Ask HN: Are startups diluting their own market?
7 comments
> 1. Don't start a startup for the sake of starting a startup.
Seen that first hand happen. Someone at old work was enamored with "startup world". Read too much HN perhaps... Then came up with an idea for a startup. Right off the bat, could tell it was a forced idea. It was like they sat down and given a task of "come with an idea of a startup in 5 minutes" and they came up with one. It just seemed, well ... artificial. You can almost tell how they went about it in their head "Ok maybe Uber, but like for dogs. So they can go to a park play chase...". It was that kind of thing. However, the amazing thing is it didn't matter! They convinced management to spend money on him and his startup. I believe they are still bankrolling him and his idea 3 years later, while everyone there looked at each other with a look disbelief.
One can argue the startup is good enough, if you can convince some investor to invest in it. You don't need customers, a good idea, profitability, a market, etc etc. You need a dumber investor than you, who will bankroll you and you are done. After that you can always claim you were a CEO of a startup for the rest of your life, and do talks and presentations about it, put it on your resume and so on. It just feels good, you are part of something cool and exciting.
Seen that first hand happen. Someone at old work was enamored with "startup world". Read too much HN perhaps... Then came up with an idea for a startup. Right off the bat, could tell it was a forced idea. It was like they sat down and given a task of "come with an idea of a startup in 5 minutes" and they came up with one. It just seemed, well ... artificial. You can almost tell how they went about it in their head "Ok maybe Uber, but like for dogs. So they can go to a park play chase...". It was that kind of thing. However, the amazing thing is it didn't matter! They convinced management to spend money on him and his startup. I believe they are still bankrolling him and his idea 3 years later, while everyone there looked at each other with a look disbelief.
One can argue the startup is good enough, if you can convince some investor to invest in it. You don't need customers, a good idea, profitability, a market, etc etc. You need a dumber investor than you, who will bankroll you and you are done. After that you can always claim you were a CEO of a startup for the rest of your life, and do talks and presentations about it, put it on your resume and so on. It just feels good, you are part of something cool and exciting.
I took a technical entrepreneurship course, and the professor forced us to come up with startup ideas very early on, and then iterate and convince everyone to throw our original ideas out. After a couple months every group had startup ideas that were clearly much more sound than the originals.
"First startup" ideas are very easy to identify, and are the majority of what you see in college entrepreneurship. The close, but often not scalable problems in competitive markets: food delivery. Textbook re-selling. Better course scheduling. Some way to make profit off of nightlife and parties. And then the large, technically unfeasible ideas: Solve X with drones, 3d cameras, machine learning.
The startups that keep going are usually not in either of these camps, but often start firmly in one and move towards the center as far as complexity.
But your last point is also spot on - a campus food delivery startup from my university got into a good accelerator and raised some money. Seems to be doing well.
"First startup" ideas are very easy to identify, and are the majority of what you see in college entrepreneurship. The close, but often not scalable problems in competitive markets: food delivery. Textbook re-selling. Better course scheduling. Some way to make profit off of nightlife and parties. And then the large, technically unfeasible ideas: Solve X with drones, 3d cameras, machine learning.
The startups that keep going are usually not in either of these camps, but often start firmly in one and move towards the center as far as complexity.
But your last point is also spot on - a campus food delivery startup from my university got into a good accelerator and raised some money. Seems to be doing well.
Counterexample: FTP Software (https://en.wikipedia.org/wiki/FTP_Software). A group of friends decided they wanted to start a company, they realized that with some effort they could turn an IP mostly stack for PCs into a full featured TCP/IP stack and did quite well for a while. Then again, the messes discussed in "Fate" section could be see as suggestive.
Additional details on its fate: the company's sales function got so screwed up people started contacting the president to get a copy (and don't laugh too much, this put Xerox in dire straits and improving this was a if not the most important goal of Mark Hurd when he became HP's CEO). And I was less reliably told that at one point they completely lost their source code repository.
But the idea certainly wasn't forced, full TCP/IP on MS-DOS was a killer app at the time.
Additional details on its fate: the company's sales function got so screwed up people started contacting the president to get a copy (and don't laugh too much, this put Xerox in dire straits and improving this was a if not the most important goal of Mark Hurd when he became HP's CEO). And I was less reliably told that at one point they completely lost their source code repository.
But the idea certainly wasn't forced, full TCP/IP on MS-DOS was a killer app at the time.
Interesting question.
I would say that yes, startups (as a whole) are likely diluting their own markets. When a startup notices a real pain point and tries to solve it, but cannot make a sustainable business out of it, it shakes the customers' trust in trying an unproven company. This can have negative consequences.
Think of it this way: currently, people have faith in the 'startup brand'. A potential customer's internal monologue may be something like: "Oh a startup is trying to solve this problem that I have? They're probably doing something really innovative and they're inevitably going to build a successful company because of it." After the same customer gets burned a couple times by a new company shutting down, they're not going to be as likely to put their faith in the next new company that comes around the block. The 'startup brand' to them comes to mean a bunch of naive kids who will fail in the next year or so. Even if this company can do it better than before, it may not be worth the risk of frustration/headaches/delays that using the old startups' software has caused them in the past, so they choose to not try the new product. This makes user acquisition a lot harder, and I'd imagine that it would be a net negative (when compared to a scenario where the weak startups didn't try to start a company).
I would say that yes, startups (as a whole) are likely diluting their own markets. When a startup notices a real pain point and tries to solve it, but cannot make a sustainable business out of it, it shakes the customers' trust in trying an unproven company. This can have negative consequences.
Think of it this way: currently, people have faith in the 'startup brand'. A potential customer's internal monologue may be something like: "Oh a startup is trying to solve this problem that I have? They're probably doing something really innovative and they're inevitably going to build a successful company because of it." After the same customer gets burned a couple times by a new company shutting down, they're not going to be as likely to put their faith in the next new company that comes around the block. The 'startup brand' to them comes to mean a bunch of naive kids who will fail in the next year or so. Even if this company can do it better than before, it may not be worth the risk of frustration/headaches/delays that using the old startups' software has caused them in the past, so they choose to not try the new product. This makes user acquisition a lot harder, and I'd imagine that it would be a net negative (when compared to a scenario where the weak startups didn't try to start a company).
So consequently there would be a lot of startup failures as well...
One more interesting scenario that can result could be if there will be an investor fatigue as well similar to the customer fatigue of investing their time & money in these startups...?
As this could potentially make finding initial capital harder for startup teams which could potentially be solving similar problems with better execution strategy but in the same market...
Indeed, there is absolutely no modern startup that's still in that stage that I would wager any sort of long term reliance on. Especially with this common shamelessness: http://ourincrediblejourney.tumblr.com/
Fair point. An alarm fatigue of sorts.
Starting up without doing proper industry research and without having a solid foundation can lead to a personal dilution of one's time and resources that could eat away from what could have been more valuable endeavours in the future. If we're talking about individual success here, then personal waste of time is probably the most significant factor -- more so than the effect the failed startup has on the ecosystem.
You also have to wonder how much startups are benefitting from the increasing number of startups, specifically B2B companies that sell to early-stage startups.
No. Ideas are not as important as sensing what consumers need in the market.
It doesn't matter there are other 10^n distracting ideas, the real need of consumers will still be there.
For example, Theranos may be a distraction, but that doesn't change the underlying problems and demand for better healthcare.
It doesn't matter there are other 10^n distracting ideas, the real need of consumers will still be there.
For example, Theranos may be a distraction, but that doesn't change the underlying problems and demand for better healthcare.
Intriguing. So, regardless of the noise, you think the signal will resonate due to its demand by the consumer. But, won't the first commenter's idea play here where consumers get sick of trying new products after getting burned?
I think the factory-style production of prototypes is causing real effects in terms of the importance of design, just in order to not get brushed off.
There are just so many decent looking projects being posted to Product Hunt every day, and even traditionally crappy-looking mainstream sites like Paypal, GoDaddy, or ESPN actually look decent these days. I just can't imagine a successful new startup that doesn't have solid design people... Not just back end devs who 'have an eye for design', but devs who can fire up a vector tool and make custom graphics if they need it.
There are just so many decent looking projects being posted to Product Hunt every day, and even traditionally crappy-looking mainstream sites like Paypal, GoDaddy, or ESPN actually look decent these days. I just can't imagine a successful new startup that doesn't have solid design people... Not just back end devs who 'have an eye for design', but devs who can fire up a vector tool and make custom graphics if they need it.
Or use a sales team. Our company had a brilliant sales team who managed to sell a good product with a horrible looking and unusable website by directly setting up face to face meetings with clients for a sale.
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1. Don't start a startup for the sake of starting a startup. 2. Product should solve a personal pain. 3. Build something users love. 4. Live in the future. 5. Learn powerful things. 6. Get users. 7. Dominate small markets. 8. Make everyone do customer support. 9. Do things that don't scale.
Particularly though, I thought #1 was the most interesting, as every college now has an entrepreneurship course and PG says that college students shouldn't be starting startups. I'm curious about the dilution of real (whatever that means- can be measured by future success metrics) startup ideas with ones that people are coming up with just for the sake of starting a company. Will this have any effects on the market, funding attainability, customer acquisition? And will the pot of ideas get so saturated at some point that it drives innovation away?