If you’re an entrepreneur raising money, a big question you may be wondering about is whether you should mention your competition to a potential investor —and if so, what should you say about them?
Simply put, yes! You should definitely mention your competition. It demonstrates that you are in touch with reality, and not mentioning any competition is just a red flag that you are not. There is no way you have zero competition. Even if it is indirect competition, it is still competition. Mentioning all of them shows that you have thought about and have a deep understanding of the game you are playing. If you literally have zero competition, then it can also (but not always) be a red flag, because it could signal that you are in a terrible market to begin with.
Of course, mentioning your competition does have it’s downsides. Your potential investor may not even be aware of a startup doing something similar, and end up funding the other guy. But in practice, most investors will do their own research and find the other guy anyway, and then wonder why you didn’t mention your competition. The last thing you want is for them to assume you didn’t know. Or worse, assume that you didn’t mention your competition because you didn’t want investors to know about them. Mentioning competition will enable you to address any concerns upfront and control perceptions.
So, what should you say about your competition? Should you say that all your competition sucks? It is easy to get defensive when it comes to this topic. But rather than debate about who is better, think about how you’re different. Map out positioning and specify strengths and weaknesses. This exercise is not just for investors. It is also for you, as it provides clarity into the market you’re tackling.
Lastly, mention the risks. What happens if Competition A does this, and Competition B does that? Investors want to know how you will be defensible long term. More importantly, they want to know that you are thinking ahead, and that they can trust you to also think about the bigger picture.
Mention your competition. It’ll make you look better.