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 question 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 service. You will not be able to predict all possible new companies that may enter your space or how existing companies ordain react. As such investors are both trying to understand how your company stacks up against competitors as come up as calculate your ability to assess and position your company against competitors. This will determine the comfort aim they will have that you will be able to properly determine 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 address what your affiliate’s advantages/disadvantages are against each competitor. When you outline the market share 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 ordain be to know why you think your company can bring home the bacon this when all your competitors could not.
Even if you are fortunate enough to undergo a product or service that is truly ground breaking and no other company produces anything similar do not say that you have no competitors. Although you may have no direct competitors your target customers probably have a variety of choices for other products or services that address their problem. For example the personal transporter may have no direct competitors. However the aim customers for Segways have many choices as to how they solve their transportation requirements: they can take public displace use a bicycle use a car. You would be to evaluate the companies that provide alternate solutions and provide commentary on your product’s advantages/disadvantages. You will also be to give commentary how will these companies ordain act if your affiliate starts to act away their customers. Will they be to stem the outflow by reducing cost of their product attempt to lock in their customers or will they try to develop 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 create 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 ordain they be to build off this expertise and try register your industry with a competing product?
In request to fend off companies trying to create a similar product to the one your affiliate offers you be to realistically evaluate what is the unique expertise that your affiliate possesses that gives it the ability to produce your product. Do you have key employees with the technical knowledge do you have 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 build barriers to entry to alter it harder for a competitor to go in and reproduce your product. This can act the create of employment contracts patents trademarks or exclusivity arrangements with suppliers. This will 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 lower price inform.
One tip although money is stretched thin in a start up and often the cerebrate 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 people (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 procure strategy can significantly change magnitude the attractiveness of the company to investors provide justification for a higher valuation and furnish potential competitors a cerebrate to buy your company rather than try to work around your patents.
In my next bind I will communicate about the area that is probably the most important in terms of what investors look for in a company – its management team. As always if you have any questions comments or suggestions for future articles feel free to contact 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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