Similar to what people said don't worry the competitor validates your b-model and focus on your product not your competitor
In addition, remember to treat your competitors as frenemies. http://www.bothsidesofthetable.com/2010/12/27/why-you-should...
There's much more to learn about your space than you probably think and they've already been in the trenches and might have gone through some pain points you can skip.
Location: If they're national, I'd focus on being local. Look at the way Yelp did things in taking on Zagat, Citysearch, etc by focusing on a core market to build that strong loyal set of powerusers that on average were way more engaged (# of reviews per reviewer).
Lastly, I'd consider trying to figure out the competitors cost model. A lot of times many startups that are well funded get that larger funding round because they're looking to scale which means they're spending extra on marketing or sales. Some startups as such are focused on ramping up a sales team. If that's the case, you'll lose playing the game the way they're playing it (ie: groupon vs a local copycat clone since it might work locally but u'll never scale). Try to figure out different methods to do this, price model, sales model, marketing model (guerilla marketing vs traditional marketing), or whatever that will make you more unique and more cost-effective.
Gluck