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Must you show that you are different from a competitor to raise venture capital?

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Finance & Capital mentor Guy Kawasaki responds to the following question from an inc.com user:
When approaching venture capitalists, is it an absolute must to be able to show that you are different from a competitor? Can you just be equally as good as a business that is already running?

Guy Kawasaki responds:
It all depends on the state of your existing competitor. Copying a company that is already succeeding at implementing its business model generally isn't going to get you far with venture capitalists. VCs are looking for home runs and new technologies. Having a strong competitor out there won't do much for your chances.

In some very large markets, you can get funding as the second or third player if you have all of the other characteristics of a winner - for example, a very strong team and a solid business model. And in other cases, presenting VCs with an alternative to an existing competitor that has taken the wrong business approach or has a weak team may allow you to successfully raise capital.

No matter what your space is, you must have a solid plan for dealing with the competition. Even if you currently have no competition, you should have a pretty good idea of where the competition is going to come from. Try to differentiate yourself as much as possible to demonstrate why you will be successful and why your competition won't. Remember that people make all the difference in start-ups. VCs know how important the team is and often bet on the best "jockeys," not the best idea.

Copyright © 2000 inc.com LLC

Related resources at inc.com:
Guide to Writing a Business Plan
Guide to Getting Venture Capital

Last updated: Sep 8, 2000




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