Since starting my company and volunteering for Portland Startup Weekend, I have had the opportunity to be around hundreds, if not thousands, of both budding and experienced entrepreneurs. During casual conversation and formal presentations, entrepreneurs regularly share with others what they are building. They say "I'm building an Instagram for pet photos" or "My company brings together artists and art collectors," sometimes even "I'm making the next Facebook."
One of my biggest pet peeves is when a person listening to a new business idea says "but someone has already built that!" At a recent Startup Weekend, one of the participants was excitedly pitching their new product to an official mentor who responded by saying "Company XYZ has already built that" before walking away and writing off the entrepreneur and their abilities.
Doing this is one of the most naive and unhelpful things you can say to an entrepreneur, and I am asking you to stop. Now.
Thank god Larry and Sergey didn't listen to the naysayers that likely said "but Yahoo already does that" upon hearing about Google. Thankfully, Apple didn't look at Blackberry and say "Well, someone has already made a smartphone, so we don't have to." There are 1 billion people around the world that wouldn't be connecting with friends, family, and strangers online if Mark Zuckerberg decided that the world didn't need Facebook because MySpace already existed.
Simply the existence of a product or service means nothing. Is it the best it can be? Does it serve all potential customers? These high level questions lead us into more detailed ones. Is it priced right? Do consumers want more....or less? Does it serve all the consumers it could?
Additionally, the entrepreneur you are talking to probably already knows about XYZ company that you so quickly jump to say has already built what they just pitched. You aren't telling them anything they don't already know. If someone said they wanted to start a new car company, do you think you'd need to tell them that Ford already exists?
So here is what I want you to do, here are the helpful things you can say. First, be honest and don't grin fuck them (tell them what you really think). Instead of saying that a competitor exists, approach the topic from another angle by saying "so how are you going to differentiate your product from company XYZ?" Ask what company XYZ has done right, and what company XYZ has done wrong. Ask what consumers in the industry as asking for, and ask how the entrepreneur will deliver it.
Simply stating that a competitor exists is an insult to the entrepreneurs intelligence and shows your inability to have an intelligent business conversation. However, if you approach the conversation as I have suggested above, you'll not only look more intelligent yourself, you'll be providing value to the entrepreneur through your questions. You'll give them a chance to show that they have researched the competition and that they have thought about how they'll effectively compete.