Know your Competitors — and Know How to Talk About Them with Investors
It always makes me smile a little when a startup says that they have no competitors. On more than one occasion I’ve had to awkwardly show a startup a competitor that they’d never heard of and then send them home crestfallen to do some homework before working on their pitch. (Hey, better this happening with me than with 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 what would be the fun if Apple didn’t have Samsung chomping at their core? But just because Apple is killing it in a certain market doesn’t invalidate Samsung. There’s room for both.
So how do you handle competition when pitching to investors?
- Know your Landscape Inside and Out — Look under every tree and rock to find who your direct and indirect competitors are. 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. For example, VRBO is a direct competitor of Airbnb but Craigslist is an indirect competitor because they also offer short term rentals, but don’t have the whole ranking and payment system in place. Even though VRBO was considered the underdog to Airbnb, that didn’t stop them from being acquired! Where do you find 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 as well, but there are websites like SimilarWeb that can give information on competitors — and here’s a great Quora post that gives other insights and tips.
- No Talking Trash — 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 then. It also reflects badly on you that you have to belittle your competition to aggrandize yourself. 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. For example, I had a client building an Enterprise solution that had 3 competitors that were acquired by Gartner in the past 12 months. That’s a pretty big signal that if he could prove his capabilities that he might be snapped up by a Gartner competitor.
- 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:
Where your startup is at the center of several competitor types, each touching on a specific aspect of your solution, but you actually encompass all of them all. Note that there are only about 3 of the top companies in each petal — this is a good representation without over-crowding. You don’t have to have 5 petals — even 3 is enough — it’s a great way to solve the conundrum of having more than 2 metrics to measure your uniqueness by.
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 even more than the answer!
Have more questions? Need more guidance? Talk to me!
Donna Griffit — Corporate Storyteller
Donna Griffit is a Storyteller for Startups who, over 15 years, has helped hundreds of startups and VC’s around the world raise hundreds of millions of dollars. Need a pitch deck? Click Here.
