What if (big company) builds your business tomorrow?

Investors love to imagine all the worst-case scenarios for your business, and they love even more to ask you how you’d handle them. Which makes sense - they’re taking a big bet on you.

So let’s talk about how to answer one of their favorites: “What if [insert huge company name] builds this tomorrow?”

Of course it’s possible that a tech giant bulldozes you. But typically, that possibility doesn’t make you un-fundable. The key is to make sure that in your fundraising arsenal, you have a simple response to this question that shuts it down as fast as it comes up.

No matter your business, there are most likely two main statements you have to make when asked what you’d do if a big company builds your product:

1: They most likely won’t.

2: Even if they did, they’d be behind.

Then you back those up.

“They most likely won’t”

Investors already know the company probably isn’t going to steal your idea. But they want to make sure that you know that and that you know why.

You can’t say they don’t have the resources. If they’re a Fortune 500 company, they can get the resources.

Instead you have to say they don’t have the insight. They have blindspots you don’t have. Maybe you and your team know a certain market better than anyone else. Or you’re the only ones who have real experience with what you’re building. Or you’re the only ones who’ve tested this in the market.

Either way, it goes something like this: “This isn’t a priority to them right now. They’re more focused on XYZ. They see this as a risk - they won’t be in this market until it’s been proven out more.”

Then there’s the second statement. If saying they won’t build it isn’t enough for the investor, then you can go into this:

“Even if they did, they’d be behind”

It can be hard to imagine that if a huge company launched your product, they wouldn’t wipe the floor with you. But there are some cases where that’s actually true.

For example, an incumbent might not beat you if:

1. You’re already multiple product cycles ahead.

If you’ve launched into a real paying customer base and have a team that can ship updates fast, your product is likely already far better than what a huge company would launch. Plus their bureaucracy makes it hard to make big changes to products fast.

2. You have defensible IP.

This goes without saying - if something core to your product is legally protected, that can quickly shut down a lot of concerns about competition.

3. You have a massive, hyper-specific network they don’t have.

This is rare, but maybe you or your team’s background gives you exactly the connections you need to distribute your product effectively.

4. Your team is that good.

Also rare, but maybe your team is truly the only group of people that know the space and the tech well enough to execute.

But if none of those are true for you, just make the first argument of “they most likely won’t”. There are risks with all startups, and one of them is that incumbents might out-compete you. Again, for most startups, that’s not a reason investors won’t invest.

Best,

Nathan