pitchThe problem with this question is, if you are in a market without competitors you cannot know how you will compete until the time comes.
Yet in every startup pitch I seem to hear this question and none of the answers the entrepreneur gives convinces the jury/investors.
What is a good answer to give to this type of question?
There’s no generic answer, and note that it’s actually an indirect question. The VCs want to get a feel of how well you’re able to articulate:
Why there is no competition in the first place. Usually it’s because there’s no demand whatsoever at a lucrative enough pricepoint. More rarely it’s because you’re one of several who are about to enter this new space.
Why your marketing and sales strategy is nimbler and better than that of your potential competition. Competitors will come, make no mistake. The bigger ones will usually come with a big budget and no original ideas. Highlight non-standard or hard-to-reproduce stuff that you will do.
An example to illustrate.
The usual approach to selling telco links to financial institutions was to call banks and brokers one by one, and convince them to use you to connect their trading floor with a shiny app.
A much less obvious approach was to convince the shiny app to recommend that banks connect to them using your extranet – effectively letting them do the pre-selling. Sign enough of those, and you can now call the banks and offer one extranet link to many such apps for the price of one telco link – effectively cutting their needs (and costs) from several links to a single one, and pre-selling all of the apps on the extranet in one go.
Besides the non-obvious sales dynamics illustrated here, note why there was no competition and why large telcos wouldn’t easily step into that market: by offering their own extranet, telcos stood to cut their telco link sales to banks by a factor of 10 – a tough call to make willingly, let alone fast.
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