The WTFs of a Business Angel: #9 Know your enemies
When we started SpeedInvest in 2011, we were a startup ourselves. A very well funded startup, but still, we were a team of people who had some experience in building companies and no experience in building a business angel fund. We are still learning an awful lot, because you can profit from other people’s wisdom, but there is no way around doing things yourself, making mistakes, trying again and again, learning from what you’ve seen so far. However, there are those rare events where we sit across the table in our office and are having a facepalm moment…
#9 Know your enemies
I have talked at great lengths about founders, teams and doing pitches. What always amazes me when we meet startups, is the lack of knowledge about the competitive landscape. In many cases it seems almost like ignorance (“we have no real competition”), and it almost always surprises us and makes our lights go at least orange. It’s not because we think you need to do a full-fledged competitive analysis before starting your business, there are things that are more important than that. But it shows an attitude.
We have met those kinds of startups. I had that attitude myself in the past. But read Mark Suster and then rethink that. If you don’t have competition, you didn’t look from the right angle. Or you don’t have a product that someone needs. Understanding what others did or do wrong is the first step to finding out what you are doing right. It is not the thing you should focus on, because a startup defined by not being the product of your biggest competitor is addressing a deficit in that competitor, and not a customer need.
But you should care about the landscape you operate in. If only to be a good discussion partner when meeting up with investors. Because: believe it or not, the investor will most likely know less about the market that you operate in than you do. So if the investor (us or someone else) can easily point you to some competition, without even googling or making some calls, this seems strange. It refers to one of the points I already made earlier: key to our investment is trust. If we can’t trust the founders, to be ahead of us in terms of knowledge and action, we don’t believe in their success. It is as simple as that. And honestly, if you don’t look at your competition, at least to learn from them, you’re leaving one of the biggest existing treasure chests untapped. So get to know your enemies.