My biggest competitor just raised $30 million. Here’s what I did next
Yesterday our biggest competitor didn’t have $30 million in the bank and today it does, says Scratch co-founder Mike Halligan.
Tuesdays are pretty boring around the Scratch office. It’s a meeting-free day where we can all just get stuff done at our own pace. Most of the time I take my pup Mello to the dog park and sneak in a nice brekkie for myself.
Some Tuesday mornings come with a little extra drama, like that Tuesday in October when another dog food company of a similar age to us announced a $30 million raise. Thirty. Million. I knew it would need to be raising and was well and truly on the VC train but the number really threw me.
This Tuesday wouldn’t be so chilled after all. Let’s add a bit of context. We’ve raised around $750,000 all up, the last of which was nearly two-and-a-half years ago. All of a sudden, we’re playing against 40x that, not to mention the nearly $10 million that had been pumped into that company already.
I try to personify a calm, methodical and sustainable approach to our team. A sense of this month’s numbers not being nearly as urgent as the business world would have them believe. But I wasn’t calm anymore. I wondered if the team had caught wind of the news. They had. I logged on to commentary from anyone from customer service to our graphic designer.
In times like this, I’m always extra conscious of the responsibility of leadership within even a small team of 11. Managers set the mood, the pace, the standards. Not calm, I posted a short nonchalant message to give the appearance that I was.
“Oh wow, good for them” or something to that effect.
Meanwhile, I took a few breaths and began to wonder if I really should care. Here’s how I approached it.
Dull the emotion
Most founders are competitive as hell. I can be the same, but just as competition can fuel serious motivation, emotional analysis leads to emotional decisions. Emotional decisions are usually dumb decisions. I looked back at our books, at our strategy notes for the year and felt comforted by Scratch being profitable, our customers’ dogs well fed, and our team feeling good.
Think about who the real competition is
Startups often think that their competition is other startups. Most consumer brands aren’t like that. We’re a 20% better version of dry dog food — not the most revolutionary thing to ever happen. Rarely is a consumer startup competing for customers from other startups. Our data shows that 99% of our customers switch from decade-old brands, not the new wave of dog food brands, and 90% of dog owners have never even heard of either brand!
We certainly didn’t plan on raising again so investor competition was out of the question. What we actually might be competing for is PR, media buying and occasionally hiring talent.
Review the strategy
“Slow is smooth and smooth is fast.”
I’m no Navy SEAL, but I love their famous approach to how you apply effort. It’s really the opposite of blitzscaling and raising a $30 million Series B. Both can work, but we prefer the craft of building a business with longevity, seeking the flexibility to look after people and community along the way.
Which is all well and good, but yesterday our biggest competitor didn’t have $30 million in the bank and today it does. If we stubbornly didn’t revisit our objectives and re-evaluate their feasibility with such a cashed-up competitor, we’d be running on emotion. Dumb decision.
So we reviewed our strategy, dusted off a SWOT chart, and did the same on how we saw it deploying the cash. Things started to feel under control.
Communicate with the team, and quickly
Many in our team were unphased, but some wanted to know what it all meant. Were we going to speed up growth? Would we need to raise again after two-and-a-half years of ignoring investors? What did they think we’d do with all the money?
Once we assessed where we sat strategically and whether our goals were at risk, we needed to be quick and refocus the team.
Things like this can be a bigger distraction than they think. It’s not often their friends are asking about dog food, but many would be.
Maybe they had past employers where strategy flipped after a piece of news broke and they were worried about the same. Some of them might be targeted by newly minted ‘Head of People & Talent’ roles, eager to bring in talent quickly and support that VC pace.
My girlfriend even got asked to interview with the company a week after the news broke!
You’re never completely sure what your competitors are going to do, but we’re full of respect for its abilities and figure the business smart enough not to think we’re its main competition either. Odds are that we’re sitting here in a year and nothing has changed, but we’ll each have continued on our own paths, happy and hopefully with plenty of healthy dogs thanking us.
Oh, and thankfully my girlfriend politely declined their job offer…
Mike Halligan is the co-founder of pet food company Scratch.
