Recently, Sven dined with a group of seasoned angel investors in Berlin. At some point between the entrée and the main course, they began joking about the competitor slides in various startup pitch decks they had recently seen. The amusement quickly switched to frustration in the group.
“I don’t even look at them anymore,” one of them said. “They’re almost always rigged so that they invariably place the founders’ offerings atop the pedestal.”
There are two typical patterns for competitor slides — where you show who your competitors are and how you’re different. You either have a quadrant chart that compares startups based on two arbitrary metrics; inevitably it shows the startup has carved out its own unique niche. A bit like this:
The other compares the startup with competitors on a table — inevitably the startup checks more boxes than its “competitors”, though founders do love to rate themselves as lacking on one or two things to give an air of credibility and self-reflection. It ends up looking a bit like this:
So why are founders getting competitor analysis so wrong?
The risks of overselling
These biased simplifications suggest the founder is either blinded by their love for their own company, that they lack a comprehensive understanding of the competition or that they are attempting to deceive their audience. We leave it to you to judge which option is worse.
When founders look at competition purely from a feature perspective (Are we present in the US? Y/N; Do we have a crypto offering? Y/N) they miss a key point: different customers have different needs, and understanding these differences is one of the things that truly separates a successful company from the rest.
While your child might be more delighted by a frog watch, you might find a Daytona, albeit far more expensive, to have a higher return-on-investment for your personal brand. Different technologies solve different pain points, come at different price points, require different form factors, etc. Founders that make comparisons without considering where they choose to play have, in all likelihood, not really understood their customers and market. Hello red flag, how are you doing?
Portraying an unwavering belief in your product's superiority and the promise of unrivalled dominance can, momentarily, seem like the winning ticket. However, this is a precarious path, for two reasons.
Firstly, you might attract investors who are misaligned with your venture's true potential and objectives. These investors are typically drawn to the glitz of a grand vision but may lack the patience for the grind of building a sustainable, problem-solving business.
Secondly, the very investors who understand the importance of a balanced competitor analysis, and who could offer valuable guidance, might be dissuaded by your overly optimistic and oversimplified portrayal of the market.
The investor perspective
Karim, who has been on both sides of the pitch table, says that the problem often lies in a fundamental misunderstanding between entrepreneurs and investors. Founders often portray their startups like this because they think that’s what investors want to see. There is a misunderstanding of the risk-return trade-off: the entrepreneur thinks: “I have to show I could be a billion-dollar company that can dominate the whole of my industry to compensate investors for the high risk that I might fail."
A finely tuned competitor analysis that is deeply analytical and actionable, is what really matters
This, however, is a misconception. Sophisticated investors who still think this way are the exception, not the norm. Most experienced funders want a company to begin by establishing a viable minimum-value proposition in a real, well-identified market, and they spend very little time dreaming about the blue-sky case where the company becomes a unicorn.
A finely tuned competitor analysis that is deeply analytical and actionable is what really matters. It should guide product development and customer messaging, offering a clear and simple route to the market.
Authentic competitor analysis isn't about exhibiting dominance in every possible metric. It's about demonstrating a deep understanding of the market and its players. It's about identifying the pain points that your product or service is designed to alleviate, and how it does this differently or more effectively than others.
Blind faith or pragmatic realism
But there’s a deeper issue at play here. Being a successful founder requires critical self-reflection and the ability to constantly question and evaluate yourself and your business. Naive belief can blind you to the many obstacles ahead. That’s true for everything, from your whole go-to-market strategy to your competitor slide.
If you can stay realistic and honest with yourself — and your investors — about your company’s strengths and weaknesses, you’ll be able to build the foundation to create real solutions to real problems and build a business proposition that can withstand market pressures and deliver consistent value.
Since you asked, some thoughts on creating a good competitor slide
Just avoid the 2x2 which effectively limits the scope to two parameters. What usually works better is a "Competitive Landscape Chart" that allows you to illustrate how your startup compares with the competition in several key areas.
Your choice of these key areas will make all the difference and they should help you draw an authentic, comprehensive picture of the market landscape rather than one that is clearly biased towards your solution.
The most important part here is that you take the customer needs and preferences as the key context for a comparison. You can show them as "Jobs to be done", as the Revolut pitch deck does:
Or you can refer to generally accepted definitions of "better". Almanac does that, for example, by simply comparing the time it takes to get a task done — although a criticism here might be that it only compares itself with the status quo and not with other emerging players.
By spotlighting both established giants and innovative startups, your chart shouldn't just be a tool for self-aggrandisement, but a platform for an open conversation with investors about your market awareness, strengths and challenges. As said before, investors appreciate and respect this avoidance of overly positive depictions.
An in-depth knowledge of not only your competitors' features, but also their business models, pricing, past pivots and funding history is critical. Your chart should initiate dialogue, allowing investors to gauge your industry knowledge.
Again, competitor analysis isn’t just about outdoing others; it's about knowing your customers and finding your niche where you can serve them better. Remember that you don’t always have to replace what’s on the market, you might also augment or complement it.
This also means that your startup doesn't need to excel in every aspect. Rather, it needs to resonate with the right audience. Aim to present an honest representation of your market, demonstrating how your startup's offerings align with what your target customers value most in a specific situation.
If your counterpart expects the story of a silver bullet, you’re probably wasting your time.