Inside Mercury

How I CEO: On thinking about competitors

Written By

Immad Akhund

Headshot of Immad Akhund for CEO blog column | Mercury
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Banking engineered for startupsExplore MercuryMercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group and Evolve Bank & Trust®; Members FDIC.
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Over the next few months, I (Immad Akhund, CEO of Mercury) will share my stories, learnings, and tips for other leaders based on what has worked for me. I started my entrepreneurial journey 16 years ago as a recently graduated engineer and have had to learn all the “CEO” lessons the hard way — often feeling like I was making it up as I go. How one leads as a CEO is extremely dependent on any number of factors, like your style, your company, your stage, or your industry. Rather than taking these ideas as ones to copy verbatim, take them as food for thought — one example to learn from amongst the many.

In the last column, I talked about the importance of how to avoid being a bottleneck. This week, I dig into how leaders should think about competitors as they build their companies.

Building a startup is an emotional journey for an entrepreneur. It can be tempting to start viewing your startup journey in an adversarial way, where you are up against a competitor in a zero-sum game to see who wins and who loses.

In my experience, the reality is far from that and in fact, one of the biggest, most common cases of making bad decisions is when a startup is focused too much on what a competitor is doing. As YC says: “Startups die of suicide, not homicide.”

If you follow a competitor and react to them, you are always behind them — you are always reacting to their decisions. When their decisions are good, you are doing the same thing too late and without fully understanding why you’re doing it. When their decisions are bad, you are making the same mistakes they are.

And often the competitors that a startup will focus on aren’t even the real competitors that their Ideal Customer Profile (ICP) cares about. Most of the time, your ICP is probably comparing you to a boring old incumbent, not that flashy startup that is making a lot of noise. Or if your market is small, then your ICP is probably a little different in subtle but meaningful ways from your competitors anyway. And in that case, you’re still just wasting time thinking too much about a competitor that is not even selling to your target customer.

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Instead of being competitor-focused, you should be radically customer-focused. This will give you three big benefits:

  1. You will automatically get some of the competitor's learnings in terms of what the customer says they want your product to do.
  2. You’ll be able to leapfrog your competitors by building things that your competitor is not even thinking about.
  3. You will be taking customer feedback and combining it with your long-term vision to build a lasting and cohesive product.

I believe a startup is an exploration of finding the truth of a “perfect” strategy that makes sense in the context of not just your industry, but your business model, leadership, stage, cash position, etc. By building a strategy around what a competitor is doing, you’re ultimately ignoring the unique variables that inform what is best for you and your company. This is something that comes up with burn rate, for example. Mapping spend and burn to match industry or competitor benchmarks distracts you from thinking about the correct amount of burn that matches up to your growth and financial forecasts.

Opting for a customer-focused long-term vision is also inspiring to your team. It will drive them to come up with their own ideas and to deliver excellent products. A competitor-focused company, on the other hand, is detrimental to your own morale as a founder as well as your team’s morale. It’s easy to fixate a lot on the positives of what your competitor is doing — how polished their latest marketing campaign is, how much money they raised, how they launched a neat feature that your team didn’t think of. We often tend to frame these comparisons in the context of our own company’s shortcomings, and I think that’s pretty unhealthy and just isn’t productive. We fell a little bit into that trap at Heyzap (my previous company), where we could easily look around and see competitors raising more money than us or being more successful than us and getting stressed by that.

But I would say to find true product-market fit, you have to do something original — and you don’t get there trying to chase after competitors. One of our Heyzap competitors, for example, did really well as an ad network — a lot better than maybe we could have done. But what we ended up doing was ad mediation, which came about by talking to customers and understanding the problems they had. Ad mediation was something that no other competitor was really doing, and then after we did it, everyone tried to buy us or copy us. It was original. I mean, there were other people in that space, but we did it in a way that focused on product-led growth, and that made us stand apart. We probably couldn’t have gotten there if we kept focusing on our competitors more than ourselves and our customers.

One exception I would make to this rule is that you need to have a good idea of the competitive landscape and where you fit in when doing a fundraising process. Most of the time, you already have this understanding just by talking to customers enough, but it is worth doing the research such that you can truly answer investor questions well.

The best kind of competitor to talk about with investors is one that is a very large company (>$10bn ideally) and is clearly a not-so-innovative incumbent that is at least one step behind on the current technology ladder (they are mainframe vs. you’re cloud, or something like that). This allows you to frame an important conversation about the competitor landscape around an area of strength for your company, where you can showcase how you solve a problem in a way that even one of the biggest successful incumbents in your space might not be able to.

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Immad Akhund is the co-founder and CEO of Mercury.

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