Startup David vs. Goliath: What To Do When You Uncover a Well-Funded Competitor

Don’t Fight On Their Turf. Instead, Take the Battle Straight To Them

At one of the startups I advise, we’ve been working for several months on building a spin-out product based on its existing product. The build started as a set of requested new features for an existing customer, but it could become a standalone software platform that they could resell to a lot of other businesses.

Last week, we ran into a brick wall. Or rather, a brick wall fell right on top of us, when I got wind of a massive, well-known and innovative technical company deciding to essentially build the same thing we were building.

So did we pack it in?

Luckily, this isn’t my first spinout. I’ve been down this path many times, starting with the very first startup I joined — a technical consulting firm that started creating custom frameworks to speed up our development time. We eventually pivoted to just selling those frameworks to other development shops. The multiple on our bottom line increased tenfold, so did our valuation, and we were acquired three years later.

With the experience of that outcome at my back, I’ve done the same thing over and over again since, basically extracting the innovation out of whatever we were innovating, making it repeatable, universal, and accessible, and then packaging that into something that we could license to customers who weren’t yet ours.

It works wonders when it works, but I’ve learned that a lot of things have to come together and go right for it to work. So you don’t so much set out to do it as perpetually look for the opportunity to do it.

Here Comes Goliath

The biblical story of David and Goliath makes for some interesting and inspirational reading, but we all know in the real world the big guy usually crushes the little guy without a lot of fanfare or even much of a fight. Right?

I’ve found a more inspirational story — although it’s now almost as old as the Bible — in George Clooney’s speech to Brad Pitt in the remake of Ocean’s 11. It’s the speech where he justifies taking on a massive casino empire with just a handful…