Talking to investors about the competition must be taken seriously. Your words, arguments, and the tune you use while discussing competition could be the difference between moving forward and rejecting your fundraising request.
Investors care a lot about discussing competition because it shows them whether 1) you have done your homework, 2) you have an arrogant personality, and 3) you can think strategically to grow despite competition.
Here we will show you a few tips to keep in mind that will help you ace the Competition Talk with potential investors.
Tip #1: Do your research, really.
Never say you have zero competition! This is a huge turn-off to potential investors and will raise serious concerns. Even worse, the investor might mention some current competitors you’re not aware of.
Do your homework before meeting with the first potential investor. You must be aware of the market’s shape, different types of competition, and the big names in your market.
Competition can be divided into direct and indirect. Direct competitors offer a very similar solution to you, while indirect competitors offer a different solution to the same problem you solve.
Additionally, be aware of:
1- competitors serving different geographic locations.
2- big names, e.g. Google or Meta, that might compete with you in the future.
3- new upcoming competitors. Turn on Google alert to stay updated with new companies.
Tip #2: Use competitors as a motive for investing
The existence of competition means both good and bad news:
- The bad news is that they are slicing the market with you.
- The good news is someone else saw the potential of your opportunity and believes in it too.
Investors don’t want to miss a new trend, industry, or technology. When a competitor surpasses you with a key success, raising a new round for instance, you can turn that into a key advantage for your case. Show investors that it’s a great space to invest in right now and the competitors are good proof.
Tip #3: Big companies are potential acquirers
Your company might be innovating in a product that is offered in a different form, or could be offered, by big companies such as Google and Meta. If this is the case, you are in for a big competition and investors have all the right to be concerned.
But here is the catch, these big names could be your potential acquirers, serving you and your investors with an early exit. Not every startup investment should end with a successful IPO. Most exits happen by acquisitions. Some founders even build companies with the very goal of selling them to acquirers.
Turning the threat of corporations into a potential opportunity makes your investment even more appealing and attractive to investors.