Should Startups fear Google / Yahoo / Microsoft/* ?

In brief, I believe the answer is a resounding NO. Otherwise, there will be no big companies like Microsoft/Google/Yahoo/*, because once they were small startups just like others and must have faced similar if not same situations.

Recently, there was lot of buzz about the demise of few small companies because some big company entered the same niche market. And there was equal buzz and frantic and quite fanatic response by the blogosphere about Google's entry in to web based office software. Many, so called entrepreneurs are panicking that they can not simply survive. And many are suggesting that startups should look for way out, when a big guy enters the same market.

"there’s no need to panic (yet), but it may help to think now about ways to get yourself out of the headlights" - OnStartups

"the reason companies ought to be scared of the big fat guy is that since they have more resources (money, personell, exposure, media visibility), they can quickly replicate or outdo the concept of the upcoming small start-up. - Jean Biri (comment on the post at OnStartups)

It does not make any sense to me, though it looks like a reasonable and acceptable advice in the blogosphere.

In my opinion, the key reasons an entrepreneur comes up with an idea and start a business are:

  • he/she got a wonderful product/service idea  or an exemplary execution strategy
  • he/she spots a big earning opportunity and want to make big buck
  • he/she is so passionate about a product/service/strategy

You had a niche area of expertise, product or service offering and you spot a big opportunity to make money. Now some big guy is entering. Some are suggesting that get ready to 'get yourself out of the headlights' and find another niche spot. Few questions came to my mind when I read first read the blog.

  • Is there any entrepreneur who builds a business thinking that Yahoo/Microsoft/Google/* won't enter the market? Or assume there would be no competitors?
  • If you think you spotted a great opportunity to build a product, why one think that no one else could spot the same opportunity and compete with you?
  • Do we forget for some strange reason that every big fat guy starts so small just like any other?
  • If you loose your nerve by looking at G/M/Y/* entering your own market/product line, and start thinking about ANOTHER NICHE area/product/strategy, why do you think the big fat guy does not enter your NICHE market? They already did once, right?
  • If there is some market that is not reachable or not approachable to a big guy, is there real money there? Because, if there is good money, then why would big guy miss it? Even after you showed them how to do it?

Some how it does not make sense to me. The big fat company is once a small company just like everybody else.  Ofcourse, the big guys must have garnered a greater marketing muscle, image and reach. But why is it a surprise now? Didn't you know to consider such a threat at the beginning itself? Why would one assume that there will be no competition?

I don't know how today's entrepreneurs are facing this issue. And I don't intend to suggest a solution either. But I don't think it does any good to divert from what you are doing and start looking for another niche market. Simply because, it did not work so far. Did it? If it had, you wouldn't be thinking about another NICHE area/segment now.

Few things that can be thought over.

  • The so called Big fat guys are once small startups like any other. How did they do it when challenged with similar threats? I believe, We can learn some thing from them.
  • You got a wonderful product/service idea  or an exemplary execution strategy, and you are the first to bring it to the world. Use that as your leverage to promote further.
  • Since the big fat guy is now competing with you, you would obviously get lots of publicity at no cost in the media. Use it to your advantage.
  • There are many advantages of being small, bring them on.
  • Do whatever it takes to let your user community speak for your product. The user community you got have more experience with the product than a new comer.

The user community has always demonstrated so much passion and love about the quality of a product and value it can bring to users, it would not fail any good startup, just because the same product is being offered by a big guy. If that is true, you will not see so many Web2.0 companies in particular and startups in general. If What many of the bloggers are suggesting to stay out of main stream market is true, then you would not see even those big fat guys today. (They were small once, and faced similar challenges from big guys then)

Update: Listen to a discussion by Niall Kennedy and Om Malik on this topic.

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