Ariel Cohen states his primary competitive threat isn't established giants or well-funded rivals. Instead, he worries about the undiscovered team that is "ignorant enough about the problem but are really, really, really good," as they are the most likely to introduce a truly disruptive new approach to the market.
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In crowded markets, founders mistakenly focus on other startups as primary competition. In reality, most customers are unaware of these players. The real battle is against the customer's status quo: their current tools like spreadsheets, hiring a person, or using an old system. Your job is to beat those options.
Investor Stacy Brown-Philpot advises that to win large enterprise deals, an AI startup must create a solution so compelling it beats the customer's internal team vying for the same budget. The goal is to access the core 15% budget pool, not the 1% 'play money' budget.
Pre-AI, the main challenge was creating a compelling, non-incremental value prop. Post-AI, creating 10x value is table stakes. The primary risk has shifted to intense, multifaceted competition from incumbents, foundation models, and new entrants.
Lacking deep category knowledge fosters the naivety and ambition required for groundbreaking startups. This "beginner's mind" avoids preconceived limitations and allows for truly novel approaches, unlike the incrementalism that experience can sometimes breed. It is a gift, not a curse.
While domain experts are great at creating incremental improvements, true exponential disruption often comes from founders outside an industry. Their fresh perspective allows them to challenge core assumptions and apply learnings from other fields.
The core conflict is whether a startup can achieve mass distribution before the incumbent can replicate its core innovation. Historically, incumbents have an advantage because they eventually catch up on technology. AI may accelerate this, making a startup's unique and rapid path to acquiring customers more critical than ever.
When evaluating revolutionary ideas, traditional Total Addressable Market (TAM) analysis is useless. VCs should instead bet on founders with a "world-bending vision" capable of inducing a new market, not just capturing an existing one. Have the humility to admit you can't predict market size and instead back the visionary founder.
Ken Griffin warns startups against direct, head-on competition with industry giants, stating, "you're going to lose." To succeed, you must find an asymmetrical advantage—operating "under the radar" or solving niche problems incumbents ignore. Citadel initially did this by hiring unconventional quantitative talent.
Significant change doesn't come from the established core of an industry but from the margins. This is where smaller, private companies and overlooked founders operate, making private markets a crucial hunting ground for the most disruptive investment opportunities.
A16Z's Martin Casado argues that startups should not fear being copied by public clouds like AWS, as a focused startup consistently beats an incumbent's "two-pizza team." The real competitive threat comes from founder-led scale-ups like Stripe or Figma, which remain hungry, execute at a high level, and possess significant institutional momentum.
