Startup general interestVenture Capital

Getting the competitor analysis right when pitching

By November 12, 2009 2 Comments


Jason Cohen has a good post on Venturebeat where he talks about four common ways that people turn him off in an instant.  The whole post is worth a read if you are going to be raising money, but there is one point that he makes which I’m going to bring out here, and that is how to make a good competitor analysis.

In Jason’s words:

Let me guess what your feature-comparison chart looks like. Probably pretty close to the illustration to the right [above actually], huh?

You have all the checkmarks, they have few. Even when your competitor has a checkmark too, your implementation is still better. There’s nothing they have that you don’t. Oh, and they’re more expensive too.

When I see this chart, all I know is: It’s a lie.

The point of “competitive analysis” isn’t to say: “I’m better than everyone else.” Rather, it’s to define your niche in the market and explain how you own that niche better than everyone else.

Jason then goes on to point out that your competitors may well be larger, stronger and more established than you, so it is a mistake to say that you are better than everyone else.  Better is to define a niche of the market that you will own and say why you are better than everyone else there. 

This takes us to another area that a lot of people could do better, and that is defining their target market.  I’m not talking about putting a size on it here (although that would help), but rather describing which parts of the market you are going for and which you are not.  It is usually more credible to tightly define a market and plan to take a big share than to aim for a small share in a larger market, so it doesn’t matter if the market subset you are targeting isn’t huge.

As an example my dad’s company was a computer rental’s business.  That is a very broad market and one of the things he did after he took over was to focus the company on renting PCs to training companies.  This was a definable niche in terms of customer which had some distinct requirements that he was well set up to service (large numbers of computers delivered simultaneously on short term rentals with pre-loaded software and high prices 🙂 ).  Critically this meant there were whole areas he decided not to service at all – e.g. minicomputers, and others where he responded to inbound queries but didn’t proactively target – e.g. longer term loans to large businesses.