat equity? Which avenues would you suggest I should take?

Best regards,
James

How to Find a Technical Partner

Here’s what I wrote in reply to James’s query:

What To Do When There’s No Venture Capital

It’s agreed. We’re in the biggest economic downturn we’ve ever seen. So why would anyone want to launch a startup?

1937 photo by Dorothea Lange

Maybe because a downturn is the best time to launch a startup (see “6 Reasons Why This Economy Is Good For Startups”). Or maybe, “Why not?”, because what else are you doing that’s truly worthwhile? Or maybe, finally, because startups are the only way to create prosperity when established businesses are failing.

Whatever your motivation to launch, some of the rules for success just changed (along with everything else that got broken with the collapse of 2008).

How to Work with Developers: Avoiding Stockholm Syndrome

Stockholm syndrome

Have you experienced “Stockholm syndrome” in working with a developer? That’s the psychological condition where a victim becomes loyal to a powerful abuser, to the point of defending them despite obvious danger. It seems crazy to say an entrepreneur might act like that after hiring someone to do programming or web design, but I’ve seen it, and I think it’s more common than you might think.

What are the tell-tale signs and what can go wrong? Read on.

Startup Mistakes: The Partnership Gone Sour

What makes a startup fail? I’ve been collecting startup horror stories, hoping to share some lessons learned.

This week brought a story with three classic elements of a startup “tale from the crypt:” technology, money, and people. This time it was technology (with attendant uncertainty and doubt), money (lack of it), and people (the dark side: their personalities). I hesitate to tell this chilling tale because it’s not over (and may yet have a positive outcome). But hearing it may save readers from a similar fate.

Startup Advice: Should You Attend TechCrunch50?

What’s the value of the TechCrunch50 conference for an entrepreneur? I attended the 2008 show and here’s my thoughts.

If you don’t know, TechCrunch is the most active publication focused on investment in the web startup community. In an earlier century, it would have been the leading trade magazine for Internet entrepreneurs and investors (that is, it would have been Red Herring). It’s 2008 now, so it’s a blog. The publisher of TechCrunch, Michael Arrington, has organized a series of events to showcase outstanding web startups, with the collaboration of the Internet entrepreneur Jason Calacanis. The two day event in September 2007 was named TechCrunch40; the three day event in September 2008 was named TechCrunch50. In 2009, TechCrunch50 will be held September 7th to 10th.

Web Chief Technology Officer (CTO) Job Description

A web startup client recently asked me for a CTO job description to paste into a business plan. Eager to oblige, I googled “Web CTO job description” and “web chief technology officer” anticipating it would take me five minutes to find what my client wanted. You’d think there would be a adequate boilerplate job description somewhere on the Net. But no, there’s no sharable, standard description of the work we do to run a web startup.

Here, then, is my first draft of a job description for the work I’ve done as a chief technology officer for web startups. You can find the entire article here: Job Description for a Web Chief Technology Officer (CTO).

After you’ve read the article, if you have anything to add or refine, you can leave a post, and I’ll update the article.

Startup Advice: When to Use a Consulting CTO

There are not many to be found. He or she might call himself a “consulting CTO,” “freelance CTO,” “on-demand CTO,” “CTO on call,” “CTO for hire,” or just a “technology strategy advisor.” Most likely, this is a person who is a serial entrepreneur and was the chief technology officer for two or more web startups. If you find him, he’s gold, and not only because of his knowledge and experience. He’s valuable because he will work on your project on a short-term basis.

In this article, you’ll find out how a consulting CTO can help you, when to use one, and how to find the right person.