How can you show your startup's advantage in a different way?

SDS 004: Clarifying Competitive Advantage

Hey! thank you for reading issue 004 of Startup Definition Sunday (SDS).

SDS is the newsletter for founders, bringing you clarity so you can read the startup newsletters in your inbox.

SDS arrives every two weeks (you guessed it) on Sundays.

In every issue you can expect:

• 1 Definition of startup jargon

• 1 actionable tip you can implement right away

• 1 article on Africa tech that you should read

• 1 gift for founders

Let's dive in:

What is Competitive Advantage?

Competitive Advantage: unique difference a company has over its competitors that lets it create more value for its customers, capture a larger share of the market, and by extension, drive investors' excitement about the company.

Why is this topic necessary for founders?

As people like me continue to write about Africa tech and startups, more and more founders are looking to raise VC money. This translates to investors seeing 100s, if not 1000s, of decks yearly.

Unfortunately, most decks are passed on by investors for no / low differentiation - investors don't think the model, product or company culture is set apart from others in the industry.

The reason being, most fundraising startups are representing their unique advantages ineffectively. Most startups use a variation of the magic quadrant below to show their advantage.

While this may be simple to communicate, it is flawed in one main way, leading investors to pass on the opportunity:

A magic quadrant presumes you only differentiate on two features or strategies.

If your product is only different in two ways from competitors that either are better funded, or have been the preferred alternative for so long, why would people pay for your solution?

How can you show your startup's advantage?

Honestly, any way that is NOT a magic quadrant is a win.

However, you read this newsletter for actionable tips so:

Storytelling: Every startup has a customer. The ideal person, business or archetype they are targeting. Your ideal customer should have a painpoint you are trying to solve. Use storytelling to showcase how your product or service has made impact for a specific customer. A great customer for this is the one who used your competitor before switching to you.

Data Visualization: In Africa, we don't have the luxury of accurately collected and stored data on industry standards and metrics that you can benchmark against. However, for industries that have easily accessible standards for delivery or fulfillment of services, showing how you perform against established options is a great way to show your competitive advantage. For instance, if the average logistics player takes 3 days to deliver but your unique model allows your startup to consistently, and predictably deliver faster, find a way to show that.

If data analysis is not your forte, check out Zindi for access to some of the continent's best data analysts.

Power Grid: I'll be transparent - a power grid is my least favorite way to show competitive advantage.

When used right, it can tell a clear story of your startup's advantages. Unfortunately, very few fundraising decks use power grids effectively.

Most power grids look like this (Source) but are missing a critical piece: sustaining advantages.

An effective power grid should:

• Have your most significant competitors (excluding peers because you don't have as much advantage is never a good idea. If investors have to tell you about your most significant competitor, you lose credibility.)

• Showcase and quantify your sustaining advantages, not different features. Here is where you sow how much more beneficial your product is compared to others.

If you forget everything you just read, remember this: magic quadrants may look cool but they do a terrible job of showing investors how different your company is from other alternatives. Find a better way.

If you only read one thing this week, read this...

1GB of Data in Africa costs 15x its cost in Europe. Many have hailed Elon's Starlink as the saving grace of Africa's internet connectivity. My friend, Caleb, doesn't agree and wrote this article to tell you why.

Do you agree or disagree? Let me know!

Founder's Corner

If Issue 004 has got you thinking about your startup's competitive advantage, you should read this piece by Rick Zullo on building moats.

My takeaway: moats are the only way to drive and sustain value over time as a company. But they don't exist on the first day. Companies must first build capabilities that drive their competitive advantage.

Thank you for reading to the end of issue 004.

If you enjoyed reading this, or I missed something, hit reply - it's always great to hear your thoughts on the issue!

You can:

• Connect with me on Twitter. I share daily insights on Africa tech, startups and gender-lens investing.

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Let's chat again in two weeks,

Jasiel