The Meaning of Competition in Angel Investment

There is an understandable tendency in angel investing to start with the idea on which the business is based.  What is it?  What’s new about it?  Is there any intellectual property, and if so, is it protected or protectable?  This focus is, also understandably, calibrated to take account of the competition.  In what way is the idea better than the competition in the chosen sector?  If it is clearly better, what will the competition do to retaliate, and how quickly?

Pretty soon, the angel investor gets a good idea about the concept on which the new business is based, and what it does compared with the competition.  But is this really the competitive context that matters?  There is a different context in which to understand the commercial environment that will dictate whether or not this business will succeed.  It is not the range of sellers in the market sector.  It is the buyer.
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The buyer in every sector has a finite sum of money with which to buy the goods and services he or she needs, whether in a domestic, commercial, industrial or professional context, whether for a business or for the home.  This cameo is made even easier to understand if we relate it to ourselves.  Few, if any of us, have bottomless pockets.  We have a finite sum of money to spend on serving our household and our business needs.  We often manage it by making a budget.
If we now consider a new product or service entering a sector in which we buy products or services, the context for the company with a new idea becomes rather different.  The question is, can they sell us the idea of buying from them INSTEAD OF BUYING WHAT WE OTHERWISE HAD EXPECTED TO BUY WITH THE MONEY.

​In other words, every new entrant in every new market is competing for the discretionary pound which will end up in the sales ledger of whoever sells most effectively.

This changes the context entirely.  Instead of asking what the idea is and how it stands up to the competition, the question really should be, how are you going to sell your company’s products, and why do you think it will be more effective than the way your competition sells their products?  
The cruel truth is, good ideas are two-a-penny.  Good businesses are not.  The difference between the two is not the quality of the idea, but the ability to sell it, with all that entails.  Of course, it includes developing a good quality product at a good price, which has a demonstrable USP.  But let’s not get idealistic about it.  We have all known markets in which inferior quality products or services consistently outsold their superior rivals, because they beat them to the sales punch time and time again.

Finally, an even crueller truth, those companies seeking to raise angel investment are in an even more heavily loaded competition, against their rivals also seeking angel investment.  All the same rules apply.  They are in a market sector (angel investment) where the buyers (angels) have a finite sum of money (budget) which they will spend in the sector.  There will never be enough to go round every company seeking investment.  The winners will be those who are better at selling their investment opportunity.  It is the purest form of competition you could imagine.


You can read more about the Green Angel Syndicates criteria for investment here. 

For more information on the Green Angel Syndicate, contact Nick Lyth directly on  07802150053  email nick@greenangelsyndicate.com or Tweet @GAS_Investments
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