Do you know who your competition is?

I’ve been doing a lot of investor pitch preparation with clients recently and one area where companies are consistently weak is the “competition slide“.

Looking for some inspiration on improving these I came across a great analysis from Jason Cohen of Capital Factory in Austin.  He identified two classes of competitive positioning flaws that showed up frequently in 150 pitches he reviewed:

  1. Being dismissive of the competition or worse claiming to have no competitors
  2. Defining your company by comparison with the competition

I’d add a third:

Misunderstanding what a sustainable competitive advantage is.

Let’s look at each of these in turn.

“We have no (real) competitors”

95 times out of 100 this translates to, “we haven’t explored our market space thoroughly and/or we don’t know the industry in which we’ve chosen to compete.”  Four times out of 100 it maps to, “our solution is truly novel but we haven’t considered substitutes, the status-quo, homegrown solutions and the like as competitors for the customers time and money.”  One time in 100 (at most) it’s true; which sounds like a great thing but is often a curse given the high cost and extreme difficulty of creating a new market or the possibility that no competition means that there isn’t a market at all.   All three are red flags for investors looking at your pitch. In the first two cases, do your homework. In the last, think long and hard about whether this is the right go-to-market approach.

“We are just like competitors X and Y but cheaper” or “We combine all the best features of competitors X, Y and Z”.

“Cheaper” is always interesting but often doesn’t pass scrutiny in one of two ways:

  1. The price advantage isn’t sustainable
  2. The company is only considering the cost of its product in the “cheaper” equation not the total solution cost.

If your strategy is to combine the “best” features of your competitors, which customers are you “best” for and why?

“We are {smarter, faster, nimbler, more dedicated and passionate} than our competitors and we have (secret, patented) feature X.”

Smarter, faster, nimbler, dedicated and passionate are traits that every start-up team touts and often it’s true (at least compared with some competitors) but it’s unprovable and claiming it shows both hubris and naivete.   If your competitive advantage is just a particular feature, protected or otherwise, what do you plan to do when big company A or better funded start-up B inevitably copies it?

So what should you do?

  • Make sure you’ve identified all viable competitors and alternatives available to the customer.  Ask yourself , “How are my potential customers solving this problem now?” or “If our company didn’t exist what solution would I recommend to our customers?”
  • Present an objective analysis of how you’re different from the competition now and how you plan to stay that way.
  • Don’t do an exhaustive feature by feature comparison but rather focus on the handful of key areas that matter to your chosen customer segment.  Ask yourself, “If I had to choose just one competitive advantage what would it be?”
  • If there’s an area where you aren’t as good as the competition, make sure to identify and address it.  You’ll build credibility.
  • Use the common “harvey balls” in a table or a “2×2 matrix” if they effectively communicate your competitive positioning.  If they aren’t the right tools for the job, explore other options like the Blue Ocean strategy canvas or this interesting approach from Kirill Sheynkman.

A weak competition slide is what investors typically see.  Making yours credible, complete and insightful will help your start-up stand out.

Mark Zimmerman

Mark Zimmerman has been working in the information and communication technology industry for more than 15 years. He’s worked with some of the biggest companies in the industry, but he’s also worked with very early stage start-ups—so he knows what it’s like to be in an entrepreneur’s shoes. See more…