Competitor Graveyard Analysis: Lessons from Dead Startups

Dead competitors aren't warning signs. They're roadmaps.

42%

of startups fail because they built
something nobody wanted

Source: CB Insights

The Wrong Lesson from a Crowded Market

When Dylan Field started working on Figma in 2012, the design tool market was crowded.

Adobe had dominated for decades. Sketch had emerged as the designer-beloved alternative. InVision was growing fast as the prototyping layer. Dozens of smaller tools carved out niches.

The conventional wisdom was clear: this market is taken. The incumbents are strong. New entrants get crushed.

And yet.

By 2022, Figma had grown so dominant that Adobe offered $20 billion to acquire it — what would have been the largest software acquisition in history. (The deal was later blocked by regulators, but the valuation spoke for itself.)

How does that happen in a "crowded" market?

The answer isn't that Figma was smarter or better funded than everyone who came before. Dylan Field was 20 years old when he started. The seed round was $3.8 million. The answer is that Figma learned from the graveyard.

The psychology: We suffer from survivorship bias — we see the winners and assume the market is competitive. We don't see the specific ways each predecessor failed, which means we don't see the gaps they left behind.

What the Graveyard Teaches

Every dead or struggling competitor is a data point. Not about whether demand exists — but about which approaches don't work.

90%

of startups fail — but you can
learn from their specific mistakes

Source: Startup Genome

When we run a graveyard analysis, we're not asking "did similar ideas fail?" We're asking "why did they fail, specifically?"

Because "similar ideas failed" is useless information. It could mean:

The market doesn't exist
The timing was wrong
The execution was wrong
The positioning was wrong
The business model was wrong
The technology wasn't ready

Each of these implies a completely different strategic response. Lumping them all into "competitors failed" is analytical malpractice.

Understanding why predecessors failed — not just that they failed — is also central to identifying what we call startup kill vectors: the specific, recurring failure modes that destroy companies in predictable patterns.

The Figma Graveyard: Three Failure Modes

Let's look at what Figma saw when they examined the competitive landscape circa 2012-2015:

Failure Mode 1: Platform Lock-In (Sketch)

Sketch was the darling of the design world. Designers loved it. It had momentum, mindshare, and a passionate community.

But Sketch was Mac-only.

This wasn't a small limitation. It meant:

Design teams were fragmented when not everyone had Macs
Developers couldn't easily access design files
Stakeholders needed special arrangements to view work
Collaboration required file exports and version chaos

Sketch optimized for the individual designer's experience. They made the person using the tool happy. But they didn't solve the collaboration problem — they actually made it worse by creating another format silo.

The lesson: Best-in-class for individual users isn't the same as best-in-class for teams. The pain wasn't in designing — it was in sharing designs.

Failure Mode 2: Adjacent but Not Core (InVision)

InVision grew by solving a real problem: designers needed to share prototypes with stakeholders. They built a great layer on top of design tools.

But InVision never became the design tool itself.

They were dependent on designers creating in Sketch or Photoshop, then uploading to InVision. This meant:

They were always downstream of the actual creation
They couldn't innovate on the core design experience
Their moat was thin — any design tool could add prototyping
They had to maintain compatibility with tools they didn't control

When Figma combined design and prototyping in one browser-based tool, InVision's core value proposition became a feature.

The lesson: Adjacency is not defensibility. If you're a layer on top of someone else's core workflow, you're one feature away from irrelevance.

Failure Mode 3: Bloat and Legacy (Adobe)

Adobe had everything: the brand, the distribution, the user base, the ecosystem. Creative Cloud was the industry standard.

But Adobe was fighting its own success.

Decades of features meant complex, heavy applications. Enterprise sales motions meant slow product cycles. Professional pricing meant small teams couldn't access the tools. File formats meant collaboration still required export/import.

Adobe couldn't simplify because their existing users depended on the complexity. They couldn't move to the browser because their architecture was desktop-native. They couldn't pivot to collaboration because their model was individual licenses.

The lesson: Incumbents often can't respond even when they see the threat coming. Their existing customers, architecture, and business model constrain them. Clayton Christensen documented this pattern in The Innovator's Dilemma — successful companies fail not because they're poorly managed, but because the rational response to their current customers prevents them from serving emerging needs.

How Figma Inverted Each Failure

Figma didn't just avoid the mistakes. They built the opposite approach:

| Predecessor Failure | Figma's Inversion | |---|---| | Sketch: Platform lock-in | Browser-native from day one | | InVision: Adjacent layer | Design + prototype in one tool | | Adobe: Desktop complexity | Lightweight, fast, simple | | All: File-based | Multiplayer, real-time, URL-based |

The browser-first decision wasn't a technical choice. It was a strategic inversion of Sketch's platform problem.

The all-in-one approach wasn't feature creep. It was a strategic inversion of InVision's adjacency problem.

The simplicity wasn't minimalism for aesthetics. It was a strategic inversion of Adobe's bloat problem.

The psychology: Founders often try to be "better" than competitors on the dimensions competitors chose. Graveyard analysis reveals that the winning move is often to compete on dimensions the competitors can't match due to their own structural constraints.

What the Report Would Have Shown

If we had evaluated Figma in 2013-2014, before traction validated the thesis, here's what a rigorous analysis would have surfaced:

Competitive Landscape: FAVORABLE

Multiple incumbents with structural limitations. Clear articulation of each competitor's weakness:

Sketch: Mac-only, file-based
InVision: Downstream dependency, thin moat
Adobe: Legacy architecture, pricing, complexity

Customer Sentiment: STRONG SIGNAL

Designer frustration with "file handoff hell" and "waiting for feedback" pointed to a collaboration-shaped problem, not a tool-shaped problem. The pain was in sharing and iterating, not in the design capabilities themselves.

Risk Assessment: IDENTIFIED WITH MITIGATION

"Browser-based performance" flagged as technical risk — honest about the hard part. But framed as an engineering challenge, not a structural barrier. If solvable, massive advantage. If not solvable, pivot possible.

Strategy & GTM: VIABLE PATH

Bottoms-up adoption (free tier to team conversion) meant Figma didn't need enterprise sales to start. Could prove value with individuals and small teams, then grow into larger organizations.

The Verdict: GO with specific path

Not "this market is crowded, don't enter." Not "Sketch and Adobe are too strong."

Instead: "There's a specific angle — browser-native, multiplayer-first, collaboration-shaped — where incumbents can't respond due to their own constraints. The execution risk is technical. The market risk is low."

This kind of nuanced verdict — not a simple thumbs up or thumbs down, but a specific strategic path — is what separates transparent, auditable analysis from generic feedback.

The Common Misread

When founders see a crowded market with failed or struggling competitors, they often conclude one of two things:

Misread 1: "So many have tried and failed — the market must be bad."

This ignores that each failure has a specific cause. The market isn't bad. Specific approaches to the market didn't work. Those are different claims.

Misread 2: "I'll just execute better than they did."

This assumes the predecessors failed from lack of effort or talent. Usually false. They failed because of structural constraints in their approach. "Executing better" on the same approach produces the same result.

The right read: Study why each predecessor failed. Identify the structural constraints that made their approach vulnerable. Build the thing that inverts those constraints — that can only exist because they proved what doesn't work. This is the difference between validation and verification — most founders validate that a market exists without verifying whether their specific approach avoids the failure modes.

The Graveyard as Asset

The design tool graveyard wasn't a warning. It was an asset.

Every failed or constrained competitor had demonstrated what didn't work:

Desktop-only limits collaboration
File-based limits iteration
Adjacent tools get absorbed
Complexity limits adoption

Figma's approach wasn't available to a first-mover. It required the graveyard to exist — to have proven, at great cost, which paths lead nowhere.

The psychology: We romanticize first-mover advantage. But in many markets, the advantage goes to educated followers who learn from predecessors. The trick is extracting the right lessons, not just observing that predecessors failed.

How to Run Your Own Graveyard Analysis

When you evaluate your competitive landscape, don't ask "who else is in this space?"

Ask:

Who tried this before and struggled? Not just direct competitors — adjacent attempts, failed startups, shut-down features from big companies.
Why did each one fail, specifically? Was it timing? Technology? Business model? Positioning? Execution? Each cause implies different strategic response.
What structural constraints limited them? Platform dependencies? Revenue model? Customer base? Architecture? These constraints often persist — their constraints become your advantages.
What approach inverts those constraints? Not "better than them" — but "possible only because they proved what doesn't work."
Can incumbents respond? If you invert their constraints, can they follow? Or are they trapped by their own success?

If you can articulate why predecessors failed and how your approach inverts those failures, a crowded market becomes an opportunity map.

If you can't articulate why you'll succeed where they failed, you're just the next entry in the graveyard.

Competitor Analysis Startup FAQs

What is a graveyard analysis? A graveyard analysis studies why previous competitors failed or struggled — not just who they were. Each failure has a specific cause, and understanding those causes reveals which approaches don't work and which structural constraints limit incumbents.

Are dead competitors a warning sign for startups? No — dead competitors are demand validation, not warning signs. They prove people wanted something in this space. The question is why they failed specifically, and whether your approach inverts those failure modes.

How do I find failed competitors in my market? Search for shut-down startups, discontinued products from larger companies, features that got killed, and products with declining downloads or negative reviews. Crunchbase, Product Hunt archives, app store histories, and news about pivots are good sources.

What's the difference between "executing better" and "inverting constraints"? "Executing better" assumes predecessors failed from lack of effort — usually wrong. "Inverting constraints" identifies the structural limitations that made their approach vulnerable (platform lock-in, business model, architecture) and builds an approach those constraints prevent them from copying.

How did Figma succeed in a crowded market? Figma studied why incumbents were constrained: Sketch was Mac-only, InVision was adjacent not core, Adobe was bloated and legacy. Figma built browser-native, all-in-one, simple — the approach that inverted each constraint. Competitors couldn't respond because their constraints were structural.

What if I can't articulate why predecessors failed? Then you're at high risk of repeating their mistakes. "I'll just execute better" isn't a strategy — it's hope. Before entering a market with failed predecessors, you must be able to articulate specifically why they failed and how your approach is structurally different.

References

Christensen, Clayton. The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business Review Press, 1997.
Adobe. "Adobe to Acquire Figma." Press release, September 2022. ($20B proposed acquisition, later terminated)
First Round Review. "From $0 to $10B: Dylan Field on Figma's Path." Interview series, 2020.

Verve Intelligence runs graveyard analysis as part of every evaluation — researching who tried this before, why they failed, and whether your approach inverts their constraints. Get your analysis →