Guess what is often the worst slide in an investor deck?

For me, it’s the competition slide. At best, it’s a list of competitors plotted in some 2×2 or Harvey-ball chart that isn’t terribly helpful. At worst, it’s hurtful. You’d be surprised how often a competitor slide has tons of players, but not the one that I end up thinking the most about after a bit of research.

It turns out, good investors will do their own due diligence and will figure out how they think about competition for themselves. Usually, my thinking falls into one of three buckets

1. The company is really novel. Competition is much less relevant than whether a market will evolve a certain way or whether the product can unlock non-consumption. I focus much less on actual competitors, and much more on the user needs and problems and how they think about solving them
2. There is a competitor that must be considered. I need to develop some sort of cogent argument in my mind that answers why this company can still be successful even though this other company exists. Usually, it’s a very small number of specific companies I might be thinking about.
3. There are a lot of competitors, and I’m concerned about the crowdedness of the space in general, not the threat of any one player in particular. I could probably do a bunch of work to narrow it down to a concern that looks more like #2, but initially, it just seems intimidating.

Given these three potential viewpoints, I think that the best way to address competitors is just to simply make a couple short lists.

The first list is the 1-3 competitors that you care the most about. Here’s the test. Think of the person you are most desperate to hire. Which companies would you be most worried about if they hired her instead. That’s probably your list. When talking about competition, you want to be able to have a very thoughtful discussion about these companies. You want to show that you are aware of what they are up to and how the choices you are making stack up against the choices they are making. I tend to get equally nervous when I hear founders completely dismiss competition, or seem to be overly obsessed by competitors. Competition is the reality of any successful company, so you should be approaching it with a healthy balance of paranoia and confidence from the beginning.

The second list is the next 1-5 companies that are relevant to your customers and the problem you are solving for them. Relevant is everything from direct competition for their dollars or attention as well as substitutes. For the second list, you should know the players inside and out, but hopefully there is some clear reason why they are lower priority for you. In crowded markets, you want to help investors understand why the large number of names they might turn up in a google search are not as relevant as the 1-3 in the first list. So you might need to spend more time here. In new markets, you might not need to have this list at all.

So, when discussing competitors, I’d use a script something like this: “When you do your own research, you might start thinking about a few companies that are relevant or potentially competitive to what we are doing. Here are the companies that we think about. We watch them all closely, but this group (list 1) are the ones that might be worth talking more about.”

Hopefully this helps. Competition is the reality of any company. So it’s often relevant to discuss. But for an early stage company, you can be pretty simple and straight forward in the way you approach this.