Founders should use a two-by-two matrix to show where their company sits against competitors, picking axes that prove market knowledge. Never claim you have no competitors or dismiss them without data. VCs will Google anyway, so do your homework first.
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One of the must have components of any pitch is some discussion about your potential competition for the company that you're building. One of the most common reasons that an investor passes is because they don't like the competitive landscape. They're worried that either a better funded competitor will come in and completely compete with you, or price you out of the market, or buy your customers, et cetera. And so it's very important that you talk crisply about who your competitors are and how you're mitigating those risks. The way we prefer to see a competitive landscape drawn is in a two by two matrix. And I'm sure almost everybody listening to this has seen this or created one of these. When you're placing your company in a two by two matrix, what you're really doing is placing your company in a market context, showing that you understand the different players in the market, but more importantly, showing how you differentiate from other companies in that matrix. So for example, you might choose, if you're building a payment analytics company, you might say, hey, I'm building a payment analytics company for large enterprise customers with dozens of payment processors. And you're going to be in the upper right. Because nobody, you've identified that nobody is building a payment analytics company for the largest enterprise customers with super high complexity. Whereas all your other competitors are either doing it for small and medium sized businesses. Maybe some have high complexity, but they're smaller businesses. But you're identifying is the market segment that you're going after and how you're either alone or there's fewer competitors in that particular segment. So those axes that you actually pick demonstrate your command of the market space and your positioning in it. The other things that investors will sometimes ask is how would your competitors draw this two by two matrix? And what that does is kind of test for your honesty and humility about how you're placing yourself in this market. What we're trying to get is a clear and honest dialogue about where risks are, where white space really is and where it isn't. When we talk about white space in a particular market, or sometimes you'll, you know, people will talk about greenfield opportunity. What we're really talking about is room in a market for your product to be positioned where there's few enough competitors that you can grow and expand within that particular segment of the market. So it may mean, hey look, there's, you know, this particular solution. There's a version for big enterprise customers, there's a version for tiny businesses, but no one's really tackled mid sized businesses for this particular solution. And that middle market target is our white space. That's our opportunity. There's a few things that you should never do. One of those is to say, we don't have any competitors. I have definitely seen this multiple times a founder come in and say, hey, we have no natural competitors. And of course, the truth of the matter is that there are always competitors, if not immediately potential competitors. In fact, sometimes their actual competitors at your customer will do nothing. They'll build it themselves, or they keep doing things their own way. The other pitfall is being dismissive of your competitors, saying you have inside information that their customers are leaving them, saying that you understand that their product's really terrible. It's okay if you have actual data on that front, but you have to be very careful that you're thoughtful and providing analysis as opposed to kind of just being. Just being dismissive about it. The biggest mistake you can make when talking about competitors is not doing your homework. I promise you, either before your presentation or even in your presentation, the VCs on the other side of the table are literally Googling your solution and trying to come up with competitors for what you're building. And then they're going to ask you about them. And so one of the worst possible things can happen is that two minutes of VC Googling results in you getting stumped on a question about a particular competitor that you've never heard of. So do your homework. Don't let a VC trump you with two minutes of Googling.
