DataFox Sector and Company Insights Competition Archive Welcome to the DataFox Blog

Keep Your Friends Close, and Your Competitors Closer

It happens every time. An entrepreneur embarks on a roller-coaster journey to solve a problem that they have a unique insight into, only to find themselves surrounded by competitors overnight. It seems like every week, the entrepreneur comes across a news article about a company in the exact same space, or a friend sends them an email with the subject line “You’ve probably seen this already…” containing a link to another competitor. It can be draining and demotivating!

So should every entrepreneur ignore their competition? No. But they should be militant about separating the signal from the noise.

Be Non-Consensus, But Stay Informed

The problem with paying too much attention to your competitors is that it might tempt you to copy aspects of their product, at the expense of your unique ideas. It’s like watching the car next to you too closely while driving - you’re bound to leave your lane and veer into them. Don’t let your competition stymie your creative juices. Andy Rachleff, my professor at Stanford, taught me that the startups that win big are those that have contrarian ideas that turn out to be “right”. If your ideas are consensus, the market opportunity can’t be that big, even if you’re right.

Drew Houston, founder and CEO of Dropbox, was contrarian and right. He focused on the consumer while others built for the enterprise. Critics said consumers wouldn’t have a willingness to pay. When he started Dropbox in 2007 he quickly encountered competitors coming at a similar problem from different angles, including: SugarSync (founded 2004), Box (2005), and Bitcasa (2011). This didn’t faze him, and Dropbox is now a 300 person company, last valued at $4bn (and that was almost two years ago).

Having said that, it does behoove entrepreneurs to know what their competitors are up to, and Houston undoubtedly navigated certain roadblocks using insights from his competition.

Don’t Ignore Your Competitors, Learn From Them

Founding a company is a learning process. The odds strongly suggest that our first inclinations are wrong, and that we need to iterate and pivot to find product-market fit. It’s therefore inevitable that startups in new markets develop best practices over time. What kinds of keywords can I use to source traffic through Google AdWords? Should I offer a free trial period for my product? Will social media get me paying customers? Do I need to hire a sales rep? It pays to know what my competitors are doing; I can avoid certain pitfalls without compromising my creativity.

Having competitors tends to scare founders more than necessary. Ideas are often overvalued - and execution is a far greater determinant of a company’s success. As renowned startup bloggers Mark Suster and Brad Feld attest, knowing our competition makes us appear informed and aware in front of investors, employees, potential hires, customers, and other stakeholders. If anything, having competitors is a sign of market validation, and helps us win over customers and beat inertia against our innovation.

Internally, awareness of your competition gives your employees confidence and it can serve for a powerful rallying cry. Slight paranoia is fine and can actually drive you to do better.

Separating the Signal From the Noise

What, then, should an entrepreneur watch for, and what should he or she ignore?

Above all, be wary of your competitors’ own descriptions of how they’re doing… blog posts, their “About” page, their CrunchBase profile - exaggeration is inevitable. Instead, identify a company’s actual business decisions, and qualitative as well as quantitative indicators of traction they’re getting as a result.

For example, inspect a company’s metadata to see what keywords they’re trying to get picked up for. Sign up as a customer and take screenshots of their onboarding funnel; what does the product cost and at which point do you get automated or human outreach from the company? Regress your own metadata and keywords against those of other companies - who are you most similar to?

To get a sense of a company’s growth, blend together publicly available metrics - some qualitative and some quantitative - such as the number and type of job openings, the size of their sales force, their M&A activity, their Alexa rank, and any capital raises (how much, how often, and from whom?).

Let DataFox Replace Your Spreadsheets

After collecting all that data, the key challenge is to distill it all and stay up to date. This is what we’re trying to solve for at DataFox. We’re replacing the Excel or Google Spreadsheet which for Houston could have looked something like this:


DataFox allows you to add your competitors to a watchlist, discover other competitors or companies with relevant products, and be notified when big changes (positive or negative) occur at any of those companies.

If Drew Houston used DataFox to track his competition, his watchlist might look something like this:

At DataFox we admire action-oriented entrepreneurs; founders with “maker” mentalities. We’ve learned a lot from our own competition, and saved valuable time that would have otherwise been wasted reinventing the wheel. Meanwhile, we’re sticking to our own product vision, and fostering a team culture that respects our competitors with a small but healthy dose of paranoia. Using our tool, we hope our team and many others can stay abreast of what’s going on around them, without running the risk of veering out of the fast lane.