“Oh we don’t have any competitors.”
When I hear that from a startup I know it’s going to be a painful pitch session.
On more than one occasion I’ve had to awkwardly show a startup a competitor that they’d never heard of, sending them to do some homework before working on their pitch. (Hey, better me than an investor!)
First, let’s get something straight — competition is a great thing! With no Jerry we’d have no Tom, with no Roadrunner we’d have no Coyote and then there’s the Microsoft/Apple, Samsung/Apple, Google/Apple rivalries that fuel the tech game and keep things fresh and interesting.
So how should you address your competition when pitching to investors?
- Know your Landscape Inside and Out — Look under every tree and rock to find your direct and indirect competitors. Direct meaning they are doing something very similar to you and targeting the same audience, indirect meaning they touch on your target audience but solve their problem in a different way. Where do you find your competitors? Google is the obvious first stop (and set alerts for keywords of your startup so you find out if any new competitors emerge), Crunchbase and SimilarWeb can give information on competitors and here’s a great Quora post that gives other insights and tips. My favorite and most exciting find of the past few months is Wonder, an amazing site with analysts that for a low fee can do your competitive landscaping for you.
- No Trash Talking — Don’t ever say anything bad about your competitors — you don’t know who might be sitting in the room that’s an Investor/Board Member/Mentor of one of them. It also reflects badly on you that you have to belittle your competition to to make yourself look good. Try something like — “What Competitor A is doing is ABC, we do ABC plus we have a magic dose of XYZ…”
- Build on Your Competitors’ Success — If a competitor of yours just was acquired or received major funding, use this to show how hot the market is, hint that you might be next because you have a secret sauce that they don’t and make them feel that they could be missing the opportunity of a lifetime. No Investor likes to feel that they missed out on the next big thing.
- Show — Don’t Tell — Martin Zwilling, an Angel Investor stated in a recent article that “Every investor hates those large competitive analysis tables filled with check marks and red dots.” So do I — it makes my eyes bleed. You want to have a visual that explains it at first glance. Here are 2 good options:
- The “Magic Quadrant” — a graph attributed to Gartner, shows how you measure up to competition based on 2 main metrics. Here’s Airbnb’s original competition slide:
They use Affordability and Online Transaction as the metrics.
- The “Petal Diagram” — steve blank, Serial Entrepreneur, Lecturer and Author of Startup Owner’s Manual, suggests at a different approach, especially helpful if you have more than 2 metrics to measure your differentiation by:
As you see to the left, the ever popular slack is at the center, touching on business communication/chat, collaboration, file sharing, unified communication and task management. It competes with them all but it actually does all the things the petals do in one tool!
Put your startup in the center, think of the main competitor types that you have — you don’t have to have 5 petals — even 3 is enough. Don’t overcrowd — only about 3 of the top companies in each petal. —
5. Keep it Cool — The most important thing — keep your cool, breathe, count to 10 and then answer a difficult question. Remember — they are watching to see how you deal with challenging questions, maybe even more than the answer!