Hacker News Reader

Comment by wtvanhest | Hacker News Reader

> This just sounds so wrong to me. If you have a good product and it brings value, then others should be able to value it by paying you back for your product or services. Period.

I completely understand this philosophy, but an attempt at building a two-sided market place is very likely going to require outside investors. This opinion that you need to be profitable from day one has been proven wrong repeatedly and while some 'unicorns' will fail or become less than worth $1bn, their achievements are still very real.

It is 100% OK to want to build a business, but entrepreneurs should be flexible enough to understand when it is appropriate to raise money, or make a product that does not generate profit up front.

For the record, I also attempted to create a two-sided market and I also failed. It was super painful and I hope you move on quickly with some really solid lessons learned.

View on HN

Bootstrapping is often the only practical way to run a business for numerous reasons. I think anyone who's been an entrepreneur can appreciate the good a few hundred thousand would do, but finding investors and keeping control of the operation after you have them are frequently intractable problems.

Taking startup investment begins to be impractical with something as simple as being older than 21 and thus, having external obligations, whether monetary or chronic. Anyone who is NOT your typical college kid willing to work 90 hours per week for $25k/yr usually can't get investors to look unless the business is already running and turning profit.

One day, it's my hope to open investment opportunities to the mature professionals that are capable of building our next generation of transformative software but are almost always overlooked merely because they've been doing something more prudent with their lives than pulling the lever on the startup slot machine.

We did raise funding it was around $100k-$500k (not going to disclose the real amount). We realized that we needed some boost to test the market overall, but after 1.5 year of using that money and got to 30-40k UV per day, the path of profitability from that point seems far away, numbers just don't add up.

It gets worse as I stated in the article that new startups in the same area are raising behemoth amount of funding. The funds were used to attract and subsidized sellers and buyers.

The hard part in building a two-sided market is getting users AND buyers on your platform. This generally means epic shit-tons of brand marketing to end users, which is where a lot of those millions of VC dollars go. There's really no way to get brand recognition otherwise -- you have to spend some ad dollars to inform users of your product. Ad spend is a zero-sum game from a competitive lens, so if your competitors are out-advertising you, they're going to win. And yes, this is why companies tackling two-sided markets focus on user acquisition over profitability.

You were also trying to fix the wrong problem. Focusing on the user experience is the right call, but your mistake was saying "fuck this, the distributor model is so fucked we can't do it". Ok, if the supply chain of a specific industry is super-expensive, your business model should be to streamline it by going direct and undercutting everyone else (this is what Uber did).

You needed to build a new distribution model. It's fair to say "I'm a college student and don't have time to fix this big problem" -- which is fair, supply chain problems like this are usually best left to people with experience in them or at least a passion for solving them.

Yes, so what you're saying is college student who sells aren't qualify as a part of my market since they can't fix this supply chain issue.

Which I also mentioned the way to solve it is to cut down the market size, so that only first hand suppliers are the ones majority selling

Or you need to fix the supply chain issue yourself by holding inventory. This solves a problem that your producers have and provides better service to your customers. This is what Amazon does.

The real problem is when you have a bunch of producers trying to sell direct to customers and drop ship is that it's a very inconsistent consumer experience. If your selling point is a compelling customer experience, you need consistency in how packages are shipped and changes communicated. All of that leads to inventory, shipping, logistics, and something that looks much more like a traditional e-commerce store.

Once you lose control of the customer experience in this way, it can no longer be your competitive advantage. So you either need another competitive advantage, or you need to fold up shop.

I sense a lot of naive optimism in your approach.

You understand the goal of any business, especially an internet business, is to become a monopoly right?

Look at Amazon, Google, FB, etc. They only became profitable once they became monopolies, and thus could set their own prices based on whatever metrics they chose.

The reason startups take outside funding is so that they can become a monopoly in a given market, and then charge customers whatever they want.

Don't fall for the marketing hype. Startups don't save the world. Scientists, doctors and inventors do. Startups just make a few people very, very rich at the expense of their customers by selling them mostly crap they don't need or want, using psychological manipulation (i.e. marketing).

Once you understand that this isn't some noble quest, you can finally begin to understand how to play the game (of thrones).

Posts like this are much needed in HN

Startups just make a few people very, very rich at the expense of their customers by selling them mostly crap they don't need or want.

This is laughably false for at least two of the examples (Amazon, Google) you've mentioned in your own post.

Millions of people use these services everyday to make their lives better. Thousands of employees work for good pay at these companies. Is it all scam? Of course not.

I would have to disagree with the goal of any business is to be a monopoly.

There are lots of examples of successful business out there who did not monopoly the market.

I'd also have to disagree that startups sell mostly crap they don't need or want. Uber & AirBnB definitely provides something valuable that most humans would appreciate of.

If you're talking about products such as Snapchat or Instagram, that's a different genre of product. It's a vitamin type of product not a pain killer.

> I would have to disagree with the goal of any business is to be a monopoly.

> There are lots of examples of successful business out there who did not monopoly the market.

Such as? If you cannot eliminate competition within your given market, marginal profit will eventually be driven to zero. The internet amplifies this challenge because it is not geographically constrained (minimal transaction costs) and software amplifies this challenge because of zero marginal cost (creating massive economies of scale).

You can find more on this in the works of Michael Porter (http://amzn.com/0684841487, http://amzn.com/0684841460) and Peter Thiel (http://amzn.com/0804139296). Zero to One discusses how many seemingly successful non-monopolies are actually either monopolies pretending not to be one or non-monopolies that are not as successful as they portray themselves to be.

Reply on news.ycombinator.com