Cutting down the Competitors that are also Raising Capital
When a business is trying to raise capital, one of the questions that commonly comes up is, "So, who is our competition?" This question, generally speaking, has two answers:
While the names of the companies that relate to the first answer can usually be compiled within a few minutes, the list of names included in the second answer, if they could be compiled, would be exponentially longer and perhaps a lot more unsettling. The simple reality is that, instead of competing against similar products for dollars from consumers, companies in a capital raising mode are competing against all other companies that are also seeking investor dollars.
In this situation, especially for startups with limited public visibility, the path to successfully raising capital must first start by cutting down the number of companies that would be considered "the competition". This is a three step process that starts with:
By cutting down your business' capital raising competition through differentiation, focusing on specialty investors, and becoming a known quantity, you can raise your chances of successfully raising capital dramatically. Then, after your successful raise, you can set your sights on your direct competitors.
- The competition is made up of all the companies that manufacture, distribute, and/or sell products and services that are similar to those you produce and sell.
- The competition includes every business in the world that is also trying to raise capital at this point in time.
While the names of the companies that relate to the first answer can usually be compiled within a few minutes, the list of names included in the second answer, if they could be compiled, would be exponentially longer and perhaps a lot more unsettling. The simple reality is that, instead of competing against similar products for dollars from consumers, companies in a capital raising mode are competing against all other companies that are also seeking investor dollars.
In this situation, especially for startups with limited public visibility, the path to successfully raising capital must first start by cutting down the number of companies that would be considered "the competition". This is a three step process that starts with:
- Differentiating your business – The only way your business is going be successful over the long term is by doing things better than your direct competitors. Not only do you have to do things better, you'll have to be able to explain to potential investors how you're business is going to do things better, even though you may not have actually done any of them yet. While this may sound like a tall order, your chances of raising capital because your business executes like no other are much better than taking a "me too" position that describes how your business will succeed by following the trail of your direct competitors.
- Focus on talking to investors who specialize in investments in your industry and your investment stage – Focusing on specialized investors eliminates all the other companies that are outside your business' realm of operations, a reality that can reduce the uncountable mass of capital raising competitors to only the ones being considered by your potential investors.
- It's all about who you know – Being a "known" to potential investors gives your business a huge advantage over companies that potential investors only know in passing. If your potential investors only know your business in passing, work to change the situation by attending mixers, meet-ups, and other events where you can start the process of becoming a known.
By cutting down your business' capital raising competition through differentiation, focusing on specialty investors, and becoming a known quantity, you can raise your chances of successfully raising capital dramatically. Then, after your successful raise, you can set your sights on your direct competitors.