Loving the Underdog! PART1: The 800lb gorilla

I recently helped organise a startup competition in our City. There were five startups pitching.  Several of them are attempting to take on much, much larger entrenched competitors. It seems like madness! They’re competitors are stronger, have more resources and many more customers. But, sooner or later, a startup has no choice. They have to fight the 800 pound gorilla!! Despite the odds, startups can and do beat their massive competitors.

You’ve gotta Love the startup underdog’s sheer audaciousness and courage against the odds!

If a startup is lucky enough to find a gap in the market, they will attract copy-cats. Initially most of them will be other startups. Mostly there’s little point in startups competing with startups, as they both have nothing to loose. Startups are quick to change, nimble and have a low-cost base. It’s almost best to ignore other startups playing in the same field.

With traction and time other copy-cats will be big powerful competitors. With customers and revenue streams, larger companies have the luxury of time. They have power. Startups don’t! If startups persistently compete against big players they will either be acquired or squeezed out of the market. Of course, if funded, the VC’s love the ‘acquire now’ option.

Just today I see startup Slideshare is taking dominant Cisco and Citrix head in the on-line meetings market. At our startup competition the winner Go-Dine is competing against the very well established Opentable. And Annot8, one of the finalists,  is completing against Google!! My website performance monitoring startup is also increasing competing against our much larger competitors.

It seems like a no win situation!!

So how on earth can a startup win against the 800lb gorilla..?

  1. Find their weak points – Often large dominate market leaders become bloated with the fat of large profits. They have not explored new channels or markets. This is when a nimble startup can attack!
  2. Go niche – Much large competitors can be avoided by going deep into a niche market where the play is too small for a large company.
  3. Attack their profits - There is probably a product or service where the 800lb gorilla is making their fattest profits. Attack this treasure chest and weaken their position.
  4. Forget them – It’s easy to get obsessed by the competition. Focus on the customers and their needs, not what the competitors are doing.
  5. Out innovate them – This is making the most of their weak points. Re-define the market! It’s a challenge without significant resources i.e. major funding but it can be done. And when it is, the profit are huge. VC’s love this approach.

Startups have little choice but to stand and flight using their limited resources.  The founders can’t just tuck tail and run when they they’re up against a large competitor. Startups can and do win against the 8o0lb gorilla’s. Just look at Mint v’s Intuit or Dyson v’s Hoover, the list goes on and on. This is the way of our evolutionary economics system. Startups change everything!!

Next post in ‘Loving the Underdog’ series: PART2 – City of creation

Here’s a few good posts on startups v’s bigger competitors:

 

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6 Responses to “Loving the Underdog! PART1: The 800lb gorilla”

  1. Greg Simpson Says:

    Great points Nick. Particularly about the VC element. Too many founders are obsessed with the “dilution” effect of equity finance deals but in reality, especially now and especially within the tech sector, this sort of funding is vital to understand and be open to if high growth is to follow.

  2. Nick Barker Says:

    Hey Greg!

    Thanks for the comment. Agreed – tech startup need big bucks investments to take on the established competitors. And they say ‘its better to have a small slice of a large pie than a big slice of a small pie’.

    However beware of diluting too early as well. Remember that the average exit founder equity share in ‘The Valley’ is 5-7%!! Still, if that’s a $1b exit its an aweful lot of money!!

  3. Tweets that mention Loving the Underdog! PART1: The 800lb gorilla « Nickpoint -- Topsy.com Says:

    [...] This post was mentioned on Twitter by Nick Barker, Phil Wheldon. Phil Wheldon said: RT @nickpoint: Did you see – my 1st in a series of posts about: 'Loving the Underdog!' – PART1: The 800lb gorilla http://goo.gl/aMI6i [...]

  4. Loving the Underdog! PART2 – City of creation « Nickpoint Says:

    [...] This is my follow-up post to Loving the Underdog! PART1 – The 800lb gorilla [...]

  5. Loving the Underdog! PART3 – Why we Love ‘em « Nickpoint Says:

    [...] is the final part to my Loving the Underdog blog series, with previous posts: PART1: The 800lb gorilla and PART2 – City of [...]

  6. Loving the Underdog! « Invest in Nottingham blog Says:

    [...] is the final part to my Loving the Underdog blog series, with previous posts: PART1: The 800lb gorilla and PART2 – City of [...]

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