When a Competitor Raises Money

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Early today an entrepreneur shared with me how he was super worried that a competitor just raised $2 million. Being a bootstrapped startup still trying to find product/market fit, he felt that the competitor was going to build a large team and capture the market before he gets enough traction to become a player.

Hmm, I thought. At Pardot, we didn’t raise any outside capital and our main competitors HubSpot, Marketo, Eloqua, Genius, Act-On, etc. raised over $500 million in capital. You don’t have to raise money to build a successful business.

Here are a few thoughts on competitors raising money:

•  Almost all B2B tech markets aren’t winner-take-all or even winner-take-most. How many successful email marketing companies do you know? Exactly. There are dozens of them. The same holds for most markets — find a niche and build a base of passionate customers.

•  Raising money doesn’t equal success (see Quirky’s bankruptcy). Some entrepreneurs execute poorly. Some markets change. Heavy startups without product/market fit are a real challenge.

•  Venture investors putting money into a company helps validate the market. Are the investors right about the market? Not sure. But, the fact they’re willing to put serious amounts of money into it is a good sign.

The next time a competitor raises money, understand that it’s commonplace and doesn’t mean there won’t be multiple winners in the space. The best thing to do: continue building a passionate base of customers.

What else? What are some more thoughts about competitors raising money?

 

Posted By David Cummings on David Cummings On Startups 

Published by InterConnecta on under: , , , , , , , , , , .

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