The trick to doing well with these things is to be in a place where people are saying, Hey, that's a crazy idea. If you're right, there's the opportunity to produce something really big. You want to be one to three years early. You want to start before others think it's an easy idea. It's much harder to be successful when 10 similar things are all being financed.
--Reid Hoffman via inc.com
This is one of the tougher parts of entrepreneurship -- it's entirely unclear to most passive third parties what startup ideas are brilliant, and which ones are just insane.
Being early certainly has its benefits too. But just because lame competitors are getting funded doesn't mean you can't whoop them. It's just a little tougher.
Though if we wanted an easy life, we probably wouldn't want to start companies, now would we?