I’ve just finished sitting on a judging panel, and reading a stack of applications from eager entrepreneurs looking for funding.
It was shocking to see how many companies couldn’t, or didn’t, answer this one simple question: ‘who is your competition?’
Virtually every company we reviewed had a really interesting idea. The businesses all looked wonderful in a vacuum.
The thing is, businesses don’t exist in a vacuum. Businesses exist in an ecosystem with other businesses, and other solutions. Yes, we buy that your (potential) users have a pain. Yes we buy that you have this nifty vision of a way to solve that pain. That’s great.
What’s missing is an understanding of how customers are solving that pain today. Who do you compete with? Who else can that customer buy from?
Some entrepreneurs may be shy about listing their competition: don’t be. Having competition is a good thing. It validates the need, and shows there is a real pain. If you have zero competition, it sounds like the problem isn’t really that painful.
Some entrepreneurs may not know their competition. That shows that you haven’t talked to enough customers (often because you were just building). Get out there! From personal experience, I know the more time you spend in the market selling your solution, the better you know your competition: as you hear what people are using or buying instead of you. It’s painful, and important, knowledge to learn
Some entrepreneurs know their competition, but don’t know how to communicate it. They say ‘we are better than competitors with the hairy black hole approach’ without naming any names. If you’re not from the industry, you don’t know what the hairy black hole solution is and who offers it. That makes it hard for us to go to the websites for competitors and see what their solution is. Don’t make us research: just name them.
If you were running a real business, making real sales, and someone asked you to list your top 5 to 10 competitors, you would probably be able to rhyme off their names. Then you would be able to rhyme off the reasons why people choose you or them.
If you aren’t making real sales yet, show that you are ready to. Be able to tell us who your competitors are, by name (and why you’re better, of course).
Kamal Hassan is the CEO of www.VentureLynx.com, a platform for entrepreneurs and their ecosystems. The firm’s vision is ‘all corporate information, for all stakeholders, in one place’ – which drives time and money savings and stronger relationships for small businesses and those who work with them. Kamal has run businesses for the past 15 years, and started investing 10 years ago. He writes regularly at blog.venturelynx.com.