We share offices with Harvest and often rib each other when our competitors come out with something new. With the release of Haystack last week by 37signals, who have only produced small business software until now, it was my turn to take a few in the ribs. Haystack is self-proclaimed to "find the right Web Designer for your next project" and has a bit of a portfolio twist to it, but it really doesn't worry me.
The More Competitors The Merrier
There's a lot to worry about when running a startup, but worrying about your competition is one of your least concerns. Competition means your market is big enough to support multiple companies. If you find yourself with a new competitor — or hopefully multiple competitors — it's time to rejoice, especially if they're venture-backed.
If a Venture Capitalist is backing a competitor of yours, you know you're working in a large market with a lot of upside. VCs generally give their first consideration to the quality of the team, but they also take market potential very seriously. A bootstrapped startup on the other hand may not worry about market potential as much, they just see a niche and hope to create a market as they go along. (That's true to a certain extent, anyway.) But VCs always worry about the market, hence VC backing for a competitor proves the market is out there.
I'm not advocating that you completely ignore your competitors. We don't. But if you're looking to them for key ideas and not focusing on your own product and your own users, then you're going to be a step behind. Typical things I look for in a new competitor are: who is behind it and what have they done before? Here are a few more things to keep in mind:
- Teams of two or fewer who are moonlighting aren't a cause for concern initially — until they start bootstrapping for real. A team working in their off-hours won't be able to compete with you if you're working full-time. If they do come out with something innovative, you'll have enough time to react.
- If the competitor's product is simply a carbon copy of ours, then I'm delighted, not worried. I can name a couple dozen Carbonmade copycats off the top of my head — teams that even copy our layout options and color schemes. They'll always be playing catch-up and are hundreds of thousands of users behind us. They tend to grab a few thousand users and then give up. You rarely see a second version from these people.
- Has this new competitor been successful with something else? This can be cause for minor concern. At Carbonmade, I was initially concerned when Krop released their portfolio tool after doing such a good job with their creative job market, but then again that was just a validation of our market size. (Side note: Krop was actually an early advertiser on Carbonmade before they launched their portfolio tool.) Haystack falls into the same category as Krop as it too was launched as another product by a successful team.
Close But No Cigar
So as I say, Haystack falls into my to-be-concerned-about category because of who is behind it. But at the same time it's different enough so that I can brush it off after a brief look-through. Haystack so far is simply a means of finding a new web designer, and that's not too worrying. They have implemented limited portfolio-like features and could, if they chose to, spend some time building out an online portfolio system, but I don't think that's the direction they'll take.
As Jason Fried wrote when introducing the product, “So there's another question we've been hearing a lot: ‘Can you recommend a web designer to help us with a project?' Now we'll have an answer to that question as well: Haystack.” They built Haystack to divert all the requests they were getting for web designer recommendations. I don't think he envisions the product being any more than a tool for offloading those requests. It also serves as a supplement to their job board.
Apart from that, in the end I think Haystack fails to produce real value for the job seeker and is more of a giant advertising billboard. My evidence to support this claim is that at the moment there are several companies listed there that have no intention of taking on designers work. They simply want their brand shown off. Many of these companies aren't even doing consulting work any more; like us, they did that in the past before releasing their own products.
Haystack is also choosing to charge web designers instead of charging the people who are hiring. And, as anyone who works in the creative arena knows: The best designers aren't going to pay for references because they have jobs coming in all of the time while the poorly-established people don't have the money to spend, hence you'll be left with the designers of middling quality. For this product to be truly successful, you need to be able to attract the best creative people. But don't get me wrong: they're still going to make a killing on this product.
Is Carbonmade Going to Compete With Haystack?
In my earlier article, 100,000 Users And So Can You, I mention in the second to last section that we spent all of 2008 working on a second product that we ended up scrapping. We even had a successful private beta. Well, that product would in fact have been a direct competitor for Haystack. So at least behind the scenes Carbonmade is a closer competitor to Haystack than it seems to be.
It's been very interesting for to me to see how 37signals chose to tackle the same problem that we came up against: it's just not that easy to find a web designer out there. Like 37signals, even now we get a dozen e-mails a week from people hoping we can recommend a designer to them even though we stopped doing consulting nearly two years ago. Their solution is a lot different from how we chose to tackle the problem. A lot different. I don't think there's necessarily one right or a wrong way to approach this challenge, but I don't think either that they've taken the best approach by any means.
I won't comment on the solution we came up with, but I will wrap up this article by reiterating my earlier point. Having competition is a good thing. Besides its validation of market potential, it allows you to see how other people tackle the problems you face yourself. This is not threatening, it's informative.
David Myers about 1 month ago
Great post Spencer - very insightful. (Good) competition also forces you to be innovative and come up with new solutions and ideas, which in turn helps your business more because of the scare from competitors.