6 Strategies To Position Your Business Against Rivals

In their passion and excitement about a new product or service, entrepreneurs tend to continually narrow the scope of potential competitors, and often claim to have no direct competitors. This raises a big red flag with potential investors, who conclude that no competitors means no market, or you haven’t looked, and the new startup is likely not investable.

They are looking for startups that have a sustainable advantage over direct and indirect competitor offerings, as well as obvious value to customers living without your product today. First to market, for example, is not normally a sustainable advantage for startups. Startups simply don’t have the resources to keep ahead of large competitors who see initial traction and go after it.

A narrow scope doesn’t help your case either. Competition for your new hydrogen fuel auto engine is not limited to other hydrogen auto engine offerings, or even other autos. Remember the transportation transitions from horses to autos to trains to airplanes. All of these are competitors in terms of speed, price, or luxury.

A sustainable advantage also has to be quantifiable and large enough to overcome the natural resistance everyone has to change, or learning a new approach. My perspective as an angel investor is that once you get past early adopters, most people won’t switch to a new approach unless they perceive a cost or time savings or speed advantage of at least 20 percent. Non-specific terms, like better usability and low cost don’t incite customers to action these days.

So what are some of the key points that you should highlight in your investor slides to convince investors that you indeed do have a long-term competitive advantage over other alternatives in the marketplace? Here are some of the key ones:

1. Patent protection in place as a barrier to entry. Investors understand that patents can be broken by unscrupulous competitors, but they prove your conviction that you have created something innovative, and are willing to do the work to defend it. Other intellectual property has similar value, including trade secrets, copyrights and trademarks.

2. Your solution is just the beginning, not the only solution. Your startup needs to be focused on a specific solution, but you need to show a long-term plan for a continuously innovative product line, or a series of follow-on solutions, that will keep you ahead of competitors. No investor wants to be tied to a “one-trick pony.”

3. Order-of-magnitude cost reduction or productivity increase. Entrepreneurs often proclaim that they will work harder and more efficiently than competitors, thus reducing costs and improving productivity. This approach is not convincing. Investors are looking for technology, process, or business model breakthroughs, to move costs to a new level.

4. Startup team with experience and connections is this domain. Teams that have worked together in a previous startup are always a plus. Expert knowledge in the relevant business domain is another plus. Warm connections to required distributors, suppliers, and large potential investors is a major plus. Investors check connections.

5. Thought leadership position in your market and customer set. Prior recognition and visibility in the target market is invaluable from a competitive perspective. Successful entrepreneurs start early building their own brand through social media, industry forums, scheduled events, book publishing, and speaking engagements.

6. Clear product differentiation and a singular focus. Solutions that primarily integrate the functions of several existing products will likely not provide a sustainable competitive advantage. The focus is diluted, it’s hard to keep up with individual product changes, and you will always be on the defensive. Investors want focus and breakthrough innovation.

Almost as bad as positioning no competitors is trying to position a large list of competitors (ten or more). I recommend never naming more than three specific ones, and using each of these as representative of a group of competitors. For example, “Company A is representative of many who provide commodity solutions in this space.” Investors are wary of a crowded space.

Of course, a great competitive advantage won’t do you much good if your market opportunity is small or not growing, or you don’t have the resources to deliver. Investors like billion dollar opportunities with double digit growth rates.

Now that I think about it, your biggest competitive positioning challenge with investors may be your peer startups down the street, also looking for investor dollars. How do you stack up against the ones you know?

Marty Zwilling

Martin Zwilling is the Founder and CEO of Startup Professionals, a company that provides services to startup founders around the world. See more details at www.startupprofessionals.com