
Why I don’t like “lab” companies. - sahillavingia
http://sahillavingia.com/blog/why-i-dont-like-lab-companies/
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mikeryan
_Every startup is already a “lab!”_

So you _do_ like "lab" companies - you just don't like calling them labs?

I'm on the "call it like it is" side of the equation.

I actually like what Milk is doing, and I like "lab" companies in the mobile
space. I think, outside of Angry Birds" its going to be very difficult for an
"iPhone App" company to exit based on a single app. I think the "Tapulous"
model, where a single brand makes a whole bunch of Apps is much more
attractive. I think these kinds of companies are going to have a much harder
time getting early seed funding unless you're a Kevin Rose or Bill Nguyen (BTW
I think Color _became_ a lab, I don't think it started that way). But on the
flip side going to be much easier to bootstrap these companies.

~~~
mechanical_fish
_So you do like "lab" companies - you just don't like calling them labs?_

No, there's a distinction trying to be made here. A startup is a _temporary_
lab. The goal is: Do lots of experiments, but generally only a few at a time,
and then when you find something that works even slightly _stop experimenting_
and start iterating.

It's true that the word _startup_ connotes experimentation, for the same
reason that the word _baby_ connotes being small, helpless, and illiterate.
But just as the purpose of a baby is to _stop being a baby as quickly as
possible_ and grow up to be an adult, so the purpose of a startup is to find a
repeatable business model and then _crank on it_.

Whereas a true "research" company doesn't do the cranking part. Their entire
product is research reports, and their customers are the people who give them
grant money.

Now, mobile-app companies with constantly-churning portfolios probably don't
fit cleanly into this dichotomy, which seems to be what you're sensing as
well. And it's also fair to ask if the "lab" metaphor really fits, e.g., Milk.
Maybe the Milk folks have decided to label themselves a "lab" in the short run
but will eventually pivot to being "the X company" once they find the value of
X, just as Rovio used to be "a company with a portfolio of small games" but is
now "the Angry Birds company".

~~~
angli
I think the second part of your comment hits the nail on the head: labs might
actually be _safer_ because of that lack of total commitment to a single idea.
This lets them seek out value in areas that might be too risky, or with
product/market fit that's hard to predict in advance. Essentially, it lowers
the chance of failure for the startup.

~~~
mechanical_fish
The business model you're describing is YCombinator's business model: Invest
in ten or twenty experimental businesses at a time, to hedge against each
individual business's probability of failure.

The problem with this model was described by the OP: It's hard to sell
"Product/Market Fit in a Box" because so much of product/market fit is tied to
_specific_ products built by _specific_ teams. YCombinator finds
product/market fits, but they don't just sell the ideas: They sell the
_specific companies and products_ along with the ideas, because these things
are not separable. Indeed, PG's explicit belief is that even a valuable idea
like, say, Dropbox is less valuable than the specific team of people who built
Dropbox.

Because the value is in the people and the brands and code they create – these
things are your real product – your "labs business" will need a constant
stream of fresh recruits to replace the veterans who graduate. You're
basically running a school. (Incidentally, it's no coincidence that, even in
actual laboratory science, so much funded research gets done at schools.)
However, in case you haven't noticed, it's not that easy to find a constant
stream of smart founders, each with the skills to find a product/market fit
and grow it into a business.

And there's a big cash flow problem. Poor people do not get to be angel
investors, no matter how good the angel-investing business model is. Perhaps
funding ten startups at once is less risky than funding just one, but it also
costs ten times as much up front, and it will take years to find out if you
have a winner. Better have years worth of living expenses in the bank. Better
have a lot of money you can afford to lose.

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stephanimal
_PayPal had a clear vision_

This is actually not true. They started as a way to transfer money or IOUs
between palm pilots. The web portion of the product got so much more traction
that they pivoted.

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fluxify
I agree with most of the points in your blog post and would also not recommend
to take the 'labs' approach. My team and me have dropped our 'labs' company
just recently. We have built extremely innovative algorithms to tackle a huge
problem but completely failed to define and follow an actual product vision
and strategy. Our motivation went down over time and our individual visions
became more and more misaligned.

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kqueue
I feel the word rubs you the wrong way and you are trying to come up with
arguments to support your emotions.

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bhewes
I view these lab companies as following the publishing model. A company like
Milk produces say 12 apps a year hoping a few of them are hits.

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ideaoverload
BTW: chrome 15/Windows-text zoom does not work in your blog. FF 8.0/IE 8.0
increase font size as expected

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uast23
What you are saying is right indeed, but most of the problems that you talked
about are people problem rather than having to do something with the tag of
"labs". Otherwise how different is the failure of two consecutive products by
the same team under the same "labs" banner from the failure inside two
entirely different banner!

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AznHisoka
they have to call it a lab to pump up the valuation and attract investors.

Would you rather invest in a single iPhone app, a company that makes iPhone
apps, or a lab?

