Someone recently sent me a link to this advice that startups should never say “we have no competition.” I think it’s good advice.
I just saw a pitch deck for a real estate investment that used the phrase “conservative assumptions.” That’s another phrase that should just go away. No one ever claims the opposite: “This valuation is based on wild assumptions that are really just guesses we picked to make the numbers look good.” Even when that’s how someone built the model — more true than not for most companies — they don’t want to admit it.
The success of your startup is almost certainly unrelated to the number of competitors or how much of the potential market they might get. They can be huge and not making money. It was true in mobile phones for a while: Apple had a relatively small share of the market but made almost all of the profit. Everyone else was fighting a losing battle.
NB. This note is the obligatory reminder that you are in business to make money, not to have buzz or faux traction or users or market share. You’re in business to create free cash flow. You create value for people and your customers pay you for the value you create. If it’s more than it cost you, you make money. If it’s less (you get huge numbers of users selling ten dollar bills for five bucks), you lose money. You can’t do that forever. If you don’t want to make money in your business, you don’t have a business: you have a hobby or a nonprofit (and even nonprofits have to figure out how to be sustainable). If your business doesn’t make money, either you’re doing a bad job or it’s a bad business – not every possible market niche can be filled by the market. The market for Land Rover Defenders at $10k is probably huge, but that’s a bad business because you just can’t get a real Defender out the door at $10k.
I favor clients who have built robust financial models (or asked me to build one for them) because it tells me that they’re focused on ensuring that the business creates free cash flow so the doors can stay open.