Monday, October 24, 2011

Pitching to Angel Investors: Competition & Competitive Advantage

If you want an investor to stop listening to your pitch presentation or to stop
reading business plan, state how you don’t have any competition. You might be
surprised at how many entrepreneurs make this rookie mistake in their pitch
presentations--we hear it constantly, and it’s almost certain that you’ll lose
credibility instantly with investors.

I believe that entrepreneurs that say they have no competition are trying to convey a broad opportunity to exploit a market--the problem is that it has the opposite effect. The main reason is that the customer is solving the problem somehow now,even if indirectly in comparison to your solution. There’s always another company competing for the same dollar, and even worse, If the investor finds out about a competitor from someone other than the entrepreneur then it makes them look even more unprepared.

When researched thoroughly, the competitive analysis in your business plan
demonstrates to potential investors that you understand the strengths and weaknesses of your business. It also gives them a better picture into the market opportunity.

When doing research on the competition for you plan or pitch presentation, you should focus on answering the following questions:

1. Who is out there competing for the same dollars that you’re going after?
2. Are they directly or indirectly selling products, services, or substitutes that
3. What are their strengths and weaknesses in the market?
4. How are they currently positioned in the market.
5. What segments of the market do they operating in?
6. What is their go-to-market strategy and how does that differ from yours?
7. What threats do they pose that may impact your business?

In other words, perform a SWOT Analysis (Strengths, Weaknesses, Opportunities,
Threats) on each one of your competitors and compare them to your company.

When you go to present your findings in the business plan make sure you:

1. List the key competitors with their strengths/weaknesses in comparison with your
2, Show specific competitive advantages of your solution.
3. Use numbers to make the comparison. The more numbers, the more solid your company
looks. Use numbers to show market share, your economic benefit, etc.

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