Red Oceans and a Good Competitive Slide

 

My last post mentioned the idea of a “red ocean” in connection with the market for a new startup.

Unfortunately, with still too many dollars chasing too few independent VC thinkers, red oceans are the norm amongst venture-backed companies rather than the exception.  This happens because lemming-like investors pile onto an idea that some leader takes on and fund three, four, or more startups with substantially the same product or service in substantially the same marketplace.

In any case, this puts a premium on the presenter to properly account for their competition.  I think there are three principles here for pitches that meet the needs of investor audiences:

  1. Be Respectful of your competition.  I talked about this at some length in an earlier post.  Gist of it show that you do not underestimate them, but have a plan for overcoming them.
  2. Focus more on incumbents than startups.  This is very good marketing advice in any case.  For the most part, your customer prospects will have heard of the incumbents – the gorillas or others in your space – before they will have heard of your startup rivals.  There’s no sense educating them about your rivals if they haven’t heard of them already.  So it just makes sense in a customer pitch to show how you are superior to the existing players rather than the striving new ones.  This applies to the investor pitch as well.  The main thing is to get your potential customers to try something new, and the main thing your investors will care about is likely how you will do that.  (Of course, you should have slides in reserve about your competitors in case they ask.)
  3. Have a crisp Hammacher-Schlemmer Promise.  Very important for investors as well as the market.  I posted about this here.

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