The Guide to Competitive Dynamics for Climate Startups
Discussing competitive dynamics is an important part of your pitch but can be difficult to navigate successfully. What do VCs care about? What are the key metrics? How can you best present the complexity of these dynamics for potential investors?
We sat down with Simran Suri to dig into competitive dynamics for climate tech founders. Simran is an investor at Equal Ventures, a firm that takes a “thesis-driven” approach to investing, doing deep-dives into markets before even sitting down with founders. She focuses mainly on the energy and sustainability industries and has thought a lot about competitive dynamics and how best to think about and present them to VC firms.
Differentiation, differentiation, differentiation
A differentiated path to market is perhaps the most crucial component for a VC assessing the competitive dynamics for your business. Make sure to articulate it clearly and comprehensively.
Let’s say you are building a web3-enabled carbon offset marketplace. Don’t look at just your immediate competitors, look at the entire value chain (or even network), including digital carbon offset marketplaces, developers, registries, etc.
Understand how they all fit into your market, where you fit in relation, what value you create for other entities, and how you disrupt others.
Who are the incumbents in the market today? The up-and-coming leaders? How does this inform your path to market plan? Who do you want to enable? Who do you want to disrupt? What is the right formula and order of operations to work across the value chain in this market? And, crucially, what is the willingness to pay all of your different potential customers?
It may not fit in your pitch (and that’s 👌)
Competitive dynamics are often complex, in particular given the nascent and rapidly expanding market opportunities for climate tech. Yes, you can (and should) allude to this complexity in your pitch deck. But don’t stop there. Make sure you clearly spell out the ins-and-outs of your analysis. Write it down in an FAQ or your executive summary in your data room. And be prepared (and seek out opportunities) to debate competitive dynamics with potential investors, both to benefit from their ideas and to show that you’ve taken the time to really think through these critical questions.
Go beyond a simple x, y graph. The rapidly-evolving landscape of climate tech means what is true today may not be true tomorrow. Tell a story about how the evidence and ideas you have today can help you navigate these uncertain market conditions into the future: “This is how we understand market conditions and competitive dynamics today, here are the competitive (and even macro) risks we foresee that don’t exist today but that could affect us in the future, and, given these dynamics, here is how we think about our business opportunities.”
Also understand that you can articulate your value prop as central to your strategy for navigating competitive dynamics for your product. This could be how you pitch your ability to grow when market conditions inevitably shift.
Don’t make claims you can’t back up (duh)
Present evidence and defensible metrics. Don’t make empty assertions. What you think is a better brand or product experience may not be what a VC thinks; it’s not a good look to get bogged down arguing about subjective ideas instead of focusing on your business and product. Making things up will make you look unprepared.
Make sure your arguments around competitive positioning are well-researched; there is a good chance that an investor has already spoken to most of your competitors and is broadly knowledgeable about the competitive dynamics of your market. And they will fact-check you. Many founders in climate tech are working on similar products; by presenting sound evidence and defensible metrics you can cut through the noise and differentiate yourself from your competition.
Practical tips for presenting competitive dynamics
- Case studies are helpful. Putting your product differentiation pitch in context will help investors quickly understand your path to market and analysis of your competition.
- Pricing is key. You might have a similar product to a competitor but you can differentiate yourself with a pricing strategy that enables you to scale faster. (It’s a good idea to provide your financial model to investors so they can see your backend assumptions.)
- Minimize back and forth. While you want to have conversations with investors beyond your pitch, you want to be mindful of everyone’s time. You can do this by clearly articulating your competitive dynamics assessment in written materials like FAQs or memos.
Simran is an Investor at Equal Ventures. Prior to joining Equal, Simran was introduced to venture through internships at Greenspring Associates, SoGal Ventures, and VC-backed startup Predata. Simran also worked as Managing Partner of JHU’s student-run fund, A-Level Capital. At A-Level, Simran led numerous investments in early-stage companies founded by Hopkins students, alumni and faculty. Simran is a graduate of Johns Hopkins University, where she received a B.A. in International Studies and Sociology through the Global Social Change & Development program.
Equal Ventures is a thesis-driven, early-stage VC firm investing in companies across 5 key sectors - climate, supply chain & logistics, insurance & employee benefits, retail and the care economies. Equal brings a 'Prepared Mind' approach to all of their work across the world of investing and portfolio support, making sure they intimately understand the ins and outs of specific company opportunities and bringing that understanding to their conversations with founders.