Diligencing the Competition

In diligencing the competition, check to see how well the startup knows its competitors.  

Do they know what the competitors offer, how they price it, and what their advantage is over that competitor?

Even if the startup tells you there’s no competition, rest assured there is.

Sometimes competition is for the customer to do nothing or do it themselves.

The company’s product must be compelling enough to cause the customer to switch.

Research the competitors for size of company, position in the market, as well as the price they offer.

Check to see how fast competitors bring new technologies and products to the market.  

Check to see if the intellectual property of the startup provides a true competitive advantage.

I define competitive advantage as it gives the company 30% more revenue or 30% reduced cost over the competition.

Check to see how easy it is to move from the startup’s product to a competitor’s product.  

For startups who claim a “first-mover advantage”, ask what prevents the customer from switching later.

In talking with customers of the company’s product, you can learn what feature caused them to buy the company’s product which tells you the company’s positioning.

Competitors are a good indicator of the market, and much can be learned from them.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.