7 Keys to Positioning Your Competitors to Investors
Every entrepreneur should spend plenty of time thinking about competitors, and how they relate to your business, but you need to be very careful what you say out loud about them to your team, your investors, and your customers. What you say speaks volumes about how you think about your startup, how smart you are, and your personal integrity.
I’ve spent hours talking to startup founders, and heard a thousand startup pitches, and I always listen carefully to what is said (or not said) about competitors. Everyone has a view on competitors, so you will likely get some off-the-cuff questions on this subject as well. Here are some common pitfalls or traps to avoid:
- Above all, don’t say you have no competitors. This statement is a huge red flag to investors, who will take it to mean that there is no market for your offering, or you haven’t bothered to look. Both conclusions will kill your credibility, and usually preclude any further funding interest.
- Avoid degrading or demeaning your competitors. Talking about competitors is your opportunity to make positive statements about the advantages of your own product. For example, “Compared to product x, my solution will get the job done in half the time, and at half the price.” Don’t say “Product x is more expensive and hard to use.”
- First-mover advantage is a double-edged sword. Being first to offer something is often used to cover the fact that you have no patent or intellectual property. Investors will conclude that you are highly vulnerable to the deep pockets of big players who will wake up and kill you when you show traction. The best defense is a dynamic product line.
- Don’t be caught not recognizing a potential competitor. Do your homework ahead of time on all potential competitors you can find on the Internet, from industry magazines, advisors, and team members. Great momentum in a meeting can be killed instantly by apparent ignorance or bias against a proposed competitor.
- Don’t forget to mention alternatives and substitutes. Make it clear that you have considered competition in the broadest sense, including indirect competitors and alternative solutions available. You won’t get any credibility for refusing to admit that airplanes are competition for trains. Always present a balanced and honest picture.
- Watch the timeframes implied in comparisons. Making a big point that your competitor is missing a big feature today that you will have when you come out next year is not very convincing and doesn’t make you look smart. If it’s important, he’s probably working on it also, and has a big head start on you.
- Competitors exist now and in the future. You can make real credibility points on this one by suggesting future competitor directions, and what you are doing to head-off these initiatives and advantages. Remember that the world is a small one these days, and international considerations, as well as technologies, are important.
Remember that investors invest in people first. They are looking for you to be smart, but present a balanced, realistic, and honest view of competitors. Trying to finesse investors who have real questions about competitors is not the way to close an investment deal, or even convince a customer to buy from you.
In the real world, you will never have perfect answers to questions about competition, because you can’t know what they might do before or concurrently with your delivery. Your challenge is convincing investors and customers that the risk of following you is less than the risk of relying on competitors. That’s a lot easier if you believe it yourself, and present a balanced view with integrity and conviction.
Written by Martin Zwilling
You might also be interested in
A year ago, in mid September 2014, I walked out of a Starbucks in San Francisco with the very first check from an angel investor for Glassbreakers. Though it was only $5,000, it was enough to prove to myself and my co-founder, Lauren Mosenthal, that we could actually fundraise for our startup. We already had 1,000 women signed
The median investor looking at your proposal is in her 40s. Her eyes are going, not to mention her brain. I look at a lot of spreadsheets and analytic reports, and way too many are difficult to read and therefore hard to understand.
In an effort to make my life easier, I’ve summarized here the steps that will make it much
By Paula Taas, Founder Institute
You’ve created an amazing founding team, you’ve built a brilliant product that has been gaining a lot of traction, and now you’re looking to expand your company. How do you continue to build your business? By searching for a lead investor in your next funding round.
The lead investor is the first step in
What this investor is seeking is called “permanent, full-ratchet, anti-dilution protection”, and that is neither (a) in line with the market, nor (b) practical. Even if you were willing to give it to him, it is highly, highly unlikely to stand up beyond the next financing round, because there’s no way your next investor is going to take a dilution
First, it’s important to understand that the four platforms you list fall into two very distinct groups.
Kickstarter and IndieGoGo are project-based crowdfunding platforms through which anyone can contribute money, either as a donation or with the promise that they will receive a tangible ‘reward’ of some kind if the project is successful.
Gust and AngelList are equity-based platforms, used by Accredited Investors to facilitate the investment of money for an ownership interest in a company.