Why You Should Tell Investors About All Your Competitors
I learned a really great lesson years ago about the power of controlling the flow of information. Let me set the scene for you.
I was watching a company pitch to the VC fund I was an Entrepreneur in Residence (EIR) at. The CEO went out of his way to talk about the competition, the competition’s strengths, and the competition’s weaknesses.
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I thought that was a gutsy move, but I wasn’t sure how it was going to play with the partners. However, I found out quickly enough.
You always want to be completely transparent with investors, even about your closest competitors.
As soon as the pitch was over, we went into a conference room to debrief. The partners and I all gave our thoughts about the company. Mike, the managing partner of the fund, was the last to speak.
“I’m really impressed,” Mike said. “The CEO mentioned companies we didn’t even know existed.”
BOOM.
You build trust with your investors when you are transparent.
When you tell investors more than they expect, you build trust with your investors. Eventually, the partnership would have found the previously unknown competitors.
But the CEO telling the investors allowed the CEO to build credibility and control the story at the same time. That’s a double-win for you.
Most VCs are pretty good at competitive research. Remember, if a fund is interested in investing in your segment, they are likely looking at all the potential investments in your segment.
That means they are going to find all of your competitors. But you get to frame the story and explain how you compete against your competitors by telling them first.
There is no better example of controlling the story than LinkedIn’s Series B pitch deck.
Take a look at the competitive analysis from LinkedIn’s Series B pitch deck:
Then combine it with their market share slides:
This is a thing of beauty. It doesn’t get any better than this. The competition and, this is key, how LinkedIn sees how they fit is all there for an investor to look at.
There are no surprises. There is no ambiguity.
Now it certainly helps when you’ve grown your market share to 73% as LinkedIn had, but that’s not the point. The point is LinkedIn did an incredible job of controlling the story.
That’s what you want to do. Because if you don’t control the story, then investors will fill in the blanks for you.
For more, read: What If Another Startup Is Doing The Same Thing As You?