
New ventures should focus all their efforts on problem-solving - beriboy
https://review.chicagobooth.edu/entrepreneurship/2019/article/startups-forget-about-technology
======
RcouF1uZ4gsC
I find it interesting that the two example companies of Uber and AirBnB that
succeeded by “focusing” solving problems, did so breaking the law and pushing
externalities onto others. AirBnB runs afoul of the hotel laws and makes the
neighbors of AirBnb hosts have to deal with the problems while also decreasing
supply of housing and pushing up housing prices in cities and communities.
Uber basically was an illegal taxi service and succeeded by paying their
workers often times less than minimum wage by classifying them as contractors.
They also took shortcuts on their self-driving cars and killed a pedestrian.
They have also tried to suppress rape victims stories going so far as to
invade their medical records.

To succeed as a business, you have to do something that others can’t do or
won’t do. If you have a tech advantage, you can do stuff that others can’t. If
you don’t develop a tech advantage, you have to do stuff others won’t. In
these two cases of AirBnB and Uber, it was breaking the law.

~~~
subpixel
You left out "be first" which is an advantage that is much harder to find
these days, which creates even more pressure to differentiate by other means,
legal or otherwise.

~~~
davidgh
VRBO was loooong before AirBnB. AirBnB reduced friction by handing the
payments and provided social mechanisms for buyers and sellers to vet each
other, among other things. In the days before AirBnB I remember booking an
apartment in Paris by sending half the payment by wire transfer and the other
half in cash on arrival. The apartment was great and the host even better, but
the payment was painful, and something very few of my friends and family would
have done. AirBnB made it as easy as booking a hotel, and that made a huge
difference.

~~~
subpixel
AirBnb is the canonical example. They weren't first, so they built a business
around doing something that in most places is illegal, and it caught on in a
big way.

I'm not discounting their UX, I'm sure it was a big part of their growth.

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k__
I've worked for so many companies with a really shitty tech stack. Most of the
time they just threw as much mediocre devs at it until it worked. Mind you I
was often one of them!

Most of their business people weren't too good either in terms of leading a
company or such things, working at those companies was horrible!

The only thing they were good at was finding people with problems.

It seems to me the only thing that matters.

If you find enough people bothered by something, the will throw money at it
like no tomorrow. You can't imagine how much money makes up for bad tech and
shitty leadership.

But somehow this is the hardest part for me. Solving problems is one thing,
but finding problems worth solving is another discipline.

~~~
mdorazio
It's actually pretty hard for developers to find problems worth solving at
startup scale. Your average developer doesn't encounter the kinds of problems
non-tech people will pay money to solve very often. Developers are also often
likely to look at a problem and come up with their own "simple" solution that
non-tech people wouldn't even think of.

Dropbox is a good example here - developers were largely perfectly happy with
rsync for a decade, but your run of the mill mom wanting to keep her Word
documents synced at home and the office doesn't even know what Linux is, let
alone how to run a terminal.

If you want to find non-b2b problems that are worth solving _and which people
will pay you to solve_ you generally have to step out of the tech bubble, talk
to non-tech people at length, and imagine a solution that your mom could use.

~~~
shantly
Far and away my most common experiences with business ideas others try to give
me:

"Oh man you should make an app/website to do X! God it'd make my life/job so
much easier."

"Cool, yeah, great idea"

Then I unlock my phone, check the app store, and yep, there are already 25
complete solutions to this exact problem on just this one platform. Oh but
they would totally pay for it and it'll definitely make me rich, never mind
they haven't even bothered to google for a solution, which already exists in
exactly the same form I'd make it, and is free or cheap. Ok. Toss that one in
the ol' round-file.

~~~
kirso
Here it only depends on whether its a zero-sum (winner takes all) market, or
whether you can improve an existing model and eat chunk of it (look how many
alternatives of Mailchimp spun out, I love all of the incl. mailerlite and
EmailOctopus!). So I wouldn't through the towel just because there is
competition, but rather look at the opportunity cost, do you really wanna
spend time working on this?

~~~
shantly
What throws me is that they seem to think this would make their life much
easier, and that there's no solution unless someone makes it... but there
already is one. There are several. Specifically for their problem. Most of
which seem to get the job done just fine. It'd be a big help to them, but they
haven't even spent as much time as it took to describe to me what they want,
looking for an existing solution. I'd bet they've never even asked anyone else
in their line of work if they have a solution. Anyone who has, doesn't have
the problem anymore. They don't need me to write an app, they need me to teach
them how & when to effing _google_.

I'm aware of the ability to out-compete existing solutions on quality and UX
and such, but most of the time when this happens, there aren't really any
clear pain points in the existing solutions that I'm being told about, the
person suggesting it is just totally oblivious to their existence, and they
sure appear to do _exactly_ the thing they need.

I do like the affiliate link suggestion from the other poster, haha.

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say_it_as_it_is
Entrepreneurs, forget about going to Chicago Booth for an MBA if you want to
be an entrepreneur. You should be solving problems and learning business
development and management by doing. These people have nothing special to
teach you but will put you $175,000 in student loan debt. Instead, take loans
from friends and family or find angel investors to raise funds that will pay
developers to build your mvp. Don't outsource to an offshore development
center in Bangalore. Use technology that won't just validate your idea but
will help you achieve your goals.

~~~
asdfman123
You can use your MBA to get hired onto promising startups sloshing around with
billions of dollars of Saudi royalty money, though.

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soneca
On the other hand, Google, Microsoft, and Apple started with technology right?

It doesn't contradict the point of focusing on problem-solving, it just
contradicts the click-baity title

~~~
achow
From the original paper published by Sergey and Page..

 _In this paper, we present Google, a prototype of a large-scale search engine
which makes heavy use of the structure present in hypertext. Google is
designed to crawl and index the Web efficiently and produce much more
satisfying search results than existing systems._
[http://infolab.stanford.edu/~backrub/google.html](http://infolab.stanford.edu/~backrub/google.html)

They were solving a problem - a very common problem in the days when internet
content exploded.

~~~
heavenlyblue
But they didn’t directly make money from solving that problem.

~~~
throwaway321546
But they solved a problem, gaining a massive userbase, and only then became a
great company because they were able to make money alongside the problem they
were solving.

------
asdfman123
>They develop technology that they think will solve a problem, rather than
first identifying and understanding the problem and then thinking creatively
about how to solve it.

Can you hear the creaking sound as cryptocurrency startups shift uneasily in
their chairs?

------
sergiosgc
Of course solving a problem is the central tenet of a startup. Technology is
an excellent tool to find problems to solve, though.

"Forgetting the technology" is dumb. Advances in technology enable novel ways
of tackling existing problems. Keeping an eye on technology advances, and
raising the question "Which problems can now be solved in better ways?" is an
excellent starting point to find problems to center your company on.

~~~
afarrell
People often state advice in rather extreme terms, then are surprised when
people interpret them in a way that matches the meaning of their words. This
seems like one instance of that.

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legohorizons
Most successful businesses in the U.S. are not technology companies at all,
they just solve problems in creative ways. Look at someone like Wayne Huizenga
who started AutoNation, Blockbuster, and Waste Management. That is like if
Computer/Math prodigy Reed Hastings started a couple billion dollar companies
in the Auto and Waste industry alongside Netflix.

The point being that great entrepreneurs can repeatedly find problems to solve
and create value from.

For example, the author of this article was a successful entrepreneur in his
own right. "Previously, the Chief Executive Officer of The Tie Bar - the #1
e-commerce destination for stylish men's accessories. Prior to The Tie Bar,
Alter was a co-founder and President/CEO of SurePayroll, a SaaS technology
company that is now a wholly owned subsidiary of Paychex®. Alter co-founded
SurePayroll in 2000 after six years with McKinsey and Company, where he was a
co-founder and leader of its Service Operations Practice."

The mention of Steve Blank's methodology is interesting. The best work I've
seen done on this phenomena of customer-value-driven entrepreneurship is from
[https://www.effectuation.org/....basically](https://www.effectuation.org/....basically)
that entrepreneurs start with what they have and the problems they know and go
from there.

The counterargument is the Steve Jobs/Mark Zuckerburg argument for having a
concrete vision and stopping at nothing to achieve a goal. But let's not
forget that Apple started selling the Apple I which was primarily for
hobbyists, and the Apple II didn't blow up until spreadsheets came out. Zuck
was about to dedicate as many resources to Wirehog as he was to Facebook in
the early days. Not to mention YouTube started as a dating site and many more
classic examples of entrepreneurs having to figure it out as they go along.

I wonder what Keith Rabois would have to say to this. He has an interesting
perspective in that he thinks founders will their companies into existence
with clear visions that are often unwavering, and doesn't believe in the
"lean" approach to building companies. Interestingly enough, Khosla where
Keith worked earlier is the namesake of Vinod Khosla who does like the
Effectual model of entrepreneurship (which is basically "lean" customer
development based entrepreneurship). Another interesting thing to note is that
most academic research into the age-old management question of what makes a
good entrepreneur has far more to do with an individual's unique approach and
perspective in the world, than it has to do with technology. Very few
researchers are looking into "technology driven entrepreneurship" as much as
they are personality, disposition, persuasion techniques, idea generation
techniques, macroeconomic factors. This might change, but if anything when
researchers look at entrepreneurial skill, technology skills are not the main
focus. Again, this may be changing.

Personally, I think the only type of entrepreneurship that makes sense is very
bottoms up. Look at the U-Haul story. The founder of that company simply did
things none of his competitors would do because they thought it too risky.

~~~
anongraddebt
My VC professor was the other co-founder of SurePayroll. He and Alter actually
presented the idea to the CEO at Paychex in the late 90's. The CEO told them
it was an extremely stupid idea that would never take.

About a decade later that same CEO was writing a check to them for $100M+.

They didn't even know how to design the algorithm for calculating payroll.
They put the site up and had some elderly ladies who loved doing payroll
calculate everything by hand and then send it back to a user within 24 hours.
This went on for two months until they had figured out the algorithm.

------
k__
People often say you have to start doing things to become better at it.

When I wanted to blog, I signed up at a blogging platform and wrote stuff.
People started to read it and I got a book deal and some dev-rel jobs.

It just took me a few hours a week and I could start right away.

How do you start discovering problems of people that are worth solving?

~~~
edoceo
Listen to them complain. Offer to solve in exchange for money. Repeat.

------
ElectronShak
Most of the examples in this article are more of "Do things that don't scale",
to solve problems as they arise and not "Forget about the Technology".

If you are a Tech startup, do not forget the technology.

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tvladeck
This logic falls into a cul de sac when you realize that many open problems
can only be solved by new technology.

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laughingbovine
It's almost like the customers are the ones paying money.

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cududa
What a gross mentality.. When people talk about “Silicon Valley tourists” this
is what they mean.

~~~
joshmarlow
Could you elaborate? It sounds like this is just promoting a problem/product
first mindset, which - to me - sounds like a reasonable outgrowth of the lean
startup method which you hear a lot about in startup circles.

------
EGreg
Well, there are many paths I guess.

At Qbix.com we took the exact opposite approach. We are just in the Web /
social networks apps space. But we reinvested half our revenues in new
technology, for years, since 2011. Tortoise, not hare. Now we have
superpowers. We can build anything, quickly, and we don’t need venture
capital.

On the other hand, we have heard no from like 20 VCs over the years. We had 7
million downloads now, $1M in revenues but we were still “too early” ;-)

In the last few years we made pretty “altruistic” or “anti-capitalistic”
moves. We open-sourced it ([https://github.com/Qbix](https://github.com/Qbix))
and are exploring alternative financing to VC (ie actual _paying clients_
worldwide). We are trying to build a micropayment network
([https://qbix.com/token](https://qbix.com/token)) that helps everyone, not
just us.

So basically it seems totally backwards from the current VC model but is
actually compatible with it. I remember being inspired partly by DHH from
Basecamp, and others. Remember — this is _your_ startup. Do you want to change
the world? Innovate!

~~~
mdorazio
I'm having trouble reconciling your numbers here. You've been operating for 8
years, but your _revenue_ is only $1M and you've been investing half of that
into your tech stack every year, so your operating budget for core business
operations is $500k or less? That's like... two and a half developers. I'm
guessing you're not US-based with those kind of numbers, but even so, at a
glance, I wouldn't invest in you as a VC, either. From the numbers, you've
built a lifestyle business.

~~~
EGreg
This set of distinctions and decision tree is the problem.

A startup that has actual early revenues, has been around for years with
millions of people using its apps and doesn’t need VC to survive is called
derisively a “lifestyle business”.

You’re right, most VCs wouldn’t invest in such a startup. But if I spin off a
“hot” NEW company with a cofounder growing 10% week over week with zero
friction (no revenues) then the hockey stick looks attractive even with tens
of thousands of people and a series of rounds can be closed before any revenue
is made.

Why is having revenues and years spent developing in-house code less likely to
produce exponential growth and a unicorn? Why is that worse than two college
dropouts who cobbled together a solution and went viral for a while, such as
Lantern or Shyo or Videology? Or a viral sensation flash in the pan like Down
to Lunch? I have never heard it articulated well.

At any rate, we have a factory for making VC-attractive companies, if we
wanted to go that route. Companies that do one thing, grow the userbase
exponentially with no revenues, etc.

As for the numbers... yes we did spend most of our revenues on development.
The team is in Russia and Ukraine, I live in NYC.

To answer your original question... we put out apps that have generated $600K
very little upkeep, from 7 million downloads. We got additional money revenues
and from angel investors. The platform is all about reusability — money spent
on it is money spent on our projects and core business. But we open sourced it
also. Just like Basecamp open sourced Ruby on Rails, or Fabien open sourced
symfony etc back in the day. Just because we give it away doesn’t mean it
improving it isn’t directly tied to our core business.

~~~
mdorazio
I didn't mean "lifestyle business" to be a negative term and don't use it that
way... ever. The opposite, actually - I think actually-sustainable small
businesses are far better in general than bullshit startups. However, you
specifically said you have been trying repeatedly to get VC money and have
been getting turned away. VCs don't invest in lifestyle businesses because
that's not how their funds work.

The entire VC business model only works if they invest in companies with high
risk/high growth prospects and the potential to be unicorns. To answer your
question, the answer is statistics - VCs have a large history to draw from and
have seen that viral companies and flash in the pan businesses either grow to
massive exits or fail completely in a short time far more often than
businesses like yours. On average, businesses like yours will continue a slow
growth trajectory and have mediocre exits, if any exit happens at all, after
the expected fund payout period has already passed. Basically, it's a drag on
the fund portfolio and time/resources of the VC, so they won't invest - it's
better that a company fail quickly while trying for unicorn status than it is
that it chug along in sustainable small business mode for a decade.

On the flip side, there is an entire industry of funding available to you that
isn't available to startups with awful financials - banks love to loan money
to small, sustainable businesses with decent profitability. If you need growth
cash, get a small business loan.

