## How I Analyze Competitors When Choosing a Startup Niche

In the competitive landscape of startups, choosing the right niche is pivotal for attracting investment from venture capital firms, angel investors, and private equity companies. In this article, I’ll explain how to spend 6-8 hours and get disillusioned with most of your bad business ideas — because nothing sobers you up like a thorough competitor analysis using tools like Co-Founder Ai. 🥲

Back when I was just starting my first startups, studying competitors seemed like a pointless waste of time. I believed that I was creating something unique, and customers would enthusiastically adopt my product over any alternatives offered by other VC companies.

# In Reality, There’s Nothing More Inert Than Consumer Habits

If a customer is generally satisfied with their current solution, you need a VERY compelling reason for them to even try something else.

Before investing the first dollars, it’s essential to know why customers will choose us over competitors. That’s why you need to know these venture capital business players and their products.

## How I Study Competitors:

1. Compile a List of Competitors
2. Rank Them by a Key Metric
3. Determine Their Age and Revenue
4. Build the Product Competition Field
5. Study the Main Marketing Channels

# Step 1: Compile a List of Competitors

I choose 2-3 search queries that customers use to find solutions to their problems or specific products. I analyze the top 30 Google search results, extracting the domains of competitors offering similar products.

Products similar to ours are those that solve the same customer problem in the same way. Substitute products solve the same problem in a different way.

For example, if we’re developing a service for collective real estate investments, analogs would be other collective investment services, while substitutes would include any investment products like deposits or bonds. Accordingly, we seek other collective investment services and not different types of investment methods.

Often, I’ll find listicle articles of the products we need, uncovering 2-3 companies not appearing in key search queries. Usually, these are either companies that couldn’t scale (which is still a useful case for market understanding) or those that attract customers through different channels.

Generally, at this stage, you should have a list of 20-40 competitors.

# Step 2: Rank Them by a Key Metric

Every type of business has one main metric that determines its position in the niche, and which we can observe.

For eCom and other B2C models selling through a website — that’s traffic. For apps — the number of active installations. For B2B SaaS — annual revenue.

Once I select such a metric, I add a column for it in the competitor list table and fill in the values. Traffic is sourced from SimilarWeb (not super precise, but suitable for comparative analysis), app installations from AppFigures, and annual revenue from Owler.

Then, I sort the list in descending order based on the key metric and consider the top 10 companies as the primary competitors.

# Step 3: Determine Their Age and Revenue

Next, for the top 10 direct competitors, I determine their founding dates. For instance, if it’s a website-based client acquisition model, I check the first appearance of their website on WebArchive.

Simultaneously, I assess the average age of the top 10 competitors, which grounds the analysis. For example, if the average age of the top players is ~20 years, it indicates that replicating their success will require similar (or greater) years of persistent effort.

That’s why you shouldn’t mimic everything competitors do — it will be a long, tedious game with mediocre results.

# Step 4: Build the Product Competition Field

The product competition field is a table where rows list the main features of products in this market, columns are the top 10 competitors, and at each intersection, it shows whether that competitor has that feature.

To gather this data, it’s not necessary to purchase or download the products themselves. It’s sufficient to use competitors’ promo pages and websites. If something isn’t on the site, it doesn’t exist for customers during the comparison and product selection stage.

I also add a first row in this table, where I note the unique selling propositions (USP) or slogans of the competitors.

This table helps to understand which features are essential, where and how you can compete, and where you can differentiate your product — an offering set with unique features and USPs that will make us stand out in the niche.

# Step 5: Study the Main Marketing Channels

Using SimilarWeb, I inspect where traffic is coming from and in what proportion. Which competitors focus on organic traffic, and which invest in paid traffic, referrals, and video marketing.

With the help of KeySo, I gather the primary organic keywords, along with ads and approximate budgets for contextual advertising. At this stage, it becomes clear what strategies competitors are employing and how fierce the competition is in marketing.

# What’s the Result?

And here comes the magic. 🪄

Amateurish emotional assessments like “those guys are all losers, we’ll jump in and capture the market” are replaced either by a sobering realization that, generally speaking, competition is strong and with our current resources/competencies, we might not pull through; or by a pragmatic understanding of which marketing solutions can attract customers and how much effort/money it will require.

In both cases — that’s an excellent outcome! 🚀