The problem with competitive analysis

As a VC, part of my job is researching industries that present an opportunity for disruption. Once identified, understanding the competitive landscape helps me decide where to focus. Often times when being pitched, this analysis is provided to me by founders in the form of a four-quadrant graph with their company conveniently positioned in the upper right quadrant. The purpose of this post is to provide founders with an investor perspective on competitive analysis and hopefully offer a few useful tips.

1. Focus on your strengths: Be careful not to spend to much time focusing on your competitors even at the request of an investor. You only have a finite amount of time to pitch, if they decide to move forward it’s because you’ve convinced them you’re uniquely positioned to succeed, not that the competition is weak. This is perhaps the most important tip.
2. Be careful: Similar to the previous point, you never know how the VC you’re speaking to feels about the competition. I once had a founder take 10 out of our 50 minute call explaining how a competitor was destined for failure. I not only disagreed but had a personal relationship with the CEO of that competitor and highly regarded her startup.
3. Unfair comparisons: Comparing a yet to be released product with a competitor’s shipping product is not a fair comparison. If a competitor is shipping, and you’re in the design and planning stage, your comparison is inaccurate unless you have insight into their product roadmap. See point one for a better strategy.