Another important aspect of your proposal and, if all goes well your business, is your competition. And although in practice there’s very little you can do about it if you’re just starting up, you can still use it while planning to better understand and position your product.
We’ve found that a significant portion of startups applying for funding and support rush to say there isn’t any competition to their very innovative idea. Be conscious of saying that as it’s very unlikely: your idea (at least with some modifications) has been in all likelihood tried before – you need to find those other attempts even if just to learn from them. If you look for it thoroughly and there is indeed no competition, that’s not necessarily good news: it might be an indication that perhaps your idea is not that necessary or technically or financially feasible. In this case, you should re-examine its basic premises, perhaps run it against some of your friends of a target group similar to what you’re after. That can only be helpful after all.
If you do find there is some competition, even indirect, at least some basic facts about it should be collected and documented briefly. What’s their core offering, their main revenue streams, the demographic they target, the size of their market. We understand it’s hard to find such information and especially quantify it but it’s important that you start familiriasing yourself with the process and the industry. At the very least, you can use some slightly outdated reports or estimates for numbers you can’t find. The best course of action is to be as honest and thorough as possible. At the very least find out about the major direct competition and the most relevant indirect competitors. Try to draw some practical insights from their business – which soon you will hopefully be sharing.
Having gone through researching the competition the most likely and actually useful outcome is to outline a business opportunity based on it, the so called carving out of a niche. This is important as it allows you to aim for a specific place in the market which is relatively safe. In other words, you will be offering something that is both needed by the market and at the same time not given by other businesses in it. For example, you can offer to do something really well for a particular vertical when so far only generic solutions exist. Or you could offer a solution for small or one-man companies when only for medium- and large-sized ones exist. Or you could try a different combination of features – the possibilities are unlimited.
It’s also a good idea to show if there are any future competitors that might emerge in the near future. If for example, Google or Facebook can (and has shown indication) that with a relatively small effort they can implement your entire startup as a feature of an existing product of theirs, it’s a good idea to address such a prospect. Either aim to become a good target of acquisition (and be able to support it) or have an other exit strategy if that occurs (e.g. have an alternative business model).
Finally, this is the section to show off your unfair advantage against your competitors. That can be the first mover status, but that’s not that important in online startups (which can be – and are – copied rapidly once a good idea is found). Experience in the industry by the team members is something significant and probably what you can count on the most. Tools an algorithms you have developed that work magic may also be important to differentiate yourselves. So-called killer domains are also something but again not anything to rely upon (as most unintuitive domains of successful businesses can prove).
A significant advantage is that of intellectual property. Although startups may find it hard to go through the process of protecting their IP, if they have something that can be protected, it’s a strong card in their hand – and support companies like the Openfund can help them make the most of it. In other words, it’s a separate asset from their product and their business as a whole: if the latter doesn’t do that well they still have leverage (and value) just by holding on to their IP. As such, if there is IP protection (or is required) that should be mentioned. On the other hand, if there are IP-related issues pending they should be disclosed as these are very sensitive and any reviewer will question them.
That’s about it regarding competition although at the end of the day that’s just another thing of the many that should be factored in your startup. Overall, it’s more important to focus on results achieved and work to be done in your turf instead of worrying too much about the neighbor.
The next post covers some aspects of the financials of your startup – i.e. how you plan to spend the support earned.