Find a vertical niche that you can dominate and build out from there. If it's a new area, or a relatively new area, your competitor can't build a product that will appeal to everyone. So you two may not even compete head to head for a while. And since you're small, you're probably more nimble and can make a better reputation. And you won't have to compete on price -- you might even be able to charge more than they can once you have a few customers.
Once you start a company (assuming you do) you can offer stock that costs less for a larger stake in the company than your competitor could. The only people who want to work for Google or Facebook are those who work for the salary -- the stock is high priced and isn't going to go up by any appreciable multiple. So in addition to the fun and terror of working for a startup, you have something the other guy can't offer.
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A couple of points:
Find a vertical niche that you can dominate and build out from there. If it's a new area, or a relatively new area, your competitor can't build a product that will appeal to everyone. So you two may not even compete head to head for a while. And since you're small, you're probably more nimble and can make a better reputation. And you won't have to compete on price -- you might even be able to charge more than they can once you have a few customers.
Once you start a company (assuming you do) you can offer stock that costs less for a larger stake in the company than your competitor could. The only people who want to work for Google or Facebook are those who work for the salary -- the stock is high priced and isn't going to go up by any appreciable multiple. So in addition to the fun and terror of working for a startup, you have something the other guy can't offer.