The real competitor is often a spreadsheet or doing nothing

Competitive diligence maps every alternative a customer could choose, including internal tools and inaction, and uses win and loss data to see where the company actually wins.

10 min read · Level 3

The point

'We have no competitors' is one of the few pitch lines I think should lower confidence rather than raise it. Every customer has an alternative, even if it is tolerating the problem, and a founder who cannot name what they lose to has usually not looked.

What is it?

A pitch's competitor slide usually shows direct rivals on two axes with the company in the best corner. Customers choose between a wider set:

Alternative Example Direct competitors other software for the same job Adjacent products a general tool that partly does the job Internal solutions spreadsheets, in-house systems Services an agency or consultant Doing nothing living with the problem

The best evidence is win and loss data from actual sales:

Deals over 12 months 40 Won 12 Lost to doing nothing 14 Lost to spreadsheets 4 Lost to a direct competitor 10 Win rate 12 / 40 = 30%

Here, 18 of the 28 lost deals (14 + 4) went to inaction or spreadsheets, not to a competitor. The biggest obstacle is convincing customers the problem is worth solving.

Why does an investor care?

Because competition determines pricing power, sales cycles and how large the company can become. A company that mostly loses to 'doing nothing' has a demand problem, not a competitor problem, and needs a different strategy.

It also tests the company's self-awareness: founders who cannot describe why they lose deals are unlikely to fix it.

Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.

Example

The competitor slide versus the loss data.

Pitch: 'We have no real competitors; incumbents are outdated.' Loss data: 10 of 28 lost deals went to one direct competitor, mostly on price.

The investor calls two customers who chose the competitor. Both say the products were similar and the competitor was about 30% cheaper. The claim of no real competition does not survive, and pricing pressure becomes a central diligence question.

The common mistake

Accepting the competitor slide at face value instead of asking for win and loss data and speaking to customers who chose something else.

How it works

Step 1: List every alternative

Include adjacent products, internal tools, services and doing nothing.

Step 2: Request win and loss data

Ask for deals won and lost, and to whom, over a meaningful period.

Step 3: Speak to lost prospects

Ask customers who chose an alternative why they did.

Step 4: Test the defensibility claim

Judge whether any advantage is durable.

When to use this

During diligence on any company with an active sales process.

When not to use it

Do not over-interpret win rates from very small numbers of deals.

How investors actually did it

A recurring pattern: 'no decision' as the top competitor

Sales research and practitioner writing on business-to-business sales have repeatedly reported that a large share of lost opportunities end in no decision rather than a loss to a named competitor, making customer inaction one of the most significant competitive forces.

Include inaction in every competitive analysis. It often wins more deals than any rival.

Do this now

Ask one company for its win and loss data
Add 'doing nothing' to its competitor list and estimate how often it wins

Create a free account to read the rest and apply it to your own investing.

Related lessons

Ask why now, and what stops the next ten companies — Evaluating competition means understanding why this opportunity exists now, who else can serve the customer, and what would make this company hard to displace once it is working. (11 min)
A moat is what stops a competitor copying your success — Competitive advantages come from switching costs, network effects, proprietary data, brand, scale and distribution. Network effects are especially powerful, and especially often claimed without evidence. (11 min)
Red flags: the signals that mean slow down — A red flag is not a reason to stop. It is a reason to stop moving at the speed you were moving, and to go and find out which of two explanations is the true one. (11 min)