Competition analysis for noobs that want pro results, Hack funding 102
Chapter 2, Pre-game
Competitive analysis is the document that shows you, who you are competing with, directly, indirectly, currently and in the future.
Why you need that?
Knowing your competitors is a crucial part of your marketing plan. From product development to fundraising, to scaling, keeping track of your competitors can make the difference between winners and losers.
In Hack funding, we need competitive analysis to locate relative investors for your business plan.
“But Chris how likely is for an investor to extend his exposure in an industry by investing in competing or potentially competing startups?”
“-Very.”
And, it is not science to explain why; Venture Capital funds, both private and corporate, tend to focus on specific industries. The more investors there are in your market, the less widen their scope is. By focusing on specific verticals, they can achieve greater returns by using their expertise as leverage. So do not worry, there are numerous cases an investor has put his money to companies that were competing from day one.
Competition analysis and Business model.
A company’s success is attributed in many cases to two factors:
What do you sell and who do you sell to?
How do you sell it and make revenues?
What do you sell shows the exact vertical you business operates.
How do you sell it demonstrates your Business Model.
Vertical VS Horizontal Market
There are many cases that a company operates in more than one market verticals. Thus, it caters more verticals with the same product.
Business Model VS Verticals
Your vertical indicates what and to whom you sell and your business model how you sell it. It seems a straightforward distinction but more than often not so obvious. The most used example is the one from Google. Google (far before alphabet was formatted) had a core operation of being a search engine. That was its primary industry, and it was/is free so how Google earned money? -Through advertising. Various features and products (Google ads, promoting content, etc.) enabled Google to create immense revenues. So Google search engine was in data research vertical, but its core business model was advertising. We will talk more one business model in a while.
Take a look of how mattermark aggregates all the kinds of Business models and industries in one list.
Keep in mind that:
- Your business can utilize various Business models and operate in a number of verticals.
- Some verticals can also work as business models (i.e., Advertising) but in a different context.
- Sometimes there is a gray area between verticals (i.e., a startup may partially cater a couple of verticals but none 100%)
Create a competitive analysis using Mattermark.
In this very first task, you have to choose the business models and verticals that fit your business plan.
You may also place a couple of keywords that better describe what you do.
So now you should have a list like this:
Next step is to identify which of these companies are direct, indirect and potential competitors.
From this point and on, your job gets a bit manual. Check each one of your findings, strike out those you believe are irrelevant and create three lists for your direct, indirect and potential investors.
Direct, indirect competitors.
As direct competitors, you may list all of those providing the same product/service as you do. As indirect you may list all those offering a slightly different product that doesn’t necessarily tap the same market as you do, often called subsidiary product. For example, an equity crowdfunding platform selling equities of seed, series A, rounds in accredited investors is an indirect competitor to a platform selling equities of pre-IPO private companies to the public. Both of these startups utilize the same business models and target -roughly- the same market segment, but their final product is different in many ways.
Tip: A useful shortcut would be to check the right section of each startup profile called “similar companies” . You can double check and maybe register more startups from there.
Last but not least. Now that you have taken a deeper look at your market, you may go to CBinsights /Analytics & Research /Industry Analytics from there you can see a snapshot of your industry. Then you may dive deeper to explore the numbers of your industry with a visually pleasing and easy to comprehend way.
Now you know how easy is to make a competitive analysis by using the right tools. In the next installment, we will enter the in-game phase, within this section, we will use the findings from competitive analysis to locate suitable investors.
Till next time,
Happy Hunting!
