How To Compete With Amazon and Google

like how the hell does anyone compete with like one of the greatest companies of all time on the thing that they're experts at right and it turned out that just like picking the right avocado was too big of a challenge for like this trillion dollar company [Music] hello this is michael with harj and brad and welcome to the partner lounge hey so as yc partners we work with hundreds of startups and we find ourselves repeating the same advice something seems pretty obvious over and over again and we found ourselves wondering why before covid we'd often gather together in the partner lounge at the yc office to try to figure out why this was the case and how we could help startups figure it out faster and today we're going to talk about competitors hard you want to set this one up yes you know one thing i've noticed is that i'll do office hours with a company that's doing great and they'll be to psych themselves out because they'll just want to talk about how worried they are about a competitor and it will be um you know a big company another startup um and they're just like it's like they've lost their excitement for their company and replaced it with fear and we end up talking about this a bunch right like what's going on like why is this company that's doing well suddenly feel like they're failing well it's because their competitor raised five million dollars argent we all know whichever company raises five million dollars first wins right isn't that how this works what do you think brad what what lies do you think or or how do you think folks are psyching themselves out like well i i think when you start working on something you think you're the only one that's had this idea you quickly learn that's not the case and then it can be very easy to start thinking that you have to compete with this company and have to beat them in order to succeed with your own company and so you start thinking of things like they're going to steal my customers i have to steal their customers um i uh their product roadmap it must be amazing so i should copy whatever they do without really thinking about it too much and it's just a very dangerous mindset that can take you away from thinking about your own customers and having like a first principles approach to building your company but there's so many lies that founders tell themselves about about competition and about what their competitors are up to when i think about a yc company and competing with folks oftentimes it goes to my head and the first thing i tell them is like the depressing fact that most likely everyone's gonna die it's like you're not accounting for like the most common outcomes like you and your competitors none of you will make something that people want and then the second thing they don't account for is that there are lots of businesses where they're multiple winners like how many banks are there like one bank doesn't look at the other banks and say well i guess that's it we got fold up shop there's already a bank in existence and so i often think when i'm encountering this fear thing i like to kind of run with the fear and like be like let's fear this out to the end point to see what you're really afraid of and like maybe when we open the closet the thing in the you know the boogie man isn't actually there as opposed to like we're sitting on the bed and just obsessing over all these like things that could go wrong yeah the boogie man is not there um in fact i think oftentimes your competitors are just as uh you know messed up as you are they uh you you read the uh the you read about the fundraising and tech crunch or whenever and um and then years later you talked to someone that worked at that company and they say oh man what a mess like the everyone was leaving then um the the ceo was on a bender and was was all sad because we lost all of our big customers you just don't know and it's so easy to assume that if you're having a hard time everybody else must be having a great time when everyone is having a hard time yeah i think that's a really important point so you know one of the things i remember surprised me the most about when i switched from being a startup founder to a yc partner is that running a startup you're exposed every day to how screwed your company is like you're just hit in the face with it every day right and so you constantly feel like you're failing you're not like you don't know how to build product you don't know how to manage people all of this stuff and like you see everyone else's exterior and it seems like they're doing great right like michael room the earliest yc like i always just felt like everyone else was just crushing it and i'm like man we suck and so it's not even it's not even the exterior heart it's their marketing right you're seeing their carefully crafted marketing but then as a partner you work with these companies and you start realizing that like all of them like are like kind of really badly flawed somehow right like literally in any yc batch i could take every single company and like pick out some like fatal flaw um and like you know that some of them are going to turn out to be worth like billions of dollars but you can still do it but like you don't get that perspective when you're running your own company but wait a second hard wait a second so maybe i shouldn't be worried about my competitor but this is different situation we're in a land grab situation like i if if i don't get those customers unprofitably as fast as possible my competitors will and then they'll beat me we hear this all like how often do we hear land grab situation at yc yeah it's definitely a bit of a meme i mean it's there's truth to it actually right like i don't think it's not unfair to say that um you want to get more customers than your competitors um i think it's like what we see is that founders are really quick to assume that their competitors are going to win and like brad said they look at the external signs it's like oh like you know they just announced a fundraising round oh they just got like a article and the press like ah they just like hired someone from google like all these reasons but what i try to do in the office hours i'll be like hey like well like are your customers talking about them are you losing deals like have you looked at the product do you like you know compare how do you rank up and it's funny like i don't know about how do you guys find founders often answer those questions i mean usually things are fine right the customers are usually not talking about the other the other companies it's it's like a confusion of interfaces that the founder is thinking oh my gosh my competitors in the new york times therefore my customers are having a worse experience with my product today it makes no sense whatsoever and as soon as we ask those questions you know hopefully we can get it through to them that that's that's not what they should be worried about you know it was funny because i was thinking about this in the context of my competitors must know something that i don't so i have to like copy their stuff i remember back in the day early in twitch back when we were justin tv we were competing against this company named ustream and another company named livestream and inherently i knew that we were copying each other's features like i knew we were all looking each other's websites but there was this one moment where we built a feature that was exclusively for copyright owners taking content off of our site like and it was something you could see on the main site it wasn't obvious it had no clear user value at all and two weeks after we released it a competitor released the same one and we were like oh crap like we're this is clearly the blind meeting the glide like they don't even know why we have this like we wish we didn't have this feature but like they built it anyway but then after that you shut down the next day right because it was a horrible disaster right that was it that was the end of the company right the company only started working when emmett and kevin started actually talking to the users and figuring out what they wanted instead of you know the years where all of us just looked at each other all the competitors just looked at each other copying each other's dumb features i feel like that's what i'm trying to do in these office hours mostly is like founders come in and super focused on negativity around a competitor and i'm basically just trying to get back to basic what's your growth rate customers churning like what's the pipeline on sales look like and if they can answer all those questions well you're like well then like let's get back to it like keep going why are we stopping spend time on the things that you have control over not the stuff that you don't well okay but let's be clear sometimes when we talk to founders there are some reasonable competitive concerns right and and i'll i'll start this one out and brad this is an idea you had before like when we when we ask like so who's competing with you and then the answer is like well we don't have any competitors like there's no other way to solve this problem other than us yeah that's a red flag right yes that's uh when we hear that in a yc interview we buckle up um yeah because it just shows it shows kind of a lack of understanding of the customer and what the customer is doing right now to solve the problem it's it's very unlikely that no one the customer has never tried another solution to whatever the problem is that they're trying to figure out and you should know what those are yeah and then harj you were talking about like sometimes your competitor objectively has a better product like i've encountered this like i remember the day after social cam sold one of my close friends you all know who they are messaged me and said okay i can delete your app now because i've been using something else for this whole time to take videos like i guess we didn't have the best like even my really close friend was only using the products like to you know uh make me feel good because there was a better product out there that he was actually using what about structural advantages though right like i remember when you know my former co-founders justin emmett they created a calendar company before um their kind of success later and they literally six months into their company google calendar came out and just absolutely crushed them so like what happens when someone has like an actual product structural advantage yeah that oftentimes you should worry about that with my company perfect audience we started off using the facebook exchange api and so we had ostensibly eight or nine competitors and we didn't we tried not to worry about them too much we worried about them too much and we were all using the same facebook guy api to sell ads when facebook announced that they were going to launch custom audiences and sell this themselves directly facebook was now a competitor and they own the platform they wrote all the code they control pricing so that's a time when you should worry about competition and so we sold the company yeah i think a good recent example of this too is probably microsoft teams and slack and again this is i'm talking about this as a observer of it but slack's a pretty great product we all use it every day um and i haven't used microsoft teams but i i'll guess that it's not as good of a product as slack but good enough that microsoft could actually use that like massive sales distribution advantage to kind of beat them in the enterprise right like what do you guys think about that if you have a structural advantage but you bring a crap product to the game you'll lose right and like you know we saw that microsoft's done that too right their music player remember back in the day their their mobile operating system back in the day so a structural advantage with the crap product doesn't win a structural advantage with a product that's good enough can win and man it really helps when some startup specs the whole product for you right like microsoft's move is to not innovate the good enough product it's to copy it like maybe five to ten years later and so that is something to be worried about but weirdly just as often they don't nail it like just as often they they they just don't nail it and like you see this with facebook right like i would say more often right because like if you think about like we're like scratching our heads trying to find examples of times that like a fang company launched a product that killed a fast-growing successful startup so like like clearly more often not like structural advantage isn't actually that much of an advantage i mean snap snap lives right yeah just just the fact that it lives right it you know um tis about a scratch right facebook keeps hacking away at it and it's still alive it's still a going concern and i think for a lot of founders where structural advantage is something that comes later they're just trying to build a great product the takeaway is that just build a better product and if you do that then all of these other advantages are just kind of moot points because it's really rare for the company that has the structural advantage to also put out a great product but why would they it doesn't make any sense it's not the ideal allocation of resources to make it great when you don't have to so there's always an open door another good reason why i see example is instacart like instacart from like day one like the number one thing was what amazon's gonna do this amazon's gonna do this like how the hell does anyone compete with like one of the greatest companies of all time like on the thing that they're experts at right like um and it turned out that just like picking the right avocado was too big of a challenge for like this trillion dollar company like man like can you imagine how many times our people with instagram must have just been like have to sit there and listen to some investor explain to them why like like amazon and jeff bezos is just going to crush the company well think about kyle and cruz when cruz started google was already a decade into building self-driving cars right like i it was so funny because i remember talking to an investor about this and that was their whole point they were like kyle's screwed from day one and i just was like look like kyle has built the most complicated products inside of our company whenever there was ridiculously stupid technical challenge that no one else could do kyle volunteered for it i would never bet against kyle like and the crazier the more i wouldn't bet against him and you know that investor was like you're right michael and that person made a lot of money oftentimes we have to give this somewhat depressing advice to founders which is basically like this is a hard problem but not a complicated product you need a better product it's really hard to build a better product but it turns out you get such an advantage by delivering more value to your end users than everyone else does it's the it's the the club you can bludgeon everyone else with so like instead of worrying about all these stupid things like land grabs and whatever all the other crap it's like man just build a better product for your users and you might get surprised at how well that strategy goes like stay informed like know what your competitors are building and you know how you stack up against them but don't like let it deflate [Music] you

Channel: Y Combinator

Views: 88,087

Keywords: YC, Y Combinator, yt:cc=on

Id: tzsmJtKZ2No

Length: 16min 5sec (965 seconds)

Published: Fri Apr 08 2022