Part 9/20 - Twenty Questions You Will Be Asked By Venture Capitalists (If You Get That Far)

By Laurence K. Hayward

This is part nine of a twenty part series on this topic.

9. What gives your company a competitive advantage?

VCs want to know how you plan to outmaneuver the competition -- and this doesn't just pertain to existing competitors. They want to see that you've thought about future market entrants and how you will stave them off. "First-mover advantage" is rarely a sufficient response to this question. A more effective answer depicts intellectual property barriers or the ability to reach the target market in a manner that is more effective than the competition. What is unique about your company that gives it an edge?

Positioning matrixes in business plans can demonstrate visually how a company is differentiated from its competitors. A matrix shows the space your company plans to occupy in the market relative to everyone else. People often mistakenly assume that a crowded marketplace is ‘bad’. What is more important is the relative strength of the competitors. For example, it may be preferable to have a number of fragmented competitors than to be up against just one Microsoft. So, in your business plan, be sure to address the strength of your competitors and why some may be greater threats than others.

Laurence K. Hayward is the Founder and CEO of TheVentureLab. To learn more about him follow the link here