What’s the best way to create your competitive advantage?

Paul Graham (Co-Founder & Partner at Y Combinator)
Mean People Fail

Startups don’t win by attacking. They win by transcending. There are exceptions of course, but usually the way to win is to race ahead, not to stop and fight.

David Jackson (Founder, Seeking Alpha)
Your biggest competitor may not be who you think it is | A Founder’s Notebook

The real challenge is creating a compelling user experience, rather than being incrementally better than an existing competitor. This is why “worry more about your customers than your competitors” is good advice.

Seth Godin (Founder at Yoyodyne Entertainment)
Seth’s Blog: Wasted kindling

You need significant…things that keep the system working without a constant stream of promotion. A few: (a) a remarkable product that users enjoy talking about; (b) a product with virality built in–something that works better when my friends use it too; (c) a community orientation, so that each new user enhances the value of the community, creating a virtuous cycle; (d) economies of scale in both production and marketing – as you grow, things … (read more)

Michael Mauboussin (Managing Director and Head of Global Financial Strategies at Credit Suisse)
Michael Mauboussin: “The Success Equation:Untangling Skill and Luck” | Talks at Google – YouTube

If you’re in a competitive interaction, what you want to do is simplify the game to the areas where your skill will overwhelm that of your competitor. If you are the underdog, the weaker player, what you want to do is complicate the game. Add battlefields. You’ll still be the weaker player but it dilutes the strength of your competitor.

Tomasz Tunguz (Partner at Redpoint Ventures)
The 3 Competitive Defenses of Enduring SaaS Companies

[to create a competitive advantage try] data network effects, [customer] network effects, ecosystem creation.

Boris Wertz (Founder of version one ventures)
Marketplace dynamics: buyer mindshare is key to building a moat – Version One

A marketplace can adopt two strategies: protect the supply and protect buyer mindshare. When it comes to supply, you can give your sellers little reason to seek out other marketplaces. For example, you can lower listing/transaction fees for unique inventory, tie sellers to your site through reviews (which cannot be transferred to other marketplaces), or find some other innovative model like Uber’s leasing model.

David Jackson (Founder, Seeking Alpha)
Who has more power in the media business, celebrities or platforms? | A Founder’s Notebook

Platforms have power because (i) it’s hard to build traffic from scratch, and (ii) they benefit from network effects.

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Make Wealth

When you’re running a startup, your competitors decide how hard you work. And they pretty much all make the same decision: as hard as you possibly can.

Peter Thiel (Co-Founder & Partner at Founders Fund)
First-mover advantage is over-rated | A Founder’s Notebook

Moving first is a tactic, not a goal. What really matters is generating cash flows in the future, so being the first mover doesn’t do you any good if someone else comes along and unseats you. It’s much better to be the last mover. Last movers build non-commoditized businesses. They are relationship-driven. They create value. They last. And they make money.

Mike Cassidy (Four successful exits – Ruba, Xfire, DirectHit, StylusInnovation)
What They Don’t Teach in Business School about Entrepreneurship – YouTube

Speed is the primary business strategy. Any average chess player can beat the best player in the world if they get to move twice for every time the grandmaster moves.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Differences Matter – AVC

being different matters. But you have to be different in ways that users will feel right away. From differentiation comes defensibility. And in the hyper-competitive world of social media, that’s a good thing.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Where Is The Value In The Tech Stack? – AVC

You need data to provide defensibility and differentiation. And so most of USV’s investments have been companies that combine software and data to provide a solution to the market that we believe is defensible, usually via network effects which are a data driven phenomenon.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Where Is The Value In The Tech Stack? – AVC

I also don’t think data alone is the new oil.The new oil is going to be found in various places in the tech stack where software and data come together to produce a service that has high operating leverage at scale and is defensible by the network effects that the data provides. That’s a mouthful. Software is the new oil sounds a lot better. But the mouthful is more accurate.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Emerging Architecture Of Internet Applications – AVC

The most important things to understand about this blockchain stack are the overlay networks (most of which are still emerging), and the shared data layer and the shared protocol layer. Differentiation and defensibility and network effects will be much harder to obtain with this architecture. Most things will work like email. Take your keys from one app to another and all your data and relationships come with it.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Dentist Office Software Story – AVC

software alone is a commodity. There is nothing stopping anyone from copying the feature set, making it better, cheaper, and faster. And they will do that. This is the reality that Brad and I stared at in 2003 as we were developing our initial investment thesis for USV. We saw the cloud coming but did not want to invest in commodity software delivered in the cloud. So we asked ourselves, “what will provide defensibility” and the answer we came t… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Privacy As A Competitive Vector – AVC

And if that is the case, are there other big product categories out there other than search where privacy could be used as a competitive vector? How about email? How about messaging? How about maps? How about browsers?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Mutual Company – AVC

Maybe the creators of these networks ought to mutualize so that their users, who are creating the value, can participate in the upside. We have not seen anyone do this to date. We have talked to a number of startups and networks about the idea. We have not seen any takers yet.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
What Is Strategy? – AVC

Products, how it acts within a market relative to its competitors, or other aspects of the business. Specific approaches may include: Differentiation, in which products compete by offering a unique combination of features.
Cost, in which products compete to offer an acceptable list of features at the lowest possible cost.
Segmentation, in which products are tailored for the unique needs of a specific market, instead of trying to serve all consu… (read more)

Ben Horowitz (Co-Founder & Partner @ Andreessen Horowitz)
The Case for the Fat Startup – Ben’s Blog

If you are a high-tech start-up, your value is in your intellectual property. Don’t stare at your spreadsheets so long that you get confused about that.

Sam Altman (President at Y Combinator)
Startup advice, briefly – Sam Altman

Have a strategy. Most people don’t. Occasionally take a little bit of time to think about how you’re executing against your strategy. Specifically, remember that someday you need to have a monopoly (in the Peter Thiel sense).

Noah Kagan (Founder of AppSumo)
Mint Sales And Marketing: How Mint Beat Wesabe | OkDork.com

We spent countless weeks figuring out what people really wanted before we launched our beta. Guess who we found out Mint’s biggest competitor was? No one. Apathy. This shocked me! Most people would rather not track anything and just see how they are doing when they go to the ATM. Guess who was #2? Ms Money, Intuit, Wesabe? NOPE. Microsoft Excel. Who would have believed that!

Paul Graham (Co-Founder & Partner at Y Combinator)
Beating the Averages

A startup should give its competitors as little information as possible.

Peter Thiel (Co-Founder & Partner at Founders Fund)
Peter Thiel’s CS183: Startup – Class 11 Notes…

The basic challenge is to find things that are hard but doable. You want to find a frontier. It’s worth making a rough division between two different types of secrets. There are secrets of nature and then there are secrets about people. Natural secrets involve science and the world around us. Secrets about people are different. These are things that people hide because they don’t want other people to know about them. So two distinct questions to … (read more)

David Jackson (Founder, Seeking Alpha)
Why the best products don’t always win, AKA how to build a moat around your business | A Founder’s Notebook

If you want to build a moat around your product, make sure it has high switching costs and network effects, and lock up distribution. Many successful companies have done this. But as customers, we fear and resent lock-in. The alternative strategy is typified by Amazon: relentless focus on generating value for customers, resulting in remarkable trust and brand promise.

Sam Altman (President at Y Combinator)
Stupid Apps and Changing the World – Sam Altman

The value of a network grows as a function of the square of the number of nodes. So the value/importance of the service grows hyper-exponentially. There is all sorts of emergent behavior as something grows in importance a million-fold in a short period of time.