Education Center

How do I evaluate a startup’s competitive advantage and defensibility?


First-mover advantage alone does not suffice to provide a startup with a sustained competitive advantage. Ultimately, even when a startup has a first mover advantage, it requires some other form of sustainable competitive advantage and defensibility to maintain its edge as new entrants enter the market to compete.

Helpful but not sustainable competitive advantages similar to first mover advantage include “Better mouse trap", operational/product excellence, and deep knowledge.

Sustainable competitive differentiators include network effects, differentiated technology / intellectual property (IP), cost leadership/economies of scale, trade secrets, data, and brand.

Oftentimes, a startup can use one or more of the above non-sustainable competitive advantages as a means to attain one or more of the above sustainable competitive advantages. Ultimately, you should feel confident that the startup has a leg-up on the competition, both now, and in the future, including competition that does not yet exist today.

Want to learn even more about startup investing?