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Don’t Throw The Competition Under The Bus

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Much of what an entrepreneur presents when speaking about their company to potential investors is defining market in which they operate — which, of course, leads to identifying the competition.  As we wrote here and here, articulating the market size allows for investors to understand the growth potential of the company.

During this part of the presentation, we not only listen to what the entrepreneur says about the competition, but also what they don’t say.  It’s important to identify the competition — this shows you understand the market.  It is also important that you don’t speak negatively about it; trashing the competition doesn’t win points.

We take a few points from Martin Zwilling’s playbook, where he provides seven ways to speak about the competition and the market to define the investment opportunity:

  1. Frame the competition as manageable:  First of all, going into a meeting saying you have zero competition isn’t realistic, nor believable.  Investors want to see that you have a sustainable competitive advantage.  Use three generic categories, and relate your position to a key player in each.  Remember come industry competitors could be considered alternatives — like train vs. plane vs bus.
  2. Highlight your positives to suggest competitor shortcomings:  This is where eliminating the trash talk comes in.  Position your company against competitors with positive statements about the advantages of your own product/service.
  3. Emphasize intellectual property and a dynamic product line:  If your company has patents or trademarks on the product, this trumps your competitive position in the market.
  4. Demonstrate expertise on the range of competitors: You don’t need to know every detail about your competitors, but you need to know enough about each one.  Investors do their homework and they will challenge your claims.  Be prepared to defend them.
  5. Become a thought leader on industry evolution:  As the CEO of the company, you need to be the “master of your universe” when it comes to understanding it.  Show that you have thought about indirect competitors and alternative solutions.
  6. Develop a timeline showing continuous innovation:  Most investors are in it for the long haul.  Demonstrate you’ve thought into the future and your company isn’t just a one-trick-pony.
  7. Position your solution in the world market:  While many companies start out local, every entrepreneur needs to think globally.  E-commerce solutions have allowed global distribution to scale quickly.