For a while, I’ve been publicizing one of my favorite questions for founders.
“What unique insight (that makes money) do you have that either everyone else is overlooking or underestimating?”
I first mentioned it in my thesis. And, which might provide more context, was quickly followed by my related posts on:
- Why the secret sauce matters to a VC
- How to create a minimum lovable product (MLP) rather than a minimum viable product (MVP)
- And, in February this year, what the landscape of entrepreneurship looks like
- As a footnote, I wasn’t able to predict the COVID crisis, so my thoughts in this last piece are as evergreen as an oak tree is. Specifically, my lack of foresight on increasing startup valuations and the return of consumer social.
- Despite that, the final 2 questions of the piece are still very much pertinent now.
For the most part, founders are pretty cognizant of this X-factor. B-schools train their MBAs to seek their “unfair advantange”. And a vast majority of pitch decks I’ve seen include that stereotypical competitor checklist/features chart. Where the pitching startup has collected all the checkmarks and their competitors have some lackluster permutation of the remaining features.
There’s nothing wrong with that slide in theory. Albeit for the most part, I gloss over that one, just due to its redundancy and the biases I usually find on it. But I’ve seen many a deck where, for the sake of filling up that checklist, founders fill the column with ‘unique’ features that don’t correlate to user experience or revenue. For example, features that only 5% of their users have ever used, with an incredibly low frequency of usage. Or on the more extreme end, their company mascot.
To track what features or product offerings are truly valuable to your business, I recommend using this matrix.
And, I go into more depth (no pun intended) here.
Competitive Awareness > Competitive Analysis
I’m going to shed some nuance to my question in the words of Chetan Puttagunta of Benchmark. He once said on an episode of Harry Stebbings’ The Twenty Minute VC:
“The optimal strategy is to assume that everybody that is competing with you has found some unique insight as to why the market is addressable in their unique approach. And to assume that your competitors are all really smart – that they all know what they’re doing… Why did they pick it this way? And really picking it apart and trying to understand that product strategy is really important.”
So, I have something I need to confess. Another ‘secret’ of mine. There’s a follow-up question. After my initial ‘unique insight’ one, if I suspect the founder(s) have fallen in their own bubble. Not saying that they definitively have if I ask it, but to help me clear my own doubts.
“What are your competitors doing right?”
Or differently phrased, if you were put yourself in their shoes, what is something you now understand, that you, as a founder of [insert their own startup], did not understand?
In asking the combination of these two questions, I usually am able to get a better sense of a founder’s self-awareness, domain expertise, and open-mindedness.
Photo by Ludomił Sawicki on Unsplash
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