This has happened to me as well and, for lack of a better term, it sucks. Especially when they've executedso much more brilliantly than you could. The way I try to deal with these types of cases is to try my best to not get emotionally attached to the idea until I at least see the opportunity.

I'm currently working on a startup, and while our market isn't crowded by any means, I think having a few strong competitors puts us in a better position - they've made the mistakes so we don't have to.

Each competitor I see certainly nudges the bar higher, but it's only a nudge. Ultimately, we're all building web applications. They're just code, markup and javascript. The great thing about the web is that the entry requirements are very low and your competitors, no matter how strong, can never raise those requirements.

FWIW, my startup is testled.com. Our competitors are people like userfly.com, clicktale.com etc.

Check out your homepage on IE8! Those little green buttons are a problem.

Thanks for the notice - we're rolling out a new version of our homepage really soon, we'll have all this fixed. Cheers!

Yup, it is discouraging, but it's one of those things you have to do, otherwise you're just fooling yourself.

You have to ask yourself, why am I being discouraged by this competitor? Usually it's because you're afraid that whatever you had in mind has already been done. And that they're already doing it better than you'll ever can. In that case, you should take your discouragement as a real signal.

Take care of the tougher aspects asap, you'll have to go through them anyway.

I agree it is discouraging. Plus if you have an idea chances are someone else has already thought of it and probably implemented it (assuming it was a good idea). So you might as well assume there's already an competitor and just focus on the competitor's flaws and try to improve on them.

Facebook started off nicely despite having Myspace and a bunch of other social networks.