As you probably know, Daymond first funded FUBU with the help of his mom and a second mortgage on her house. After that was paid off, Daymond learned that you don’t necessarily have to put your house on the line if you want to start a business and be a successful entrepreneur. You do, however, have to get comfortable talking with investors, and that means knowing what you should and shouldn’t say to them.
Daymond could go on and on about crazy things he’s heard on Shark Tank from people with amazing (and sometimes not-so-amazing) ideas for businesses. In fact, he could write a whole book on things you probably shouldn’t say to investors, but the one that stands out the most is the one he keeps hearing over and over again:
“THERE IS NO COMPETITION.”
Just seeing that sentence in writing makes investor’s skin crawl because it’s basically saying, “My business is going to fail.” It seems obvious to Daymond—maybe because he’s been in the investing and startup business for so long—but all too many new entrepreneurs make the same mistake: thinking they don’t have any competition. So let’s talk about why you should never tell an investor that you don’t have any competition. When you tell Daymond (or any other investor) this, what you’re really saying is…
YOU HAVEN’T DONE YOUR RESEARCH
First of all, have you ever had a really brilliant new idea that you were just sure no one had ever thought of before? Of course, you have. Now, have you ever had that idea, not acted on it, and then seen it in an advertisement just a few weeks or months later? You know you have (and I have, too).
When that happens, it means that you weren’t the only one who came up with that “brand new” idea. In fact, someone might have thought of it before you, started work immediately, and only managed to bring it to production a little while after you thought of it on your own. What does that tell you about competition?
It should tell you that other entrepreneurs are out there looking for new products, services, and innovations, just like you. That means, no matter how original your idea is, you have to do some Googling to find out if someone else has already done it. If you say there’s no competition for your product or service, I’m going to start wondering if you’ve done that research. If you haven’t, I’m going to seriously wonder about how serious you are about this business.
YOU DON’T HAVE A PLAN FOR COMPETITION IN THE FUTURE
Of course, you might have actually created something so new and innovative that you don’t have any competition yet. That means one of two things: either you’re working in a niche so small that no one sees any profit in competing for it, or you’re about to have some heavy-hitting competition coming down the line when you get a little bit of success.
If you tell me that there’s no competition for your amazing new product, and I think that it’s an idea worth investing in, then you’re also telling me that you don’t know what you’ll do when the likes of Nike or Reebok decide to step in on your turf. I want to know that you’re planning for the future of your company, so show me what you’re going to do when you get the competition’s attention.
So, if you’re ever putting together a proposal, and you think, “This is great! And there’s no competition!” think again. Then spend some time considering how you’ll handle the competition and what sets your brand apart.