Sustainable Advantage – Every VC's "Gotcha" Question

Today I had lunch with a friend who has been part of several startups and has done quite well. He even took one of them public. He’s at it again–in the process of raising money for another new business.

business-plan-sustainable-advantage-smlWe started talking about the usual questions angel investors and venture capitalists ask all founders. One of the favorites is “What is your sustainable advantage?” In other words, what makes you different today and how will you protect that difference so that nobody else can ever catch up?

Clearly it’s a question every new business owner should be ready to answer. But it’s also a loaded question. Unless you’re starting a business based on a patent which has already been granted, whatever makes you different (better) today, is not likely to last long. The more successful you are, the more likely you are to be copied. Yes, you can do things to leverage your advantages. But your strategy for tomorrow can’t be to make today last as long as possible.

When you’re starting a business, you need to know how you’ll fill a void in a way that others currently are not. Then, you need to be committed to continuously evolving to improve upon what you offer today, so that you can out-pace your competitors. Most advantages don’t last long. As an investor, I would be looking for business owners with the following traits:

  • A good idea today articulated in a business plan
  • A go-to market strategy that fills a niche Demonstrated knowledge of the market-space
  • The right team to execute the plan

Once these items are ‘checked’ the best sustainable advantage is having a founder who is smarter than his or her competitors, is willing to work harder and has a passion for the business. The only true sustainable advantage is to get the lead and then run as fast or faster than all the others in the race. Today’s advantages will be fleeting; the ability to innovate and re-invent will be essential. Find investors who believe in your plan, believe in you and have faith in your ability to stay ahead.

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