Entrepreneurs: Don't Tell An Investor That Your Startup Is "Like Company X, For Y"

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Photo: Dano via Flickr

It’s common for entrepreneurs to compare their new ideas to existing companies. There is good reason for this –the easiest way to describe a concept is often to reference commonplaces such as well-known companies that have similar characteristics.While presenting your company as the Google of X, the Facebook of Y or the Kayak of Z to investors can help VCs quickly get a sense for your business plan, it encourages investors to focus on why the comparison is not appropriate.

As a result, it seems that every time an entrepreneur makes an explicit comparison between his company and an existing category leader, investors retort with “except your company [doesn’t have the same barriers, has smaller margins, has a longer sales cycle, has a smaller addressable market, has more competitors, or has stronger gatekeepers.]”

Almost without fail, this sales-y one-line explanation of your company drives investors to focus on relative inferiorities of your business.

As a result, I think you’re probably almost always better off staying away from these comparisons. Instead of describing your company as being similar to an existing player in another market, just focus on explaining the nuts and bolts of what your company does. If an investor draws that same comparison, that’s great, but otherwise (as they say) don’t lead with your chin.

Mark Peter Davis is a New York City VC and member of the DFJ Gotham Ventures team. This post originally appeared on his blog, and it is republished here with permission.

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