“We have no competition” is the worst thing a start-up can say

Every sale starts with awareness and creating it is costly. Even leading companies in existing categories have to spend heavily to maintain their position. Don’t believe me? An Interbrand study reports the 1999 marketing spend of three companies: Yahoo $206m; Amazon $402m; and IBM $1b.

Without Blackberry, and especially Palm, would iPhone have been so successful?

That’s why smart companies spend alot of time defining competitors. Customer experience with competitor products reveals untapped opportunities. Smart companies focus their product development spend on exploiting those opportunities. And they focus marketing spend on promoting this unique value.

These rules apply to startups. Smart investors know this. So when you say “we have no competition” it’s a red flag. It is a warning. It could mean bigger potential and bigger risk. Or that you are naive.

Expect to be grilled. Acknowledge the size and scope of the marketing challenge. Be prepared to step through your strategy for developing awareness and the thinking that went into it. Show how your tactics will leverage your marketing spend. Social media like blogging, and co-marketing partnerships, need to take prominent roles.

If you can’t prove that you are prepared the conversation will end in short order. Smart investors will never take your call again. The other kind of investor you don’t want.