One of the first filters that investors apply when looking at a company is whether the offering is a feature, product, or business. Features don’t make a product and can be copied easily. Similarly, investors understand that a product doesn’t make a business. Attractive businesses have a slew of products, and a road map for how to create customers.
Attractive businesses also have appropriate infrastructure—planned or already in place— including talented developers, salespeople, customer support, designers, and finance, operations, and logistics professionals. The combination of the firm’s talent pool, the nature of its revenue model, and steps taken to protect its intellectual property is what converts it from something that can be easily copied into something that can start to be defensible. Be prepared to have a strong answer to the question, “What stops others from following and dominating the market you discovered?” Many attractive markets are full of established companies that have substantial resources and the ability to access and serve your firm’s target customers. So, how do you stop a large company that wants to move into your space? Often you cannot. You are left with two scenarios. Either you have a structural advantage from being the first mover.
Or you simply have the best execution, which can involve a decent amount of luck at the right time.
