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I have a really hard time buying a lot of this about how novelty and monopoly are keys to a successful company. If you look at the really successful startups, especially unicorns, almost none of them are actually monopolies or new ideas. The vast, vast majority are old products done right, and almost all of them have very substantial competition. This attitude is, in fact, encompassed in the near footnote-like section entitled "Competition." That section sums it all up: success is determined with obsessively improving the company. Competition isn't what kills, it is failure to keep on improving.


There is the list of current Unicorns. I can't think of one of them that doesn't have very, very substantial competition or is a genuinely novel product. All of them ventured into highly competitive, well-worn fields and what set them apart was quality of service, ease of use, and responsivity. Very few of them made conceptual leaps in the underlying product - they mostly made leaps in lowering activity energy to use products or solving associated logistical problems.

Sorry Sam, I have to politely disagree with you on this one. Lord knows you are the one with the resume and authority on this, but I am a startup lawyer and work with clients on this stuff all day, so I am not totally unqualified. I do defer to your judgment, obviously, on companies that you want to fund, and your track record more than speaks for itself. However, what I want to know is if there isn't some disconnect between the companies you do fund and the attitude that is expressed in this post. I would love to hear your insights or opinions on whether you feel that I have this wrong, and if you think that the next generation of unicorns are going to be novel monopolies, or that maybe I am misreading the characteristics of current successful startups.

Novel does not mean no competition--there's always competition, even for breakthrough technologies. Even the telephone had to compete with telegraphs or snail mail. The novelty comes in the way an existing need is met. From your list, Uber competes against taxis to transport people short distances. Airbnb competes against hotels to provide short term housing to travelers. Dropbox competed against flash drive to transfer data between machines. These companies have a novel approach to enter and thrive in a competitive market.

A monopoly simply has to have significant influence on supply of a good. In the UK that can be as low as a 30% market share. Qualify a market enough and any company can be a monopoly (I'm sure there's some geography where Lyft or good ol taxis represent a monopoly), so it's important to determine the size and importance of a market (a monopoly over food in a small town is still problematic). So while I cannot say these companies are monopolies--we have the Department of Justice for that--many companies on your list would make a compelling case, were they to abuse their market power.

You make a fair point, and I also do appreciate the definition used by Sam in his post, which was (the site is now down) about network effects compounding the bigger you get, and creative a positive feedback loop. I buy that definition, sure, and I get your comment. However, what I take issue with is funneling tons of smart minds into a quest for green-field or blue-ocean opportunities. There are tons of huge opportunities in existing businesses. I guess I don't understand how we got from "disruption" to "find a business with no competition."

My thoughts on why is pure conjecture but I'll add that there are many such common misunderstandings. Chasing growth is another, which is why I'm very happy for this Startup Playbook. So many people do do not realize growth is STEP TWO AND YOU CANNOT SKIP STEP ONE:

"Your goal as a startup is to make something users love. If you do that, then you have to figure out how to get a lot more users. But this first part is critical—think about the really successful companies of today. They all started with a product that their early users loved so much they told other people about it. If you fail to do this, you will fail. If you deceive yourself and think your users love your product when they don’t, you will still fail.

The startup graveyard is littered with people who thought they could skip this step."

This is a small nitpick, but I'd say Dropbox competes against sysadmins setting up a corporate network share or FTP server (or even email attachments) for storing documents. They basically automated the sysadmin's job, with a slick interface that was easy to set up and easy to pay for.

Same with Slack. They took the concept of IRC, which many companies use internally, and made it dead simple to set up and use.

In essence, I'd say the competition arising these days is all about UX design. Startups are taking these existing services and making them easier and smoother to use.

Dropbox started out as a consumer company, not enterprise. When they launched, most of their customers were individual people not affiliated with a company.

>A monopoly simply has to have significant influence on supply of a good. In the UK that can be as low as a 30% market share.

A monopoly has economic control of the supply of a good or service, no competition and hence pricing power.

Having "significant market share" and zero pricing power in an intensely competitive market is not a monopoly, regardless of how SV has decided to co-opt the word.

look at Microsoft and apple both of their real winners were after the fact. Office and the ipod/iphone. Also, I think anything that makes money is a win. Not just unicorns. If YC wants export to the rest of the country it needs to shoot for more base hits. I think in SV people have already self selected to follow cray ideas. but the rest of the country if you want to get the best candidate show them something with the best odds of not failing.

Office was not the first word processor, Mac OS was inspired almost wholesale from Xerox Parc, the iPod was absolutely not the first mp3 player, and the iPhone was absolutely not the first --iPhone-- edit: smartphone (what a freudian slip!). These are all perfect examples of my point: these were all examples of these products that due to their incrementally better and thoughtful design, which included ease of integration into larger digital ecosystems, compatibility with other products, availability and cost won out in the market. Not a single one of those, however, was a first in kind, nor was it a monopoly. What drove those all to success was the absolute obsession of their developers and designers with making products that were a joy to use and fit seamlessly into larger operating ecosystems.

for office I think it was bundling word processor, spreadhseet etc. and selling it large businesses. why buy one when I can buy 4 for the price of 2. But neither of these companies started out where they ended up.

Monopoly can be a localized thing.

Most of them have a high friction associated with them. Ditching your benefit provider is a major pain in the ass if you're Zenefits. If you're a paying customer, ditching Dropbox is tough too.

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