Here is what I have seen happen and work quite effectively.
- Find a bunch of investors (that is anyone with lots of disposable cash)
- Befriend them. Use the 'How to Win Friends and Influence People' techniques on them.
- Come up with any idea, doesn't matter what it is at that point, could be "Uber For Dogs" or "Bitcoin Microloans for Clowns" ...
- Get the cash for the startup. Rent an office. Put CEO on your title. Enjoy playing CEO for 5 years.
- Rinse, repeat.
- In the process make sure to go to every single meetup, and conference and hand out business cards with your title on it as "CEO"
- As soon as any new framework comes around, re-write everything in it. Then write a blog post "We switched from X to Y". Convince said investors that this is a crucially important / strategic priority if they start questioning your methods.
- After blog is written add title "author" next to "CEO".
This is why in my angel investing (I really hate the term angel) I try to avoid just investing in people I like.
It is not that I want to work with people I dislike, but that if I like them other people probably do and if they are all investing on the basis of how much they like the founders then the price will be higher.
Coincidentally, in my research paper, it's found that one of the deciding factors that VCs and Accelerators choose/invest in companies is actually how much they 'like' people or founders
Yep. I can understand the appeal of wanting to invest in people you like because you will be spending a lot of time with them. It would not be so bad if who people liked was random, but it is not - we all tend to like the same people.
Investing is quite like dating in that it is not always best to just go the for the hottest guy/girl in the room.
I just finished "The Originals" and he basically has a whole chapter on how first movers advantage is bullshit.
Taken from the book:
* Studies show this does not exist
* Since market is more defined when settlers enter, they can focus on providing superior quality instead of deliberating about what to offer in the first place
* Risk seekers are drawn to being first, and they're prone to impulsive decisions. Risk-adverse entrepreneurs watch from the sidelines, waiting for the right opportunity and balancing their risk portfolios before entering.
>> Risk seekers are drawn to being first, and they're prone to impulsive decisions. Risk-adverse entrepreneurs watch from the sidelines, waiting for the right opportunity and balancing their risk portfolios before entering.
SO much wisdom in this. It's actually really smart to see a company jump into a market, make several failures and then you can slide in without having to take the amount of risk the "first to market" companies had to take.
Tons of real world examples. The most obvious is how Apple iphones were designed and then copied by the rest of the industry. Samsung, et al allowed Apple to define what users wanted, then piggy backed their design to take advantage of the popularity of their design without sacrificing the risk to find out for themselves, or develop something cough original cough.
The Nokia N95 was VERY similar to first iPhones. Heck, Steve Jobs is even quoted (quoting Picasso) as saying "Good artists copy; great artists steal"[1]
I haven't read the book, but from my experience I have found that truly new ideas/products are much harder to explain (I have tried a couple). If someone is already using a competing or similar product then you can say it is like X but here is how we are different/better. If you are the first mover, then you have to explain what X is, why X is useful, and why they should pay for X. Being a first mover is also riskier because there isn't proof that there is a market yet.
This is why the whole startup space drives me mad!
You can do a whole lot of naval gazing, and then what are you left with?
First movers are hard, because (as you've described) you have to educate the market, and then give a reason to buy.
Think about the marketing effort of Lotus-123 vs Excel.
Or Twitter vs Facebook
Or Dwarf Fortress vs Minecraft
This is why I think Scott Adam's book "How to fail at almost everything and still win big" is brilliant. He suggests focusing on the process (get the process right) and the goal will look after itself
yep, this is the "second-mover advantage." It doesn't always outweigh the first-mover advantage (especially where network effects exist), but it can in some cases.
1) Going for analysis of ecosystem evolution and trying to predict new business avenues from there leads to "too-early" failure cases. Lots of startups fail because they were too early to the market. More startups fail because there is no market than because the market is crowded, and arriving to a market before it exists is probably the worse form of failing because of market absence.
2) First mover advantage is not that much of an advantage. It is important, but lots of unicorns are second movers. Comments here already highlight a few, I'd like to add Apple. Apple mostly refined products that were already in the market and profited handsomely from that (no negative tone here, pretty much the opposite).
A professor at Darden, Saras Sarasvathy, has been teaching and advancing the study of entrepreneurship for some time now, with emphasis of her studies on what is known as effectuation.
I clicked though multiple pages and came away empty.
Just seems to be a cacophony of clipart and banal assertions. I feel I am being sold something. It feels like the power-point a "consultant" would use to train you in a certification in entrepreneurship...
I take most of this literature skeptically and I haven't had a chance to dive into this site much. But if the five things in the article are actionable and they work, it could be useful.
I like this. But I would never learn that I like it from that main page you linked - it's completely content free (unless you know it already, then you can find some stuff there), its only pointer to more (a button!) leads to no extra content, and it is not clear at all where to go from there.
That overview, by the other side, is very interesting.
Am I the only one who feels this is the wrong question to be asking? Having the goal of "creating a startup" leading to the search for a problem seems backwards. Entrepreneurship happens (or should happen) as an _effect_ of the struggle to solve a problem.
A more charitable reading would be that "How to pick a startup" is the same thing as "How to pick a problem to solve." There are many problems one could solve and some guidance in picking which one can be useful.
However, I would question the idea that the only way to think is in terms of "problems." There are many valuable things people can do beyond solving problems. Solving problems takes care of our basic needs, and there's definitely something to be said about the relative importance of solving problems vs. doing other things (creating art, for example), especially if you want to "make the world a better place" (tm), but I feel it's still a bit limiting.
That's why I like the Y Combinator motto "Make something people want." Start from the want, not the "problem." Solving problems is just one of many things people want.
Yes, I think startup for the sake of startup can lead to all manner of bad ideas. It's the reason why you have a lot of companies solving things that aren't actually problems.
Are there many examples of startups for the sake of startups that succeeded?
I've known three people personally who created companies in an area they didn't really care about but they thought there was an opportunity and succeeded.
I've known a lot more that start companies in things they're passionate about (e.g. video games) and struggle.
The feel good mantra of our time is damaging. It certainly was to me.
I've met a couple of founders who started by searching various "segments" of the "on demand" economy and looking for a niche with little existing (highly visible) competing startups. Seriously these folks had zero experience in the industry and the solution they crafted was certainly not based on some personal experience. In one case they have been pretty successful :)
To be fair, I do feel like there is a certain population disingenuous founders who weave a backstory around the genesis of their startup...but the population, by my estimation is small.
I know of a ton of startups that were successful after pivoting to a completely different idea, such as Twitter and Reddit. Many companies don't start with a great idea, but they discover opportunities while trying to solve something completely different.
I agree. Lots of startups are created with this goal in mind. I have a tough time believing a lot of the popular ones are because of some inner calling, vision, or passion, despite the CEO press tidbits and about pages.
My view is you should always start with a problem that is significant to you, and solve it. I know that making a living is important, but if the problem applies to more than just you and you can charge actual money for it, I feel it is worth trying. The next question is if you can afford to take on such a risk, as it is a great one. This is substantially more risk than thinking of something to think of something because you want to run a company and/or make money. In the end, if you solve your own problem, you at least have that if you lose completely or go nowhere with it.
This of course is a rosy view and things like debt and moral responsibility to employees increase the cost of such a strategy. From an optimistic point of view, this is how I would hope people try to start their companies - with good, utilitarian intentions.
I for one am so tired of all the companies that are in search of a problem that does not need solving. I am also tired of all the cash given to companies that solve some problem, but don't meet the 2nd part of what I said - make money. If you can't tell me how your company will make money in 1 sentence, you have at best a hobby, not a real company. Unfortunately, we have a billion dollar industry of glorified hobbies.
I also feel the same about advertising-based funding, but that's another minefield and to some degree one could argue at least is necessary in some spaces - ex: TV, newspapers. Too many people use ads as a hand-waiving excuse to explain how they will make money.
Unfortunately, the cold-hard capitalistic view of things and use whatever advantages you can get. Sometimes this means screw the morals, passion, soul, ethics, etc. But you know it does work and some people convince themselves they are happy. Maybe they are, but for many of us like me, I seek more intellectual purity than financial glory (as much as I want the latter).
> The first technology company to solve a problem is often worth much more than all of its competitors combined. So if a company already exists in a market, it’s overwhelmingly likely you won’t be able to displace it.
Counter-examples: Facebook wasn't the first social network, Google wasn't the first search engine, Windows wasn't the first windowing system, etc.
I don't think he's necessarily referring to the very first start up a particular space. Everything he's saying is basically true, if you think of "first-mover" as the first company to dominate, which usually tends to happen within the first 1 to 2 years of when a particular product/idea becomes feasible.
The point of the article is not "first mover". The point is that opportunities get taken and gobbled up as soon as they are feasible. And once those opportunities are devoured and a company has a 3 year lead, it's nearly impossible for new companies to come in, unless they have a significant differentiation.
First to dominate is rarely the first to start. Also the dominance can be fleeting instead of permanent. E.g. MySpace was pretty dominant circa 2006-07, not so much now.
Rather than looking for pain as the source of ideas, look for inefficiencies where you can capture a faction of the value released from using a more efficient method.
Pain is very subjective, but inefficiencies are quantifiable in dollars and cents. You don’t have to convince a new customer that your product is “better”, or will solve their “problem” - you just need to show them how much money they will save or make. Do this using a method you can protect and it is hard to fail.
And, let's not forget. The first mover can acquire his users much more cheaply than anyone else coming in at a later date. This is because, the first users, the fore-runners who try new products more easily are usually the cheapest to acquire users. Just like digging for oil, every subsequent user increases in cost to acquire.
While we're on the subject, if you're looking to acquire highly targeted users on twitter, check out http://www.find70.com/?t=hnw Target users by the accounts they follow, their twitter bios, their follower counts, and lots of other filters.
I often think HN misses cross-pollination with disciplines other than software engineering. Most programming solutions I see on HN are solutions for problems that developers have. For example, a CSS compiler, or a service for displaying statistics of cloud server usage.
I'm not sure how it would work, but I guess it would be nice to have a forum or database where problems from other fields would be discussed with developers. Such that an informal requirements analysis would result for each problem. And perhaps even designers could participate, and create mock-ups of the UI, et cetera.
the solution is to stop thinking of startup ideas in terms of solving problems in the early stages of startup germination, and instead start thinking in terms of changes in the economic environment and the opportunities these changes unlock
Agreed.
The whole 'pick problem of others', 'solve problem of others' mindset perversely maintains the appearance of a rigidly analytical, deductive line of thought and yet completely fails when applied to a wide swathe of potential businesses, unless hammered in to a contorted mess at which point it fails to hold water.
If you have a unique or novel idea/technology/angle, then great. But whether you succeed will depend on your entrepreneurial prowess, your team, and your resources. As long as you're the better entrepreneur, having your idea stolen is almost welcomed. It's genuine validation, and the highest form of compliment. Competition is free advertising and guaranteed market growth based on a greater combined effort to sell the same service or product. The better entrepreneur will win, and if you're not, then you're screwed anyway.
Be it energy drink, search engine, or Mars, the most important piece is the guy who sees a reason to do it. These ideas bordered on stupid, and they're burglar proof. But they're Red Bull, Google, and SpaceX.
The point is, the first idea doesn't really matter. Entrepreneurs practically need an idea a day to get over all of their problems. Startups are like horse races, in that speed and momentum matter. But if you're stuck on the first idea, you're banging against the gate that hasn't even opened yet.
Much like the biological environment, the economic environment isn’t static.
This is the one thing that "evolution debunkers" consistently get wrong. So many of their arguments are predicated on a static fitness function, when such a concept is clearly nonsensical. (And so far, not a single one of them has ever been able to even comprehend this enough to formulate an actual response to this observation.)
I wonder if there's something analogous that goes on with some people's startup debunking?
"...how is the world changing and what can I do about it? Only once you identify an environmental change and make sure you’re not late to market..."
"...There are no formulas to learning about changes early, but you can put yourself in a position to get unique insight. For example, you can learn about changes early because of your job or hobbies..."
"...Sometimes your unique background can make you aware of changes that other people can’t see..."
Except that most people don't think of their lives as "problems", not "big problems" (more like little annoyances), and definitely not "problems that can be fixed by software".
Source - had same idea, surveyed 50 random people on the street.
But, by interviewing them, they might be able to find those annoyances and those problem areas. A skilled interviewer could probably find potentially solvable problems, that others may not have considered.
Fill in dummy details with a mailinator account and 4242424242424242 card number, to see if I’m interested in paying for this, without disclosing a genuine card number because seriously, why would I trust you…
The premise here seems flawed. It completely ignores the fact that some of the most successful startups were companies that did something new and ingenious regardless of what they thought about the market place. Sometimes the world doesn't know what it wants until it sees it.
The author opens on a note so obviously and completely wrong that I had trouble even following their train of thought. It would be like me opening a blog post on dating by saying, "One of the most important things I have learned from (whatever) is: there are no single women, aged 18-44, and the sooner you accept this, the sooner you can (whatever)."
This is obviously so completely wrong that it really made me think, why would the author write this?
This is what I'm talking about:
>One of the most important things I learned from running a startup is that on a macro scale the innovation market is efficient. If the market conditions allow for a startup to arise, it’s overwhelmingly probable that multiple startups already exist in that market. The converse is also true — if there are no startups in a given market, it’s overwhelmingly probable that market conditions are not hospitable and startups cannot arise.
>In this sense startups are similar to biological life. Wherever the conditions are hospitable, life already exists. The difference is that startups live in an economic rather than a biological environment.
I can't even put into words how wrong this seems to me. Well, let's start with the biological example: there are LOTS of examples of invasive species, where someone brought a species over (on a ship etc) and then that species invaded the whole continent. So, by the author's analogy, the "wherever the conditions are hospitable, life already exists" -- so wherever the conditions were hospitable to the invasive species, it already existed. But this is counterfactual. It's simply not true.
So biologically the author is simply wrong. Okay, so in the analogy the new species, is like "an idea" - so when you bring it somewhere, the author is saying it must have already existed, but that's plainly false.
Next I re-read their intro very very carefully "If the market conditions allow for a startup to arise, it’s overwhelmingly probable that multiple startups already exist in that market".
Could it mean that they simply mean something very different by "market" from what I meant?
The only thing that I can think of is that the author is talking about well-defined markets with a lot of existing action. So that when you talk with a VC, they've already heard of five other startups are that are doing the same thign. When you do an addressable market analysis, you already have five other competitors who are moving products, and you can use their sales figures as proxies.
In that sense, "market" makes sense.
So the conclusion I have come to (I didn't read further I'm afraid) is that this author must be talking about entrepreneurs with no innovation, creativity, or the creation of anything new - who are simply picking something from what's "out there" to work on.
There is a well-worn joke in the economics profession that involves two economists – one young and one old – walking down the street together. The young economist looks down and sees a $20 bill on the street and says, “Hey, look, a twenty-dollar bill!” Without even looking, his older and wiser colleague replies, “Nonsense. If there had been a twenty-dollar bill lying on the street, someone would have already picked it up by now.” (from [0], but many retellings can be found on the Web)
I think you are right that Slava has exaggerated the truth in order to make his point -- as economists often do when talking about the efficiency of markets. Any engineer knows that nothing is perfectly efficient; yet markets do tend to be very efficient, and get more efficient the more money flows through them, and that fact deserves respect and consideration.
And what Slava is saying is something I've definitely observed over the years: a lot of successful businesses are created when changes in the environment open up new opportunities. Sometimes it takes a few tries before someone figures out the right formula -- there were several search engines around before Google appeared, for example, but they're mostly long-forgotten -- but whenever a major opportunity opens up, sooner or later a business will find a way to address it.
So I think paying attention to shifts in both technology and consumer behavior can be valuable for would-be entrepreneurs.
Clarification on what he means when he says "market": Everyone considers their solution to be new and innovative, but the truth is, your customers have had that problem for quite some time and have some way of dealing with it. All those ways of "dealing with" the problem are considered competition, in terms of "the market".
Except the author specifically mentions he's talking about innovation. I'm not sure what's so hard to believe about the idea that many people come up with the same "innovative" ideas at the same time. There are numerous historical examples.
surely you agree there are also numerous historical counterexamples? (innovations only done in one place or by one person/team and not being done anywhere else in the world at that time?)
tl;dr for me: You’ll need to think deeply about the world and invest years of concerted effort into building a good intuition for thinking about the future. Even then you’ll be right only a fraction of the time. But you can still get much better than random chance.
See a problem. Figure out how many people it is a problem for. Figure out why no one else has solved that problem. Figure out if you know how to solve the problem. Figure out how much folks would be willing to pay for a solution to the problem. If you asses you are able to be fairly compensated (over long periods of time) for solving the problem after all your costs of solving it are reconciled: Commit to spending vast amounts of your resource to exploring and productizing the solution to said problem. This isn't the advice the author gives. However, here is another post written by the same author: https://rethinkdb.com/blog/rethinkdb-shutdown/
It is not ok to be this sort of an asshole on HN, least of all to Slava and his team, who poured their hearts into RethinkDB for seven years. They have nothing to be ashamed of. Those of us who've followed Slava's work and writing for all that time (and before!) know that we have more reason to listen to him, not less.
It's supercilious comments like yours, which dismiss other people's achievements, that are the shameful thing. I'm ashamed to read them on HN and, even though I know it's human nature, it gives me a sickening feeling to see how they get so upvoted.
First and foremost, I'm not an asshole. I think if you asked anyone who knows me, they will say that I abide pretty heavily to the mantra of kindness that I have tattooed up my hand. Secondly, I wasn't critical of Slava or RethinkDB, although if you'd like me to be critical of either, I'm happy to, specially RethinkDB - I'm not familiar with Slava at all. I had actually written out the steps BEFORE I read the article, and expected to put a "tl;dr" at the start (as I was the first comment). As I read it actually wasn't what the author had penned I added that it wasn't the advice the author gave, and then I realized the author also co-founded Rethink so I tacked that on. There was no malice in this post, I apologize if it came across as smug (as others have mentioned) or wanky. I apologize to Slava if it was seen as an attack, and I apologize to the rethinkdb team if I belittled their efforts. Legitimately, wasn't my intention.
Point happily taken, and I didn't mean that you were an asshole but rather that the comment was a case of being an asshole or at least easily read that way.
This happens a lot on HN and we know it's unintentional, just as we know that the people who upvote such comments aren't doing so maliciously. Unfortunately, positive parts can add up to a negative whole, and good intentions aren't enough. It's a systemic problem, not a personal one.
It's totally fair for you to criticize the content of the post, and even correlate that to the author's failed startup. But don't be so fucking smug about it.
This is a community that celebrates making things people want, and I'll be damned if RethinkDB didn't succeed on that front. I think Slava & co deserve respect for that, even as we learn from whatever business mistakes occurred.
Pretty much all of this post is about unpacking the "See a problem" step of your recipe - if you don't get past that, none of the rest matters.
I'd argue that where RethinkDB fell down is on a step you don't list, "Understand the context of the problem", which you'd ideally do before figuring out how many people it's a problem for. Their initial idea was a MySQL storage engine for SSDs - the environmental change was that SSD prices were falling rapidly, SSDs have wildly different performance characteristics from disk, and so they figured there was an opportunity to catch the next wave. Only problem is that the biggest corporate buyers of SSDs are gigantic tech companies (eg. Google, Amazon) with large amounts of proprietary software, and so a generic MySQL storage engine isn't going to be useful to them anyway.
Unfortunately they'd already taken funding, built a team, and written a lot of code by the time they found that out, and there's only so far you can pivot when you have an ecosystem like that.
As I get older, I don't really buy the "see a problem" step. I'm not sure Facebook really solved any problem. Or Slack, or Twitter, or Snapchat. Or a lot of software startups, for that matter.
I'm sure I could write something contrived about either of them though, something using my 20-20 hindsight glasses: Snapchat solved ephemeral communication. I mean, yeah, I guess it did. But really, it caught on as a pseudo-sexting app. You could say Slack helped "corporate teams communicate better in real time" but we've had chat apps for like 20 years now.. it's basically a carbon-copy of IRC, anyway.
I think a lot of people put way too much stock in trying to find a problem™. Just build something cool, or fun, or useful; and execute it well. IMO, execution will always trump the idea.
- I want to stay in touch with my social circle but just dont have time and/or physical presence to do this
- I like to see what my social peers are doing in life but lose contact.
- I like to tell the world what I am up to.
Maybe not saving the world, but absolutely problem solving. 100% agree with you on doing something cool (with in reason of some business potential) as any new business is a roll of the dice. You may as well roll on something you enjoy regardless of outcome.
All those problems had already been solved prior to FB. MySpace is the obvious example, but there was also Friendster, and a few others. I'm almost certain that FB's success primarily hinged on its exclusivity (Ivy League & a few elite schools -> colleges -> gen pop) and not necessarily on what it did.
Another one: I have only just started using Facebook. Our group, BioHackQLD, is using it as a way to easily create a web presence i.e. our website with our bookmarks. I liked that the admin set up an "Ideas" page and a "Funding Sources" page. I mean it is dead simple to add a comment with a link to a relevant webpage. Easier and zero cost.
https://www.facebook.com/groups/982643618435943/
You're not wrong. But this comment completely lacks substance and doesn't even attempt to address the post.
I don't fully agree with Slava, but at least he makes some thoughtful points. You just typed out a handful of platitudes which sound like they came straight off a Startup Vitamins poster.
Heh. The mention of HPMOR makes me recall this quote from its author, which I am quoting only slightly out of context: "Be careful of this sort of argument, any time you find yourself defining the 'winner' as someone other than the agent who is currently smiling from on top of a giant heap of utility."
I see neither the author of HPMOR nor the author of this blog post smiling from on top of a giant heap of utility. A moderate heap, sure, but it's doubtful it's any larger than the one I have from a non-world-changing but well-paying sysadmin job.
In retrospect TFA seems to be the writing on the wall for this recent event, doesn't it? There is no shortage of DB engine companies, and hasn't been for decades.
> Figure out how much folks would be willing to pay for a solution to the problem.
I agree with other people about being smug. There are certain types of business where the business model is not obvious at least in the beginning, but you know that there's some value that you can potentially monetize.
In these cases, would you be smug like that and just give up trying and work on obvious ideas? Or would you try? It's not everyone's cup of tea, but I totally respect anyone who does that.
A lot of world-changing companies were born that way. Including Google and Facebook.
In my experience it's by talking to lots of people, focusing on those who you suspect "should" have solved it and asking them in great detail about the problem itself. Additionally you'll find that in many cases those with the problem will be happy to tell you either jury-rigged attempts from the past or point you to those who have tried. Interviewing many people is key.
Thank you for answering. As I suspected, a good network is a real deal. Making a good network is too difficult outside a tech hub as SV. Fortunately, we have HN and other online communities.
I think you also have to know who and how to find the resources that you don't have. Especially difficult if you are not in a high tech area like NYC or SF.
Tech talent is everywhere, not just the "hubs". IMO it's the networking that is harder outside that environment; the hubs have a nexus of finance, talent and buzz.
The best way is to locate a problem or pain point in your daily life, and find a clever easy way to solve that problem. Copying or improving other product will destine to fail.
- Find a bunch of investors (that is anyone with lots of disposable cash)
- Befriend them. Use the 'How to Win Friends and Influence People' techniques on them.
- Come up with any idea, doesn't matter what it is at that point, could be "Uber For Dogs" or "Bitcoin Microloans for Clowns" ...
- Get the cash for the startup. Rent an office. Put CEO on your title. Enjoy playing CEO for 5 years.
- Rinse, repeat.
- In the process make sure to go to every single meetup, and conference and hand out business cards with your title on it as "CEO"
- As soon as any new framework comes around, re-write everything in it. Then write a blog post "We switched from X to Y". Convince said investors that this is a crucially important / strategic priority if they start questioning your methods.
- After blog is written add title "author" next to "CEO".