The Competition: The Competitors You Think of and the Ones You Forget

When you’re planning your business, you obviously need to consider your market and how you will compete with companies already in your market space. And when you’re planning to position your product, you should be considering the strengths and weaknesses of your competitors. But there’s another less obvious area of competition that you may not be considering at all. If you are going to seek outside investment, you need to consider how your business will compare and compete with other businesses seeking investments from the same investors.

Part of understanding your market space involves understanding your competition. Since nobody plans to build a bad product, you can assume that your competitors at least tried to address customers’ pain points. So, you should understand not only the weaknesses of their products but the strengths as well. Understanding can also help you to define what your own product needs.

If you decide to put a chart into your pitch deck that shows features and competitors where your product is the only one to check all of the boxes, you should understand that there will be some naysayer in the room, usually me, who will ask you about what your competitors are missing because they don’t have some of the boxes checked. Is it possible that those features are not important? They may also ask what your competitor’s charts would look like if they made them. What capabilities would they list that you’re not satisfying?

Understand also that you only know about some of your competitors. Just as you are flying below the radar, there may well be other startups that are also addressing your market space. There’s nothing you can do about that, but you need to be aware that your audience may well have seen 3 similar products in the last year.

Remember that there is more than one dimension of competition. You are looking at your product and comparing it to other products in that space. That’s one dimension.

If you are seeking outside investors, remember that they see a lot of deals for a wide variety of products.

Investors have a finite amount of capital, so you have a lot of competition for their funds. Remember that many, possibly most, deals don’t attract funding. So how do you make your pitch more likely to succeed?

Consider the deal you’re presenting to potential investors. How does it compare to other deals they are seeing? You want your deal to stand out. You want your deal to be appealing. Here are some things to consider as you are thinking about your pitch.

• Tell investors about the deal you’re proposing. This means both what you are asking for and what you’re proposing giving to get those funds. A lot of pitches state what the company wants, but are mum about what they propose the investors get in return.
• Remember that if investors don’t see adequate returns, they can’t keep investing. So tell them about what you believe their investment will return.
• How realistic are the prospects for investor returns compared to other deals they see? You should think seriously about this.
• Is your valuation too high? Most angel investors I know don’t use a particular method to calculate valuation. Generally, they look at other deals that are around and decide how your deal compares.
• Don’t depend on negotiating down if your valuation is too high. While you may be willing to go down 20%, if the investor thinks the valuation is 100% too high, they may not even care to engage.
• Is your product exciting? Is your presentation exciting? You need to engage your investor audience. You need for them to see your excitement and buy in to your vision. If you can get that excitement and engagement, your chances of successful fund raising increase a lot.

Remember that there is more than one dimension to consider when you are looking at your competitive landscape.

It’s important to remember that you’re not only competing against other companies in your market space, but you’re also competing against other deals for completely unrelated products.

David Kessler is an active Angel early stage investor in Boston MA, USA. He is involved with Boston Harbor Angels and is part of the Capital Network’s Advisory Board