Who are your company’s competitors?

What are investors really asking?

How knowledgeable are you on the space? Who else is thinking about this idea?

What investors want to hear.

Investors are trying to understand how well you know the competitive landscape and if you’ve been able to learn from competitors’ prior failures and successes. Showing how well you understand the competition is also a good segue into talking about your competitive advantage. In addition, competitors serve as proof point validation that an industry is ripe for disruption.

Let’s look at two approaches to answering this question.

Bad Answer: We don’t have any competitors. (Side note: I know this is what you want to say. You’re building a brand new product and out-innovating complacent incumbents such that they no longer feel like competitors. But here’s what investors hear: There isn’t much of a market for your idea and/or you’re not knowledgeable on the space. Whatever the truth, neither option is good for you.)

Good Answer: Our top three nearest competitors are X, Y, and Z; although all of them are tying to be destination sites and the teams behind them don’t have a history in the target market. We, on the other hand, are multimodal, being a website, mobile application and social web application — and we’ve been living and breathing this space for the past 3 years

Originally published at facingthenumbers.com on April 25, 2016.