Ryan Rutan: Welcome back to another episode of the startup therapy podcast. This is Ryan, Rutan joined as always by Wil Schroder, my friend and the Ceo and founder of startups dot com will we have been doing this for a long while, I think that's well established at this point, we've run a lot of different businesses and we currently run a bunch of different businesses. How often in our history have we thought, oh my God, here comes a competitor. Something just happened. They raise funds, they just entered the market, you know, they branched out horizontally in our space, they're going to eat our lunch. How often has that happened?

Wil Schroter: Never in the funny thing, it's not because we're that good. I again, I would love to say this with this incredible kind of like, like fervor to say never. No one has stopped us, right? We are all powerful, Like we're good, right? We're good at what we do. But There has been so much competition throughout our careers, you know, like within the last 10 years of startups, there's been a million people and a million different things that they're doing. but also with all the other businesses that we've done before, there's always been this supposed apocalyptic moment where this one competitor is show they show up and maybe they're funded or maybe they're going to do something and it's just end of days for us. We might as well just pack up the tents and leave and go do something else in every single time, like Clockwork. It never actually happens. Like we always assume it's going to happen. It never actually happens. And I'm talking across boy, it must be Ryan now that I think about it. 20 different businesses, 20 different industries, you name it in every single time, no matter what the competitors were, whatever the situation was, just kind of, nothing really happened. And what I'd love to talk about today is what competition actually means to us. The amount of stress it puts on us, you know, as founders And what actually happens. How do we stay focused around all of this and kind of think through it. All right. So before we get into this next topic, I just want to let you know what we talk about here is like 1% of the conversation, you know, really this conversation is going on all day long online at groups dot startups dot com. Where Ryan and I pretty much talk endlessly with founders about every one of these topics. So if by the end of this discussion, you like the topic and you want to dig into it a little bit more with Ryan and I just had two groups startups dot com and we'll pick it up from there.

Ryan Rutan: Yeah, this is another one of those problems and there's so many founder problems that fall into this category of the, the problem casts a much longer shadow than than the actual problem, right? That we, we see these things magnified and huge and awful and we assume that there's a netflix for our blockbuster.

Wil Schroter: There just isn't right,

Ryan Rutan: there just isn't like there's so few of those, it actually took me a while to pull a reference and I was like, okay, I need somebody I can talk about here, who is it netflix and blockbuster, right? It's like one of the only I can think of, I mean I guess lift is definitely less relevant. Um, but they're still out there and they're still doing the million dollar public companies, right? So yeah, and I actually think lift might actually be making money at this point. I'm not sure that I was doing that yet.

Wil Schroter: Yeah, the way I see it is the problem for all of us in how we view competition, how we process competition is that if we process it the wrong way as founders and certainly how we process that with our team has real impact because this is how we respond. It's, it's how creates all this, this stress and anxiety and it gives us the thing where we, we get so distracted with the minimal amount of time that we have to execute to begin with. That's a problem if we create a whole bunch of anxiety that we're taking to bed with us every night and it stresses out now, where's our body down and it makes us less of a capable founder, that's a problem. So we need to figure out what to do about it when you see the competition, we need to think about how to think about it and again, Ryan you and I have had the benefit of having been through this so many times where we freaked out every time and then lo and behold, nothing

Ryan Rutan: happened, nothing happens

Wil Schroter: every time. Right? It wasn't again

Ryan Rutan: to your point, it wasn't because we, we laid out some strategic plan or we figured out how we could outmaneuver the competition. We just kept doing our thing. They kept doing theirs turns out nothing much occurred between the two of us. Right? You just stay your course,

Wil Schroter: the first mistakes we made, I made etcetera. I was thinking that every time there was a new entrant, they were going to be this monopolistic entrance that that if if they won, it had to directly mean that we lost. Well, hey

Ryan Rutan: look man, they showed up with a binder on it that said secret formula for

Wil Schroter: victory. So, and we're

Ryan Rutan: sure that they had all the answers that we lacked and somehow despite the fact that they were coming out of the gate cold and we have been doing this for several years. We were sure they were going to be the end of us. Right? That right? It's funny like that. It's, I guess it's, it's some version of the grass is always greener on the other side, right? The founders always smarter on the other team. I don't know what it is. Um, you know, we would think we had a head start. We had, you know, years and years of experience, we had multiple business units and yet each time when he would show up it was like gloom and doom. We were so scared, right? And without any reason, right? Nothing, nothing came to pass as a result.

Wil Schroter: I think it started off, I think we set ourselves off on the wrong course because we made the wrong assumptions. One of the biggest assumptions I think we all make as founders is that there's this winner take all mentality, that's one person, right? If they come in, it's not that they get some of the businesses, apparently they get all of it and no one else can compete. Now there are cases

Ryan Rutan: where that's happened

Wil Schroter: right, if you really look at netflix and what happened to blockbuster, but that had more to do with the timing of an entire industry that had less to do about. It wasn't like netflix opened up another retail store and somehow beat blockbuster, correct? They were heading in a completely different direction that entire industry was going away. Yeah,

Ryan Rutan: it wasn't just an iteration, it was a full innovative leap that that led to that

Wil Schroter: if you look at at facebook in the massive dominance they've had, particularly in the advertising industry, but of course in the social networking industry, you look at that and say okay, but there's also twitter, there's also linkedin, there's, I mean there's tons of other social networks that are all billion dollar companies. Right? Even in that particular case, it's not the winner take all kind of mentality. And I would argue that's one of the most asymmetric, you know, victories that I could probably point to. And so in every case, the first thing I think we need to unpack and kind of think about a little bit is how often does the winner take? All right in and how many cases are there? Well, that's just not the case. When was the last

Ryan Rutan: time you went to the grocery store? Well, how many kinds of ketchup you can

Wil Schroter: buy how

Ryan Rutan: many kinds of mustard, How many kinds of anything that you can pick up off the shelves because turns out there are differences in consumer preference and choice. Yeah, I mean, again, like there are so, so very few examples that we can pull where things actually got to this monopolistic level by the way, We have laws that help to prevent this stuff. Um, but even without those, it's just not something that occurs in nature very often because of things like consumer preference and other competitive forces, changing markets, all of these things. Um, and to your point, like it just, it never gets to that zero sum moment where it's like, okay, we've won all the business every bit of it. It's all ours now. It just doesn't happen.

Wil Schroter: I remember early on when I was running a business called swat police dot com, it was just online leasing marketplace and I remember we had a competitor that came on board and it's called lease trader dot com. Who knows if either of those businesses are still around long since gone in my career. But I remember as soon as I saw them, come on, I was like, Oh my God, this is gonna be a huge problem for us. And then around the same time, I'll never forget this. This is like, this is a long time. It was like a circuit 2001 ISH. I saw people posting on something like a precursor to what was going to be up work later that they would like for $500 to run a project to copy the exact template of swat police and give it just a slightly

Ryan Rutan: different domain.

Wil Schroter: And I was like, oh no, like all these companies are just going to copy and paste my, my idea and there's gonna be a million competitors where we run out of town, nothing happened. Everyone tried, everyone failed, not because we are so amazing because it's just not that easy. Just don't, don't copy and paste the business model. One of the things that I wildly overestimated in this winner take all mentality was that one, there was an all to take that there that somebody had the option to take all number two that the team that I was competing with. It was so amazing that they were going to run circles around us. But # three and the most important that the customer really thought of it that way, that the customer is saying, I actually only want one product option and that's it.

Ryan Rutan: Yeah. Now tell me, well, just to go back because there are, there are times where this can make a little more sense to me, right in terms of our reaction as founders, I'm not saying it's, it's fully valid, but there are times where it makes a little more sense. So with the least trader, the competition that came in who you were sure was going to be the end of

Wil Schroter: days.

Ryan Rutan: Yeah. Were they? Were they a, a larger conglomerate, some sort were they part of the autotrader, RV trader boat trader network?

Wil Schroter: They were so they were just

Ryan Rutan: out of nowhere, some, some other folks out of their garage just doing their thing. So no reason to believe this. It wasn't like Google said, hey, we're going to start allowing you to reassign your leases. Um, and we're gonna make it, you know, the core function on our site. Right? That would be a little more scary.

Wil Schroter: But here, here's why I thought it was gonna be a problem because I thought of it like this. I'm in such a niche industry At such an early time in the formative years of the Internet, believe it or not, even back then, 20 years ago, I recognize that we are still in the formative years and I'm kind of like look there's only so many people that are gonna want to do this online and they are going to find our site that we're gonna acquire that if some idiot comes in and takes up half of our business. Well my union Economics were based on having all the business and so now if I only make half as much money, I'm screwed. A funny thing happened. Nothing changed our economics didn't change our traffic, didn't change our revenue didn't change. Nothing changed. Fast forward 20 years later different business. Zeroual.com. Ryan. How many people have started a virtual assistant business? Like all of them.

Ryan Rutan: Oh man, there are quite literally thousands and thousands of them and they range from, you know, the competitors who are maybe similar size and shape to to virtual to individual assistants who launch what looks like a business where there's just one person behind me. There are thousands and thousands and thousands.

Wil Schroter: Not a day goes by that. I don't get an unsolicited message on linkedin asking me if I would like to hire a virtual assistant. That's pretty funny considering we own that business. I got an email this

Ryan Rutan: morning. Will that says hi sir. I researched your profile. Very good and I can see that you would

Wil Schroter: need

Ryan Rutan: a virtual assistant. I said if you had researched my profile. Very good. You would have seen that I own a virtual assisting

Wil Schroter: company. Nice

Ryan Rutan: try. I can see that you're very good at the research. It's

Wil Schroter: amazing. And so in all that time where every single person you can fathom has joined into the fray of that business. Everyone from up work at at one level to how many countless Ai versions of virtual assistants have come out. Like there's been so many, they've all come and gone. They're all supposed to completely destroy our business. None of them made a lick of difference. Our business has been exactly the same growth trajectory, the same margins, the same everything during this entire time. No matter how many people entered the french, what we kept thinking was someone was going to come up with the netflix to our blockbuster and we'd be screwed. We'd be all done. But we didn't think about was our customers didn't necessarily care about that. Our customers wanted to buy our product, not our competitors. And I think we should kinda stick on that point for a second. They show up and they say, hey, I love the virtual product. I love the price point. I love the service etcetera. I'm good a competitor comes out and it's an Ai version that's going to do all your schedule. It doesn't actually work, but it sounds cool, right. Our competitor. I'm sorry, our customers don't just flock immediately. They just dropped their ship and I've all heard of this? I'm all changing our business just to totally evaporates now, has it happened to somebody? Probably. But generally speaking, that's not the way the market works. The market works whereby another new entrant comes in. Some new customers who are generally new to the industry, evaluate them maybe by maybe stick around and all the reasons they're not going to be around for the long term, come to the surface and we sit on the sideline and just watch it all happen,

Ryan Rutan: happens over everything. I actually remember a getting a message from one of our assistants saying that their client had asked them to research some of these ai Assistance and they want to know what to do. Should I do that? I was like, yeah, of course. You know, here here's the list of the ones I've already taken a look at. Um and none of them worked very well, but you know, I put together a list for them and you know, give them the pros and cons. Um and I think at the end she put together something like 12 options. Just to give you some sense for how many are out there. There were 12 options in this ai category. Uh And the client ID, I'm not using any of them because they didn't actually work there, all of their taglines at the same time, like why hire a human for something, a machine can do right, well, when you need something that a machine can't, which is still the vast majority of things that happened in the

Wil Schroter: world, so if you need to actually work, but but actually, that's the core of it though, yep, a ship product is still a ship product, and what we're saying is that we now have a ship product, Yes, then we should be concerned, but we don't have a ship products, we have a great product, so we should not be concerned. When I was worried about lease trader stealing all my business at Swat Police, I didn't consider that I had a really good product. It worked really well. I wasn't gonna lose just because the new entrants said they'll do it for 50% less if it doesn't work, who cares what you're charging the same thing, you know, with all the, the ai competitors, how many people have tried to recreate clarity that FM

Ryan Rutan: Oh my gosh, like we get people on there all the time, they will reach out to me as one of the, because I'm on there as an expert as well and they'll ask, hey, you know, we're starting this new platform, it's going to be so much better than clarity. Uh you should, you should join us over there and when point I, I point out, you know, I'm one of the principles of the company, so probably the wrong guy to ask to switch over um and I said, if you're so amazing, like, why are you out poaching other people's experts, so they shouldn't, they just be flocking there like should they just uh yeah I mean it's it's constant. I mean we'd probably see somebody trying this at least once a month that we're aware of, which is to say there's probably dozens more that we're not.

Wil Schroter: You know, by the way, I just want to mention if what we're talking about today sounds like the kind of discussion you wish you were having more often you actually can you know, we're online all day everyday working through exactly these types of topics with founders. Just like you so any question you would have or maybe some problem you just want to work through. We're here and we love this stuff and we're easy to find, you know, head over to groups dot startups dot com and let's just start talking and at first once again with this kind of broken mentality like oh ship you know this next companies that have come on. I remember one specifically um it was a company called Fountain and it was run by the guy that sold the company on blank actually sold the company to into it meant it was run by the the guy that started many great guy actually um and he started this company Fountain. And the idea was going to be that you could hire any kind of expert for like carpentry or you know uh anything you need anything and he had all this funding, you know this genius ai algorithm and all this stuff and he and I met up in san Francisco talk about our respective businesses. Now I have an odd thing, I often meet with competitors mainly because I think when you, when you get behind each other's business, you know and just talking person to person um you build a lot of respect for people and then I've got a lot of people that we compete with in different capacities and I'm just cool, you know, they're just they're just good people. Yes, we compete but we're good. Um and it's so funny because we sat down, we looked at what he was doing and looked at what I was doing and wreck man these things are going to compete. Head to head fountain doesn't exist anymore, right? They raised a bunch of money and by the way I'm not I'm not proud of that fact that just happens to you, what happened and they don't exist anymore. And all of that genius level of of investment in time they put into it evaporated and went to nothing right at the time I was like ship you know, we're we're in a lot of trouble, clarity is gonna get gonna get destroyed. What I didn't think about was what if they don't pull it off but what if you name it, another example that comes to mind, I think you may remember this one remember his benefits. Oh

Ryan Rutan: yes,

Wil Schroter: great. Now when I opened up with great holiday

Ryan Rutan: parties, they had great holiday parties,

Wil Schroter: great social benefits for those that aren't familiar was I believe if my horrible memory serves me right was the fastest growing HR benefits company. And I think at the time the idea was that they were going to give you um HR payroll services for free but get your benefits. Which

Ryan Rutan: was where the fact that the words like that, that the term HR was involved anywhere in the in in the entire thing at all is still amazing. Yeah.

Wil Schroter: And I remember this at the time, little company called Zen payroll. Now Gusto right, zen payroll was a fraction of the size And I remember his benefits just being like going 0 to 1000, right? And just having this amazing trajectory of all people would talk about was this amazing company. It was a total bait and switch. We tried to use them and if you remember like they ended up just charging us for the same stuff that was supposed to be for free, different discussion. But at the time they were a juggernaut, they had all the best investors. Again, one of the fastest growing companies in history. You name it, but now they are a footnote why? Because it turns out That even if you have all the right things, sometimes you also can't make it happen. Sometimes you make too big of promises right? Where you say, Oh my God, like you know, we're going to raise $500 million dollars for this or a billion dollars for this sort of massive evaluation and then you actually have to execute, have to pull it off and it turns out that's not very easy. I think part of our assumption is that just because this company said they're going to do what they claim they're going to do that, they can also do it, which over the long run is way easier said than done. And I think we just had the benefit of having seen it enough times, you know?

Ryan Rutan: Yeah, for sure. You know, and and we have, we've seen this over and over and over and over and over again. Um and we've even seen this in markets that we're going into, Right? So I think there's the other side of the coin, which is you, you may be looking at the market. Oftentimes I'll have, you know, people come to me and say, well, hey, look thinking about doing this, but there's, you know, there's some really strong competition. Okay, let's talk about the really strong competition one. How are you evaluating the really strong competition other than they already exist, which there is something to be said for that right? There is inertia. So are you going to be able to go and take all of their customers per our earlier discussion? Probably not. That's just not how that works. Do you need to also? Probably not. That's just not how that works. You can grow your own business your own niche through your own differentiation? Um And it's it's a different, it's a different issue, but I think it's still sail into this discussion to talk about when you're thinking about launching something, right? And you're seeing that there's competition in the market. That is not really a no fly zone, right? Doesn't mean you can't go do things right? I and and we see this a lot people like, Yeah, but I just got, you know, bad news. I was Googling like, this probably should have happened months ago, since we've been talking about this for a while, um I was Googling and I found out there's somebody who does exactly what we're going to do, and then it's always we break it down, like, well, let's let's let's break exactly into a couple of pieces. They do exactly what you're going to do. Um Are you running the company? Because if not, it's unlikely to be exactly what they're gonna do. And in so many cases, you know, they're they get so concerned and so worried about the fact that there's somebody already in the space. Um and then I'll bring a couple of examples and tell me, look, you know, do we references everyone smile, but do you think uh that you know that the early search engines are glad that they beat google to market, right. Do you think that Myspace was super happy that they launched before facebook? My guess is no right. It doesn't matter to your point execution is what really starts to matter here. Um, and if they had decided not to enter those markets simply because there was someone there, uh, we would have missed out on all this fun that we've had with these platforms for all these years. The other side of it, is that just because that there's somebody in that market, um, you know, you definitely don't want to take that as a do not fly zone because most businesses that work really well are incremental innovations on things that already exist. I think people are looking for this magic bullet where they're going to find a market pocket that just exists that no one has ever touched before, they're going to discover some lost tribe that just suddenly needs whatever it is that they have and they've never been serviced before in their entire lives. So very rare to find such a thing. Um, and you face really uphill adoption curves, right? If you innovate too much, if it's something so new that people are like, wow, I've never seen that before, you want to try like hell, no. Right? So this is just the way this goes. So when you see that there's a lack of competition in the market, to me that's as concerning or probably more concerning then when there is competition. If there's not competition at this day and age, there's probably a reason. Somebody's probably already figured out nobody wants to buy this ship it, Right? So don't take competition as a sign that you should halt in your tracks, whether it's coming at you as an existing business or whether you're heading at them as a new entrant to the market,

Wil Schroter: you should also expect to have competitors, right. Another entrant into the market isn't saying, well, I guess, you know, everybody's gonna buy their product in ours. Like you were saying, like when you go to the grocery store, there's not just one brand of anything, right? There's plenty of brands of everything. There's not just one brand of car as much as mr musk would like you to think otherwise there's tons of cars and they all have, right. They all have their own merits. The whole point is, if you're in a good market, if you're in the market that you care about, you should expect to have plenty of competitors and some of those competitors will actually bring ultimately customers to you because they'll attract people that you haven't reached out to, you haven't gotten to yet

Ryan Rutan: or give you ways to reach some of those, those customers, I just went through an exercise a couple of weeks ago with the founder who has a tool that's going to compete with some other fairly major tools that already out there and they were trying to figure out, well, how can we find out who wants to use this? And I said, well, you know, there's quite a bit of dissatisfaction within the incumbent tools? He says, yeah, but how do we find those people like, well, this is a, this is a tool that gets embedded into a website. So it's actually quite easy to see who's using the incumbent solution. They just go out and start, you know what, you know, there are plenty of tools will show you what code bases these things are built on, which of these sites have this stuff installed and just start scraping and you'll know who's using, which which of these sites is using your competitors tools and start to poke at some of that dissatisfaction. Right? So, your competition can actually be an inroads to uh, to customers at some point. Again, if you have a better solution.

Wil Schroter: Well, the other side of it, though, Ryan, is is that we keep assuming that the market is fixed based on how much of it we've penetrated, Right? So, so this is how big our businesses. So if another business comes in, clearly we've gotten all the, all the possible customers, right. No one else could find any customers that we haven't found. And what do you know, 1000 other businesses have gotten into the virtual assistant business and yet our business continues to grow. It's never gone backwards. And so you've got to wonder if that's the case then? Where did those customers come from? If we're so good at what we do, and we're so prolific in the, in the audience. How is it possible that that our business got uh, continued to grow instead of getting smaller, All these other people came in. It's because the market probably isn't a fraction as big as it needs to be, and those competitors are actually expanding the market for us, which generally is a good thing, which generally gives us an opportunity to expand our own business. It generally works for us.

Ryan Rutan: Yeah, particularly innovative markets. Again, so like if this is something where it's, it's relatively on the leading edge, right? So you're still at awareness with most people, right? They're not at a buying decision level, they're at awareness level. They need to understand, does this matter to me? Why does this matter to me? How will this help me? Um, and so generally speaking, you know, the more competitors in the market, the faster awareness gets built, the more people understand yes, I do need or want this thing, then it comes down to deciding which one. Right? So then then there is some competition, but again, like nobody has, Well, if somebody does, you can, you can feel free to email me at Ryan at startups dot com. If they have the secret magic bullet for reaching the entire market at once with your messaging, or if one of your competitors does please please let me know, I'll gladly reach out and I'll share the secret with you after I find out. Um, but I don't see that happen very often. So yeah, not really as much of an issue as we make it out to be.

Wil Schroter: I think where this blows up for us as founders is, we're distracted and we talked about the top of the episode where we get to a point where we're thinking, oh ship, we need to run all these different directions and kind of take our eye off the ball when, if anything, having competition means we got to stay in our lane. We need to be more focused on. When I say we write, I don't just mean you and I as founders, I mean our whole team, if there was ever a time where we need to make sure, hey, everybody stay focused right now, having competition enter the fray is exactly that time to remind people to write that, that this isn't just about a competitor coming on, it's about us saying we've got to build a great product and we don't just have to feature, compete with them. Our product has to be amazing. No one hops in a car and says, well the other car has better features. But this thing is a total piece of ship and I'm gonna drive it anyway. Well, really any car, I guess I, I grew up, but short of that, we look at it and say, Hey, I like this car for what it does well. So I'm going to buy it. Yes, there's a competitor that has other stuff, but I'm going to buy this if it's the best at what I think it should do, Right? And for us as founders, we need to maintain that focus at a time when it's the hardest to do because someone else just raised $20 million Oh ship we have to be able to compete at that level over screwed. We don't actually don't freaking focus there. There are. So,

Ryan Rutan: I mean like we think of these things as direct competition, Right? And so we'll circle back to something you said a few minutes ago, which is that they're often reaching people that we've not reached at all. So they're not directly competing. Right? If they start calling all of our customers now, we're directly competing. But there's so few markets in the world where you really have well known incumbents to the point where they're all household names and they're all directly competing and there any one of them is taking the majority of the business. It just doesn't happen very often. Right? Even if you look at what can, will we, will we allow a sports reference here? I try not to use them, but let me, let me do this just for a minute.

Wil Schroter: So please,

Ryan Rutan: even if we're in a directly competitive environment. Let's just use the the NFL, right? We're in a directly competitor, It's one I don't know very much about honestly, but the NFL directly competitive environment, right? Even when you have direct competition and how the competition performs is directly relevant to your performance. They still spend a fraction of their time studying the competition versus the amount of time they spend working on their own product. In this case, their players, their plays, their lineups, all of that stuff. Right? So yes, you may adjust to competition and this is in a situation where that is the product, your ability to compete with them is the product and this just is so much further on the spectrum than any startup is ever going to face in terms of direct competition.

Wil Schroter: Even in that case,

Ryan Rutan: they're only spending a fraction of their time on what the competition is doing or what the competition is going to do most of their time is spent honing their own product. And as founders, we have to do the same, we have to

Wil Schroter: write, I think what we need to do again as founders, but as the entire team, we need to get to a point in the business, we're aware of competition. We keep tabs on competition just to understand what else is out there, but we make it a priority within the business, within our own mindset to say, I'm gonna pay attention for 1% of my time, but for the rest of the time, I'm zoning out, I'm focusing on my customer on my product and that's all I care about because I want to be the best at what I'm going to do. I don't care what other people are doing if I'm doing a shitty job with my product, but if I'm focused and I keep in front of what my customer wants and I keep in front of what I care about, I'm gonna win said

Ryan Rutan: differently if you know everything about your competition and you understand them inside and out and you spend no time on your own

Wil Schroter: product, you're

Ryan Rutan: not gonna win either, right? So that becomes a self fulfilling prophecy where you spend so much time focused on them, winning that, that's exactly what happens.

Wil Schroter: Alright, so that was fun, but let's actually keep this conversation going. You've heard what we think about this, but you know, Ryan and I would really like to hear what you think and we're online, like all day long, pretty much talking about every startup topic you could think of from fundraising, the customer acquisition to just really have to get all of this crazy startup stuff out of your head. And there's tons of other founders, just like you, they're weighing in on these topics, so you'll get a chance to just hang out and meet some really smart founders were also super, super easy to find, you head over to groups dot startups dot com and let Ryan and I hear what's on your mind, Let's get to know each other a little bit and let's just start having more of these conversations.