
Should startups bother having original ideas if big companies can clone them? - shlema
http://thenextweb.com/insider/2012/12/22/should-startups-bother-having-original-ideas-if-big-companies-can-just-come-along-and-copy-them/?fromcat=all
======
ChuckMcM
There are certainly startups which have, as a strategy, a "clonable" idea,
bring it to market and then sell themselves to BigCorp.

The reason this works is because BigCorp has lots of things it is trying to
get done but isn't working on your idea because they aren't sure its a winner
and they have things they are more sure of all ready in the plan. Thus StartCo
shows up, does this thing, and shows it to be valuable, it gets on to
BigCorp's planning horizon and the question will _always_ come up, ok if we
want to compete here can we build that capability? (yes/no) What is it worth
to us? How long will it take? Will the market wait that long for us to catch
up?

Now the "buy" price of StartCo is going to be something like 2x - 5x the
amount of money raised at a minimum. So StartCo can't have raised too much
money or this fails. And then there is the retention cost of the team which is
going to come out of BigCo's operating plan.

Those three things get thrown up on the board, market opportunity, cost to
acquire, cost to build. And then they make a decision. The difficulty is
predicting how "big" the impact of this change is, because it needs to return
10x its cost over its lifetime to be 'obviously' a good deal. Further those
benefits have to align with what BigCorp is looking for (more users, more
traffic, more revenue, wider reach, Etc.)

FWIW, the most common ways these things fall down is that BigCorp thinks what
ever StartCo is doing is easier than it really is, so they under-estimate the
value of StartCo, pass on it, and then pour way more money than they intended
into a 'homegrown' version. In those scenarios everyone loses, StartCo misses
out and BigCorp misses out. The flip side is that BigCorp over values the work
StartCo does, then they look silly to the market. Not as bad an outcome but
harder on the ego.

~~~
trevelyan
BigCorp is rarely a rational actor. When someone inside wants to buy you, they
may justify it this way to sell it to decision-makers, but this is not how
companies really approach the market in my (admittedly limited and non-US
centric) experience.

I would strongly advise against anyone launching a company if a successful
outcome is contingent on a potential purchaser knowing what is best for
them....

~~~
ChuckMcM
I think 'rarely' is too strong a characterization. My experience is that in
the absence of malfeasance BigCorp is _locally_ rational. They have convinced
themselves, either for or against, about how they should proceed. We rarely
get to see their reasoning though so its hard to evaluate. I've worked with
M&A teams at a couple of places and have seen deals that looked irrational
until the reasoning was uncovered but I certainly accept the claim that not
all of them would past muster, even when all the information was known.

~~~
trevelyan
Hi Chuck,

I agree that inside any company, purchases are rationalized and the process
you describe is probably spot on. The reason I posted was that I've seen
several cases where acquisition behavior in multiple industries was profoundly
illogical in terms of what the same money would buy: either companies didn't
pull the trigger on offers when they should have and a product would have been
ridiculously cheap, or (more often with unprofitable companies) a sale was
engineered by investors, and/or the purchasers did not explore the market and
only considered narrow options before them.

Not intended as a complaint. I just really wouldn't advise anyone to do a
startup that required any BigCorp to purchase them in order to have a
successful exit, that's all. You could have a way to print people money and
still have a hard time forcing it down their throat.

~~~
ChuckMcM
I think we're in agreement, I think anyone who creates a start-up with the
intent to sell it to a larger corporation is making a sucker bet. Worse their
company generally suffers as they pivot from fad to fad once they get somewhat
long in the tooth and the chance of acquisition becomes more and more remote.

But just because you and I see that, doesn't mean some starry eyed CEO wannabe
won't. They use the fact that Apple, Facebook, Google and even Microsoft have
billions in their bank accounts and have stated a desire to acquire "key
technologies" as validation of their own efforts to be a "key technology."

Most people learn in High School (or at worst College) that trying to be
something you aren't in order to win friends is a losing bet.

The only thing I disagree with is characterizing BigCorp as strictly
irrational. It makes sense to someone, and generally if you find them they can
reason to their choice which is the very definition of rational behavior.

------
firefoxman1
The biggest fallacy in this way of thinking is the notion that your idea is
"original" in the first place. Maybe you're the first to market, but that
doesn't mean there weren't 10 guys a month behind you, and it doesn't mean
that your idea and execution can't be improved upon.

While it's easy to list unoriginal innovators (Ford, Edison, Eastman, Jobs,
Gates) I can't name anyone that's had a truly original idea that no one else
soon before or after thought of. That's because our ideas are improvements
upon current technology. DaVinci didn't imagine things like the Apple I
because electricity hadn't been harnessed. All of the great innovators we talk
about didn't invent the entire world around them, they just took an idea and
added their own "claim to fame" to it.

It seems to me that chances are your idea won't be even remotely original, but
more likely it's just now technically feasible to build. I'm sick of hearing
about software patents "stifling innovation" then seeing people act as if
there isn't _enough_ protection of intellectual property.

------
kyro
I think this should be rephrased more accurately as "Should You Start A
Business?"

Or perhaps "Should You Start A Non-monetizable, Easily-clonable Business In An
Already Crowded Market?"

~~~
atleta
Exactly what I wanted to say. "Should you start a business without any
competitive edge?". This seems like a harsh move because we're used to calling
everything that is related to mobiles 'innovation'. That makes us (working on
these kind of projects) feel better.

------
kapnobatairza
Let's rephrase the question a bit:

1) Should a startup bother if all they have is an idea that anyone can easily
clone? I'd argue no - As many here already know having an idea is only one
piece of the puzzle. You have to have initiative, good execution,
perseverance, and good tactical leadership. Failing all that, you better hope
your idea is patentable but even then to survive as a patent troll you have to
be willing to commit the legal resources and talent to make that work.

If all you have is an idea, even if it's an original one, you probably should
rethink whether you want to be a startup. Nobody said starting a company and
displacing/disrupting/surviving in a highly competitive environment would be
easy, nor should it be.

2) Snapchat isn't an original idea. It is one of many examples of a
destructable message service. A quick Google search returns this site from
2006:

<http://www.destructingmessage.com/>

And this site from 2007:

<https://privnote.com/>

Self-destructing email services have also existing for quite a while, from
retractable email (AOLs "Unsend Email" feature that worked between AOL email
accounts) to full self-destructable email services. A few of the BBS' I used
to visit also had "hacked in" expiry dates for message.

So question 2 is: Why should Snapchat be given special consideration for being
just the latest implementation of an idea that has existed both in popular
culture (Mission Impossible) and in the real world for decades? They really
shouldn't be.

Snapchat's CEOs "bring it on" message seems to be appropriate and shows he is
aware of all these facts. He is up for the fight and the fight will ultimately
benefit all of us through competition. If he has the right toolset to keep
Snapchat in relevance, then it doesn't matter who clones him.

~~~
rayiner
> Failing all that, you better hope your idea is patentable but even then to
> survive as a patent troll you have to be willing to commit the legal
> resources and talent to make that work.

I think you're conflating ideas that are easy to clone with ideas that are
easy to derive, and thus leading yourself to the pejorative "patent troll" for
something that's nothing of the sort.

If you spend years designing something, figuring out the optimal way to do
things, doing experiments and testing, etc, and then patent it and license it
(and sue those who copy without licensing), you're not a troll, you're using
the patent system for precisely the purpose for which it was designed: to
protect investment into ideas that are hard to derive but easy to copy.

~~~
kapnobatairza
I'm not actually trying to use patent troll in the pejorative sense, so I
should have clarified that. I agree entirely with your point, but it doesn't
disagree with my primary argument that patenting an idea and licensing it
isn't a simple endeavor and still requires you to put more into it than an
idea.

~~~
rayiner
I'm not aware there is a non-pejorative sense of the term "patent troll."
Using it to cover pure IP companies puts ARM, MIPS, etc, into the patent troll
category.

------
groth
The founders of snapchat should be pretty happy right now -- they have an idea
worth stealing. And to push your apple vs IBM analogy farther, it seems that
they could potentially still win, by building a product that is far and away
better for a certain segment of the market (i.e. as apple did).

To address the deeper philosophical claim -- are big companies morally
obligated in some sense, to not encroach on ideas currently dominated by some
startup, I think not. The whole crux of your argument is that there's some
well ordering on the timestamp of ideas, and whoever is earlier in the well
ordering has some moral claim to executing the idea. As far as I can see,
there's no a priori reason why this should be so, and there are lots of
utilitarian reasons why this ought not be so. Just because someone came up
with the idea does not mean they are the best agent to execute the idea. I
might be a brilliant military tactician, but I might lack the charisma or
fortitude to lead an army. In the same way, I might be a brilliant social
based startup, but my same product under the influence of the most complete
social graph might be tons better.

I am not saying facebook poke is better than snapchat. I don't use either, but
I do think competition is healthy. Now what would be problematic is if
startups did -- as your article asserts -- stop having original ideas just
because they were afraid big companies would clone them. In that case, the
government should probably seriously consider penalizing companies like
facebook for scooping up the idea, if not by making them disable the app
completely, but by making them retroactively purchase or pay a large sum to
snapchat. I don't have any data to discern whether a "chill" effect is
happening, but I would guess an answer in the negative.

------
SatvikBeri
Many seemingly easy to clone businesses get dominated by startups. Facebook
copied SnapChat, but had to buy Instagram. Why?

 _The Innovator's Dilemma_ [1] explores this question in detail. The gist is
that the processes at big companies are very well suited to certain kinds of
innovations, while they preclude other kinds (known as "disruptive
innovations"). One example (not the only one) has to do with margins. Big
companies tend to assume that their cost structures are more or less fixed,
and will tend to pass over products that seem to be lower margin than their
current business. For example, home computers seemed to be much less
profitable than mainframes, so a lot of manufacturers missed the boat on the
personal computer revolution.

It's worth reading the book and learning which ideas are likely to be copied
by big companies, vs. which ideas big companies will fail at executing.

[1]: [http://www.amazon.com/The-Innovators-Dilemma-
Revolutionary-B...](http://www.amazon.com/The-Innovators-Dilemma-
Revolutionary-
Business/dp/0062060244/ref=sr_1_1?ie=UTF8&qid=1356212705&sr=8-1&keywords=the+innovator%27s+dilemma)

------
ameister14
Rockefeller did this in the 19th century. He would enter a new field and go
around and offer a good payout to competitors. If they took it and he liked
their company he would put them on his board. If they didn't take it, he would
push them out of business. Eventually he had a monopoly.

Seems like smart business to me, just as long as you offer competitive
compensation first and you don't do it all the time.

------
brianobush
I think it is backwards; [most of the time] large companies do things so
slowly, why not have a startup clone the idea of a big company? Most of the
time, execution is slow and the only benefit a large company has is capital
and existing infrastructure.

Disclosure: I went from a start-up that was purchased by a large company (same
group).

------
tomlu
An overlooked point here is that in this example the "big company" is the
platform operator. It is much easier for Facebook or Apple to brush aside a
competitor on their own turf than it is for Microsoft to brush aside Dropbox.

So I think the question should be phrased as "Should a startup implement an
idea on a platform when the platform provider can clone it?"

------
wtvanhest
I'd say yes for 3 reasons:

1) BigCo's are usually slow to recognize a good idea is a big enough idea for
them to implement until the idea is a big company at which point you have
already won.

2) If BigCo does somehow realize that the big idea is a big enough idea for
them to implement early on, they are just as likely to acquire you rather than
build it out which isn't the worst situation in the world.

3) If the remote chance that BigCo comes along and crushes you, you have a
great story to tell in your next investor presentation or interview.

[ADDED] If the idea requires a lot of BigCo's resources or API you have to be
more careful. For example, if you need to build a full mapping company to
implement a feature google could just turn on that is probably not a good
strategy. Likewise, if you need to use a google maps API (if there is one?)
you run the risk of them shutting off access to it and implementing
themselves.

------
DanielOcean
You need a better idea. Too many companies are starting companies that can
really just be a feature of a big company.

ie. Just because Facebook hasn't implemented a feature, doesn't mean you
should start a company over said feature. You may pickup a quick paycheck, but
many won't survive the long run.

------
mistercheese
The title of this article is clearly linkbait.

It's never been solely about "having original ideas". I would argue that if a
startup fails to build up a competitive advantage or a barrier to entry, then
they indeed should not bother.

I think the more interesting question is that of software patent discussions:
What is sufficiently novel, non-obvious, and useful that we should protect it
to promote innovation? Could Snapchat's messages that expire been protected?
Should they have been?

Edit: kapnobatairza seems to have shown the answer is "no", in which case
hopefully Snapchat has another plan to remain competitive in its crowded
market. We shouldn't expect anything else for a business to succeed.

------
richardjordan
I wonder if the snapchat / facebook situation is more a suggestion that the
MVP-then-launch approach to startups is more risky than some allow for. If you
just release an MVP it may not have enough in there to be a solid finished
defensible product, containing just your hook to test if you can get momentum.
Then when BigCorp sees the hook, if you get enough success with the MVP
they're heavily incentivized to take the next leap before you do, and they
have more resources - you're still working at the underfunded MVP stage. Then
you go from Lean Startup to No Startup in short order.

Just thinking out loud.

------
CaioAlonso
Dropbox had a good idea, big companies cloned them, and they're still around.

~~~
bornhuetter
Dropbox wasn't an original idea, it's just a good implementation.

~~~
ghshephard
Dropbox was (and is) a great implementation. Photostream is basically hit or
miss as to whether it will sync a photo to my personal photostream, and we
wait for hours for "shared" photostreams to pick up.

Meanwhile, when I share anything in my Dropbox, personal or shared, it
basically syncs _real time_ \- as in, while we are talking on a chat, I drop a
file into my shared folder, and seemingly at the same time I say, "I dropped a
file in our shared folder" the person at the other end says, "Yup, I got it"

It's beyond me why Apple still can't get photostream to be that responsive
with their resources and control over the platforms.

Dropbox had to figure out when a file landed in a OS X folder - Apple controls
the operating systems!

------
armenarmen
I'm currently building a business (not a startup by acceptable HN standards)
and our key point of differentiation could easily be copied by our
competitors, but none currently are. I'm worried every day that one of them
will launch a similar product before we do. Has anyone here been in a similar
position?

~~~
prostoalex
Work on your USP <http://en.wikipedia.org/wiki/Unique_selling_proposition>

------
InclinedPlane
If your idea can easily and effectively be copied by a giant, brain-dead,
bureaucracy laden business then your idea is probably not terribly novel. You
might as well just blog about it, let people steal it, and move on.
Concentrate on ideas that it's difficult for big businesses have trouble
executing on.

~~~
oscargrouch
REALLY GOOD innovation will disrupt established big players, because it
changes the rules of the games in a way that competing may represent loosing
the established market that the big fish feed from..

personal computers did that,

im working in something like that right now and i can barelly wait to see it
giving its first steps out of the doors :)

some big players will get scared if this technology starts to spread around
too much fast..

even if i miss the target by some odd detail.. inovation is unstoppable..

Who would predict that the almight wintel would start to fall someday??

------
aaronbrethorst
Funny, the answer to this is like an anti-Betteridge's Law of Headlines. The
reason being is summed up in Christensen's seminal book _The Innovator's
Dilemma_.

Facebook, clearly, is not stodgy enough to always be subject to its effects
yet, but they've had plenty of failures, like their Q&A feature.

------
wmeredith
This is a short sited move by Facebook. If they do this enough, the platform
will be abandoned by developers and they won't have any more ideas to cherry
pick. So over time the platform gets stale and their fickle user base will
move on.

~~~
kyro
No they won't. Twitter was doing this sort of stuff for the longest time and
no matter how many warnings were given, people still hacked away at the nth
Twitter app and they would've continued to had Twitter not imposed those
limitations on their API.

------
anon987
Should companies bother having original ideas if open source can clone them?

~~~
sjg007
Sure as long as you provide value that people will pay for. Many companies
support open source projects.

------
31reasons
I am not sure what would be the better thing here. To donate $500 million to
charity or Let the little guys live to foster innovation and entrepreneurship
?

------
OldSchool
Sorry, I couldn't get past implied flattery of 'original ideas.' I'd say these
are at least a million times more rare than people believe.

------
dreamdu5t
The assumption here being that big companies can simply "clone" another
business. In reality, this is not the case.

~~~
carbocation
In this specific case, Snapchat vs FB Poke, it really is the case.

~~~
rohamg
Snapchat is a product, not yet a business.

~~~
carbocation
It's the only part of the business (which is also named Snapchat) that's worth
cloning. Or are you suggesting that we're talking about something else?

~~~
rohamg
i was merely correcting that Facebook copied the product. If SnapChat had a
business (users + revenue + customers + relationships + goodwill), it would
have been much more difficult to "copy".

~~~
carbocation
Your definition of 'business' excludes many, if not most, startups.

~~~
rohamg
that's why we call them startups

------
rbn
You can't clone the Network Effect.

------
michaelochurch
Large human organizations have a ridiculous number of talented people--
something that would be truly frightening to have to compete with-- but a
negative correlation between intelligence/talent and decision-making
capability.

You know how hard it is to get an idea approved in a typical BigCo? And how
much harder it gets if it's actually a _good_ idea? If your startup idea's
legit, you have at least a 2-year head start.

~~~
doctorpangloss
I think you make an insightful point. Counter-intuitively, large businesses
nurture the generation of ideas but not the execution of them.

A corollary: lots of resources helps concoct lots of wacky ideas and the
execution of none of them, while startup culture makes extremely boring ideas
but delivers.

Nevermind all the companies that fail of course...

~~~
jaggederest
The problem at large companies is that the reward and feedback structures are
completely broken.

Annual reviews are a lot less convincing and effective, in general, than 'we
need to increase revenue 10% next month or you don't eat'

------
cmccabe
Your "original idea" was probably thought of by one of the pioneers of
computing in the 1970s, if not earlier.

The real question is whether you should develop something that is a feature,
not a product. And as per Betteridge's Law, the answer is no.

