Entrepreneurs are always biased to understate the scale of competition, but that is the biggest mistake a startup can make. That fatal temptation is to describe your market extremely narrowly so that you dominate it by definition.
Suppose you want to start a restaurant that serves British food in Palo Alto. "No one else is doing it," you might reason. "We'll own the entire market." But that's only true if the relevant market is the market for British food specifically. What if the actual market is the Palo Alto restaurant market in general? And what if all the restaurants in nearby towns are part of the relevant market as well.
...If you lose sight of competitive reality and focus on trivial differentiating factors--maybe you think your naan is superior because of your great-grandmother's recipe--your business is unlikely to survive.