One of the counter-intuitive concepts I’ve picked up over the last two cycles of coaching for the NewSpace Business Plan competition is the idea that a little competition is actually a good thing. For a given business plan, the statement “I don’t have any competitors” is actually a big flashing red warning light for most investors. Most typically it means that the entrepreneur doesn’t really understand who their competition is, and what the substitution goods are that people could use in lieu of their product. But in the case where they really don’t have any competition, it makes investors wonder: Is there really a market demand then for what you’re doing?
On the other hand, having one or more competitors tells investors that you’re providing a service that’s targeting a real market need. Now you just need to show how you have a sustainable competitive advantage. What about the existing solutions are existing customers unhappy about? Are there important inefficiencies about how your competitors are running their businesses? Are they leaving some niches poorly served? Do you have a new business model, or a new method of acquiring and servicing customers for significantly less than they can? And if you get an advantage like that, do you have some way (patents, trade secrets, sales channels, etc) of keeping your competitors from immediately copying you? Or making it cheaper for them to acquire you than routing around you?
If you’re trying to raise money for a startup, you will still have a high hurdle to clear of proving that your concept is sufficiently compelling to justify the risk of funding a startup, but having a little competition may actually make at least one part of that story easier–if you have competition at least your investors know there’s probably a real and addressable market.
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