Author:
Erik List
Who is this for?
So you’re a startup currently in the midst of fundraising and without that Termsheet everything goes down the drain?
Yes? Then better channel all your energy and make it happen! No? That’s good for you.
Either way I would argue that your stance on competition predicts your fundraising and overarching success just as accurately as your Product.
In this article I’ll explain why — and how to align your perception of competition with the sweetest dreams of Venture Capital Investors.
Note that If you’ve read "zero to one" by Peter Thiel this will sound familiar and I have to give credit to his views on competition. This article, however, will expand on his view and additionally give practical implications for your Pitch Deck.
Avoid Competition, embrace monopolism.
Your goal as a startup is simple: become a Monopoly — That’s what Venture Capitalists want from you. That’s the sweet dream.
As of now, you are probably thinking monopoly is unethical, even evil, and shouldn’t be possible in countries with proper jurisdiction. You’re right. Monopoly businesses that get preferential treatment by the government or slashes its competitors shouldn’t be tolerated.
But there’s a third type of monopoly that expands the pie for everyone.
"Creative" monopolies reach disproportionate market shares by merit. They create a market of their own by being incomparably faster, cheaper, smarter, leaner — you get the point.
VCs look for the new Iphone, the product that "escapes" competition and saves their fund from underperforming. After all, a single startup will typically account for most of the return of a whole VC fund.
A more practical guide to monopoly business.
Okay, we both know that it is unlikely that your Startup is going to produce the next Iphone and take market shares like Apple has. Such things happen rarely — every 10 to 20 years.
But the right perspective on monopoly in your startup beliefs system will get you further than the perfect build-measure-learn feedback loop ever could. You’re probably well aware of the need for differentiation but it is not enough...
There needs to be an idiosyncratic component — like the way you capture revenue, the way you distribute your product or how you make big decisions.
It’s hard to find "your monopoly" and even harder to execute on it. But once you muster monopolism in some shape or form your investor attraction will skyrocket.
And what about the Pitch Deck?
Enough abstract business philosophy, let’s focus on something tangible: How should the competition slide of your Pitch Deck look like.
As a rule of thumb try to avoid the "4 squares 4 directions slide". Any 2×2 will bore investors. They’ve seen it a 1000 times. But the secret is that if you truly have a monopoly business it doesn’t matter.
Take the AirBnB seed round competition slide that raised them 600k back in 2009.
Instead of a coordinate system, the better, more nuanced approach to set apart your business is to look like you’re comparing SaaS offerings.
Be like Dropbox and show you’re different on various critical fronts compared to competition.
Now you might think both are outdated Decks from the 2000s but remember: they received the funding to grow into unicorns.
Some last words
Now that I’ve put a heavy focus on competition and monopolism, I want to emphasize that a startup and consequently the Pitch Deck has other more important components. To put it simple: You’ll always win with a capable & determined team with good timing at the right place.
But forgetting about the companies that surround you (you have to know how your competition is different) or overfocusing on them will mostlikely crush your dreams of becoming a unicorn 99 out of a 100 times.
And on a different level: collaboration instead of competition is the better remedy for individual and societal success and push frontiers of human progress.
