Should investors avoid crowded competitive markets or treat competition as a positive signal?

Harry Stebbings · Jan 22, 2024

He prefers investing in companies that are the only ones doing something over being one of many funded competitors in a race

15:04 20VC: Why Small Markets are Better Than Big Markets, The Biggest Delusion of Early Stage VC, Why AI Investing is like a Horserace and Why The Most Ambitious Companies Growing the Fastest are not the Best Investments with Adam Fisher, Partner @ Bessemer

Adam Fisher · Jan 22, 2024

Competition in a space should make an investor less comfortable, not more; he prefers to be the only investor backing the only player

Competitors can attract better talent, raise more money, or get acquired by the only potential acquirer — and there may not even be a market

Scope: contrasted with investors who read competition as market validation

15:44 20VC: Why Small Markets are Better Than Big Markets, The Biggest Delusion of Early Stage VC, Why AI Investing is like a Horserace and Why The Most Ambitious Companies Growing the Fastest are not the Best Investments with Adam Fisher, Partner @ Bessemer

Harry Stebbings · May 27, 2024

Investing in competitive markets is something to be avoided

18:10 20VC: Why Seed is Systemically Broken | Why Pricing is Worse Than Ever and There is More Funding Than Ever | Benchmarks for Churn, Retention and Growth Rates - Good vs Great | Why Last Vintage for Private Equity Will Suck with Jason Lemkin

Reid Hoffman · Jun 10, 2024

The most valuable market to attack is one with bad competition; ferocious competition, while it can sharpen you, makes success much harder since entrepreneurial success comes from outpacing rivals.

Successful entrepreneurship is about outpacing your competition, so a lot of ferocious competition is challenging.

Scope: most entrepreneurs don't fully recognize this

29:35 20VC: Reid Hoffman on Foundation Models: Who Wins & How Do Incumbents Respond | The Inflection AI Deal: How it Went Down | Why Trump is a Threat to Democracy | The Future of TikTok | Lessons from Sam Altman, Brian Chesky and the OpenAI Board

Harry Stebbings · Jun 19, 2024

The speaker dislikes investing in competitive markets because they bring harder product marketing, higher customer acquisition costs, lower retention, and higher churn

Competition makes product marketing challenging, raises CAC, lowers retention and raises churn, and everyone competes on the same channels

14:04 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg

Harry Stebbings · Jul 15, 2024

The greatest returns come from unsexy businesses no one else is going after, because competition destroys pricing power

His biggest and best investments are things like Berlin property management and commodities pricing providers — unsexy markets with no competitors; when five people are doing it and you're one of them you have no pricing power

40:02 20VC: Why We Are in a Bubble & Now is Frothier Than 2021 | Why $1M ARR is a BS Milestone for Series A | Why Seed Pricing is Rational & Large Seed Rounds Have Less Risk | Why Many AI Apps Have BS Revenue & Are Not Sustainable with Saam Motamedi @ Greylock

Harry Stebbings · Oct 21, 2024

He does not want to invest in a company that is one of ten going after the same market

Scope: stated as his personal mindset

34:25 20VC: Kleiner Perkins' Mamoon Hamid on Investing Lessons from Leading Rounds in Figma, Slack and Rippling | Lessons Building a Generational Defining Firm with Kleiner Perkins | AI: Where Value Accrues, Startups vs Incumbents & Scaling Laws

Oren Zeev · Feb 2, 2026

If everyone is doing something, that is a reason not to do it, not a reason to do it

He wants every investment to become a market leader, and the more early competition there is, the smaller the chance of that

Scope: he occasionally still ends up in competitive situations

6:02 20VC: 50% of Funds Will Go Out of Business | Why Growth Expectations Today are BS and Will Not Last | Why Oren Zeev Takes $0 Management Fees But 30% Carry | Why GPs Should Not Tell LPs Their Strategy

Harry Stebbings · Feb 9, 2026

Markets like AI customer support, with 50 providers funded above $50M, are irrational — competition is for losers and you want monopoly markets

Subscribes to the Peter Thiel school of thought

Scope: says he can't get his head around this market

33:54 20VC: Is SaaS Dead in a World of AI | Do Margins Matter Anymore | Is Triple, Triple, Double, Double Dead Today? | Who Wins the Dev Market: Cursor or Claude Code | Why We Are Not in an AI Bubble with Anish Acharya @ a16z

Sarah Tavel · May 6, 2024

The biggest risk in AI right now is competition: more companies are pointed at every opportunity than she has ever seen, which turns obvious large opportunities into capital-intensive market share wars

Like the food delivery wars, fighting tooth and nail for every percentage point of share requires tremendous capital, and the winner-take-most outcomes that create the most shareholder value may not exist in some segments

Scope: some segments may not be winner-take-most

35:52 20VC: Benchmark's Sarah Tavel on Are Foundation Models Commoditising | Why Frontier Models Will Be Closed Source | Why the Value is in the Application Layer | The Future of AI is "Selling the Work" Not the Tools

Harry Stebbings · Jul 15, 2024

Former colleague Tavill said the biggest challenge in AI investing is the multitude of players in single spaces and the difficulty of differentiating between them.

10:31 20VC: Why We Are in a Bubble & Now is Frothier Than 2021 | Why $1M ARR is a BS Milestone for Series A | Why Seed Pricing is Rational & Large Seed Rounds Have Less Risk | Why Many AI Apps Have BS Revenue & Are Not Sustainable with Saam Motamedi @ Greylock

Harry Stebbings · May 12, 2025

One of the biggest changes from five or six years ago is that every category now has around 15 well-funded competitors instead of two or three, and they are raising $10M+ rather than small early bets

38:28 20VC Exclusive: Mercury Founder Launches First $26M Fund | Why Founders Should Take the Highest Price | Why Serial Entrepreneurs are Better | Why AI Is So Overhyped | The Future of Venture Capital with Immad Akhund

Harry Stebbings · May 23, 2025

Picking winners is much harder now because instead of two or three competitors there are 10 to 15 in every category, all with relatively impressive traction and revenue

When every competitor shows impressive traction, traction stops being a discriminator

55:37 20VC: ElevenLabs Head of Growth on Why You Do Not Need PMs | The 7-Part Launch Playbook That Gets 700K+ Views Per Product | The Truth About CAC, Payback & Performance Marketing in AI with Luke Harries

Mark Goldberg · Oct 25, 2024

Competitive markets are not a reason to avoid an investment — competition validates the opportunity

Ideas are a dime a dozen; what matters is finding people excellent at execution with the vision and chutzpah to outcompete their market

Scope: requires a founder willing to go head to head

19:31 20VC: The Truth About Multi-Stage Firms; Why Portfolio Services are for VCs not Founders | Why Politics is Rife & Decision-Making is Broken in Large VCs | Why Reserves are Bad for Founders & How Boutique Firms Will Win with Mark Goldberg @ Chemistry

Guillaume Moubeche · Dec 13, 2024

A crowded market is a positive signal because it means product-market fit already exists; you do not need to be unique or a first mover to succeed in it.

If the market is crowded, demand and product-market fit are already proven — it just may not exist yet with your product — so the bet shifts from creating a market to out-executing incumbents.

Scope: framed as a blue ocean vs red ocean choice of bet; requires actually being better than competition

0:00 20Growth: How to Scale to $30M ARR Bootstrapped through Content and Brand | The Ultimate Equation to Success in Sales and Why Most Founders Suck at Sales | Why You Should Overpay People and What That Means with Guillaume Moubeche @ Lempire

Jake Saper · Mar 10, 2025

Fast-growing competitors in a category are a signal of market pull rather than a reason to avoid it; a company's job is to offer something differentiated that taps that same pull

Competitors growing fast prove buyers want the category, and buyers will split between bundled and standalone offerings

18:04 20VC: Lessons from Investing $2BN and Returning $8BN in Cash | Why Most Venture Partnerships are Broken | We Sold Salesforce Early and Lost Out on Billions | Are The Best Deals Always Expensive and Competitive with Jake Saper @ Emergence Capital

Josh Browder · May 18, 2026

Highly competitive markets are good places to invest, not bad ones

Markets are competitive because they are massive with huge customer counts — his best investments came from them, e.g. Owner in small business restaurant tech, and data labeling companies win contracts approaching a billion dollars from large labs

69:06 20VC: Turning Peter Thiel's $100K into $10M Angel Portfolio | The One Man Accelerator at The Four Seasons | Why VCs Can Be Sharks and What Founders Need to Know | Why Stocks and Cash are BS and You Should Invest in Land with Josh Browder

Harry Stebbings · Apr 3, 2024

His ideal investment is in non-competitive, large, old industries with legacy architecture and high pricing power, rather than categories contested by the biggest players

He doesn't want to compete against Sam Altman on foundation models or Dario at Anthropic or Microsoft

15:18 20VC: Founders Fund's Trae Stephens on Why The Most Competitive Deals are the Worst, Why No Company is Successful Because of their VC, Why We are Making ZIRP Mistakes Again Today, Why Loss Ratio is BS and Upside Maximisation is Everything

Harry Stebbings · Apr 10, 2024

Founders who set out to compete with Stripe or Shopify have implicitly judged the Collison brothers and Tobi Lütke to be weak founders, which is a poor assessment — huge markets with no competition are far preferable

22:19 20VC: Are the Best CEOs the Best Fundraisers, Are the Best Founders Insiders or Outsiders to a Problem, Why Ownership Should Not Be a Focus in VC & The Biggest Lessons Scaling MongoDB to $26BN Market Cap with Kevin Ryan, Founder @ AlleyCorp

Harry Stebbings · Apr 10, 2024

Low-competition, unglamorous markets like shipping are attractive to invest in because elite-university talent overwhelmingly goes into payments and B2B instead.

Graduates of Stanford or Harvard don't set out to innovate in shipping, so competition for those markets is thin.

37:06 20VC: Are the Best CEOs the Best Fundraisers, Are the Best Founders Insiders or Outsiders to a Problem, Why Ownership Should Not Be a Focus in VC & The Biggest Lessons Scaling MongoDB to $26BN Market Cap with Kevin Ryan, Founder @ AlleyCorp

Jason Lemkin · May 27, 2024

You should not pass on exceptional founders merely because their space is competitive — doing so loses you the Ripplings, Gustos and Datadogs; big markets often have more competitors, and for hyper-agile teams competition is even a positive

Those companies reach millions in revenue with a clever product that does three things and still only does six things four years later, instead of compounding exponentially in functionality

Scope: there are plenty of good companies in those categories today

18:29 20VC: Why Seed is Systemically Broken | Why Pricing is Worse Than Ever and There is More Funding Than Ever | Benchmarks for Churn, Retention and Growth Rates - Good vs Great | Why Last Vintage for Private Equity Will Suck with Jason Lemkin

Saam Motamedi · Jul 15, 2024

Crowded categories are not a new problem in AI — SaaS investing has always involved multiple competitors doing very similar things, and the same evaluation criteria apply.

In his eight years investing there have always been look-alike competitors; the differentiators remain best founder and management team, a point of view on product depth, workflow and stickiness, and uniquely self-compounding distribution — the same questions asked of non-AI SaaS companies.

Scope: concedes there may now be seven competitors instead of two or three

10:57 20VC: Why We Are in a Bubble & Now is Frothier Than 2021 | Why $1M ARR is a BS Milestone for Series A | Why Seed Pricing is Rational & Large Seed Rounds Have Less Risk | Why Many AI Apps Have BS Revenue & Are Not Sustainable with Saam Motamedi @ Greylock

David George · Dec 15, 2025

Overweighting the fear of future theoretical competition will always let you talk yourself out of making an investment

Hypothetical future competitors can always be imagined, so the fear is unfalsifiable at decision time

0:00 20VC: a16z's David George on How $BN Funds Can 5×, Do Margins & Revenue Matter in AI & the Most Controversial Bet at a16z

Harry Stebbings · Dec 15, 2025

The lesson from missing ElevenLabs and Deel is that trying to forecast incumbents' product roadmaps is a mistake — you should simply back the amazing founder

He thought he was smarter than the market and could predict OpenAI's roadmap for ElevenLabs, or that ADP and Paychex made Deel's payroll market unattractive, when the founder quality was the signal that mattered

23:09 20VC: a16z's David George on How $BN Funds Can 5×, Do Margins & Revenue Matter in AI & the Most Controversial Bet at a16z

Trae Stephens · Apr 3, 2024

The best deals are category-defining opportunities in industries untouched by modern technology for decades, led by a founder who knows how to play inside baseball in that sector

Flexport and Anduril both fit the pattern: no one was thinking about supply chain logistics in 2014, and defense was a hard, capital-intensive sector where a rebooted prime could be enormously valuable

15:44 20VC: Founders Fund's Trae Stephens on Why The Most Competitive Deals are the Worst, Why No Company is Successful Because of their VC, Why We are Making ZIRP Mistakes Again Today, Why Loss Ratio is BS and Upside Maximisation is Everything

Kevin Ryan · Apr 10, 2024

Non-sexy sectors running very old software are among the best opportunities, and the founders who surface them are people outside the usual investor imagination.

They just invested in hospital-meal management software: a complicated problem on ancient systems, a huge sector where hospitals pay $150,000 for software, and a category neither he nor Harry would ever have thought of.

37:22 20VC: Are the Best CEOs the Best Fundraisers, Are the Best Founders Insiders or Outsiders to a Problem, Why Ownership Should Not Be a Focus in VC & The Biggest Lessons Scaling MongoDB to $26BN Market Cap with Kevin Ryan, Founder @ AlleyCorp

Kevin Ryan · Apr 10, 2024

You want a big market with as little competition as possible, but such openings are very hard to find and usually come bundled with other risks like geopolitical risk

His mobile bank in Argentina faced little competition but carried geopolitical and other risk — and that combination of a big market with little competition is why it will be a $10bn company

22:37 Big market with low competition is rare and usually bundled with other risks like geopolitical risk

Mamoon Hamid · Oct 21, 2024

He doesn't mind competitive markets, but prefers products that create new markets

Market-creating companies get to create the playing field, play on it and win the game — Slack and in some ways Figma did this, as there was no notion of collaborative design software before

34:25 Market creating products are preferred though competitive markets are acceptable

Michael Eisenberg · Jun 19, 2024

Customer service AI and AI SDRs are not niches but the classic crowded software categories investors run to first; the better places to invest are out-there areas where specific domain knowledge makes competition hard

Those categories already had Siebel, Salesforce and Zendesk, so they are where everyone goes first, whereas non-consensus areas are protected by domain knowledge others lack

13:41 Customer service and sdr ai are crowded so invest in domain protected niches instead

Michael Eisenberg · Jun 19, 2024

Competition is not what undoes companies — bad execution is — and uncharted spaces requiring market education are preferable to invest in

In a genuinely uncharted space, like synthetically engineered rocket fuel built from the bottom up at a twelfth of the cost, nobody else is doing it even if the broad category looks crowded

14:28 Bad execution not competition kills companies so prefer uncharted markets

Jerry Murdock · Aug 22, 2026

When two heavily funded competitors are slugging it out in a market like legal AI, the right move is to fund the small specialized startup watching from the sidelines rather than either combatant

Competitive pressure makes both take risks they regret; the first to suffer a security leak — which will happen — wrecks its market opportunity, and the other is likely just as vulnerable because they are copying each other

30:23 Back the sideline specialist not either combatant

Harry Stebbings · Jun 10, 2024

As an investor, the desirable form of competition is weak incumbents, not a crowded field of well-funded startup rivals.

29:22 Weak incumbents not crowded startup fields are the desirable competitive environment

Mark Suster · May 1, 2024

Valuation and price discipline matter for firms that cannot replicate the Founders Fund model of plowing hundreds of millions into a single company and being consistently right

He isn't Brian Singerman or Peter Thiel and can't plan around that model, so discipline substitutes for it

40:41 Valuation discipline substitutes for firms that cannot run the concentrated category winner model

Adam Fisher · Jan 22, 2024

Since AI became hot he has run the other way, because AI investing is like betting on a horse race where you must pick the winner from ten runners in the stands

He can't make sense of the competition in these markets

44:20 Ai investing resembles a horse race with too many competitors to confidently pick a winner

Harry Stebbings · Jan 22, 2024 · hedged

AI is the platform shift everyone claims it is, so investors have to play the game on the field rather than sit out

He fears a world where vertical SaaS apps are killed by AI tooling democratizing build-your-own over buy

44:44 Must participate in the ai platform shift despite crowding and difficulty picking winners

Anjney Midha · Apr 14, 2026

Peter Thiel's 'competition is for losers' was not wrong but insufficiently precise: perfect competition is for losers, and monopolies are mafias — what's needed is optimal competition with three or four teams at every frontier

Perfect competition, like restaurants, offers no defensibility; monopolies stop innovating and use their balance sheets to acquire and hoard resources, so the healthy middle is a handful of teams making extraordinary progress but not comfortable enough to coast

42:13 Optimal competition of three or four teams beats both monopoly and perfect competition