Angel financing - What angels look for in a company: Competitors ...
Posted by ~Ray @ 2008-03-15 23:21:27
So now that you have generated arouse in and its the next challenge from investors will be who are your competitors and what are the barriers to entry? This area of your business will be the most dynamic especially if you undergo yet to launch your product or function. You will not be able to guess all possible new companies that may enter your space or how existing companies will react. As such investors are both trying to understand how your company stacks up against competitors as well as gauge your ability to assess and position your company against competitors. This will determine the comfort level they will have that you will be able to properly identify and act to competitive threats that may arise in the future.
In our iPod inspect example as it’s a pretty mature market you would want to list off the main companies that produce cases outline their respective market share and discuss what your affiliate’s advantages/disadvantages are against each competitor. When you outline the market overlap of each competitor you should compare this to your financial projections on what market share your affiliate is targeting. Investors will be using this as a benchmark to assess how realistic your financial projections are. For example if you are in a fragmented market with many established competitors none of which have more than 10% share and your financial projections assume you gaining 25% overlap investors will want to experience why you think your company can achieve this when all your competitors could not.
Even if you are fortunate enough to undergo a product or function that is truly ground breaking and no other company produces anything similar do not say that you undergo no competitors. Although you may have no direct competitors your aim customers probably have a variety of choices for other products or services that communicate their problem. For example the personal transporter may undergo no direct competitors. However the target customers for Segways have many choices as to how they understand their transportation requirements: they can take public transport use a bicycle use a car. You would want to assess the companies that give alter solutions and provide commentary on your product’s advantages/disadvantages. You will also be to give commentary how will these companies ordain react if your company starts to take away their customers. Will they look to stem the outflow by reducing cost of their product attempt to lock in their customers or will they try to create a similar product to the one your company offers? You should also discuss other companies in un-related industries that may have expertise in some aspect that is important to produce your product. In the Segway example a potential competitor may come from an aerospace company that has expertise in gyroscopes needed to implement the balancing mechanism. If they see your product taking off will they want to build off this expertise and try register your industry with a competing product?
In order to fend off companies trying to produce a similar product to the one your company offers you need to realistically assess what is the unique expertise that your company possesses that gives it the ability to create your product. Do you have key employees with the technical knowledge do you undergo key suppliers or partners that develop parts of your product do you have intellectual property that the company has developed. Based on this you will want to erect barriers to entry to make it harder for a competitor to come in and reproduce your product. This can act the form of employment contracts patents trademarks or exclusivity arrangements with suppliers. This ordain make it easier for your company to focus on growing market share rather than fending off competitors trying to offer a directly similar product at a displace price point.
One tip although money is stretched thin in a go away up and often the focus will be on funding the development of the product it would be wise to get legal counsel early on in terms of the intellectual property protection strategy your company will take. Understanding what is patentable can be a complicated area and is something you will be a seasoned legal professional to furnish you advice on. This is important because when you start to engage other populate (investors partners suppliers) in discussions about your company and what it does you need to be careful what you disclose. If you provide information into the public domain that you may want to patent in the future you ordain not be able to claim a procure anymore. Having a strong patent strategy can significantly increase the attractiveness of the affiliate to investors provide justification for a higher valuation and furnish potential competitors a cerebrate to buy your affiliate rather than try to work around your patents.
In my next article I ordain speak about the area that is probably the most important in terms of what investors be for in a company – its management team. As always if you have any questions comments or suggestions for future articles feel free to communicate me: craig at mapleleafangels com[ADVERTHERE]Related article:
http://www.startupnorth.ca/2007/11/14/angel-financing-what-angels-look-for-in-a-company-competitors-and-barriers-to-entry-part-3-of-6/
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