I have a tech startup I'm looking to do in the mobile applications space. I thought my idea was very unique and my business partner and I spent about a week coming up with planning, name, concept, etc.
About a week after we started we identified a competitor that we had missed in our initial searches for competitors. This competitor's application is nearly identical to that what we wanted to build. This was probably 2 - 3 weeks ago.
Now, this is the kind of idea where we were planning on actively pursuing investors for funding. In trying to think about how we differentiate ourselves, we came across the business model - the competitor was charging users of the app; but we were going to go a different way in order to grow the app user base quicker (free = good to the user, right!)
This afternoon while working on the biz plan I realized that they modified their business model so it no longer charges the user - putting it almost in line with our idea to a T.
There can certainly be more than one player in this space. This competitor has about a year's head-start on us and just received their Series A funding. They are also geographically segregated from us; although honestly this is really a nationwide kind of thing, although their focus has been on implementing in certain cities.
I'm guessing from an investor perspective, it's probably a + to see that the concept is getting funded. But also a negative to see such direct competition. Also, it makes me feel validated that my Idea is good. But it's also frustrating to see someone with such a headstart (and $$!). I have a few differentiation ideas but they are all related to product scope that I was going to put as "future enhancement" list in order to not slow down the deployment of our beta release.
My questions are; how will an investor feel about this and how do I tackle it? I'm assuming I need to think of some other level of differentiation... and I have one idea on the business model side (per-use fee instead of flat recurring fee).
And also - are there risks with IP that would spook investors? I don't have a patent right now; I don't believe the competitor does either.