Challenging and above the AI get bonuses. Generally speaking the big power jump at the start is just because of that, it tends to even out after awhile longer playing. Trick is, at least how i play, is try and colonize the farthest planets from you as possible first. That way the closer planets stay our of range of the AI for awhile and you can then start colonizing inwards. The extra planets you get prevent the AI from getting them and the inner planets a relatively safe for awhile, meaning you will have adequate planets to get ahead. When the AI meets you then, because your home world will stay out of range of them you normally get the bonus Diplomacy for "Your to far away" or whatever its called, they tend to focus on closer foes. Basically make yourself less of a target as they have easier prey elsewhere.
Also i tend to research the interstellar travel tech first, the one that gives +1move, and also the specialist for the extra +1 move. It really adds up early on when all your ships have +2 move speed. Also make sure you build custom cheaper ships instead of the default ones, i tend to make super fast ships with nothing else at the start to planet grab before them. The first colony ship i get i send as far away as possible that way i get a large range boost so the life support wont matter as much. And dont worry about sending a colony ship out to get a good planet even if it say, has .5 pop. a planet is a planet, instead of taking 1 planet with 3 pop you can take 6. there is also the early Tech for the +4 morale bonus if that becomes an issue. Also as soon as you see any AI or Minors trade for some techs that are useful which gives u Bonus power rating.
Generally speaking yes you will be gimped and slightly slower at the start, BUT as the turns progress you will find yourself way ahead from all the extra planets.
Oh and also, change the government wheel at turn 1 to 50/50 manufacturing/research. money is useless early game, if you really need money just sell techs to near by Minors.
There are alot of other things you can do like rush building improvements and things as well but generally you should be fine, eventually u will find it all second nature and find your own strategys to. Hope this helps 
