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Comment by dalbasal | Hacker News Reader

Failure, in this context could either mean product or company failure, and the "fail fast" adage is usually applied to product, not company. At least as this article presents the story (executive churn, etc), it sounds like company failure is the main part of it.

The issue with "unicorn" failures is that a product can be really successful in objective terms (users, revenue, profit..) but still an investment failure, if it fails to live up to valuations.

So, if investors in 200X thought (and paid as if) the company had N potential... N becomes definition of success. They'll also, in all likelihood have already begun to spend accordingly to that N level. Failure of one kind leads to others

As I said, it sounds like there are fundamental company issues with Evernote, but it also could be that it's more of a failure to live up to expectations (we should have been slack!) than failure in objective terms.

..I know people who like Evernote.

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I often think of the story of the guy who posted here about how his startup "failed" but in reality it just didn't bring in the massive cash flow that was hoped for.

IIRC he bought it from the investors for cheap (so they could get it off their books) and then just ran it as one guy (maybe a few more added part time later)... and it does just fine in that conext, and who knows what might happen from there.

Kinda makes me think that a lot of Unicorn style world domination or nothing, result in some business opportunities being lost if those are the only two options.

"Kinda makes me think that a lot of Unicorn style world domination or nothing, result in some business orotundities being lost if those are the only two options."

I think a lot of companies are doomed because of that attitude. Companies with high valuations like Slack, Github and others can't just keep a nice business going but they have to expand like crazy to justify their valuation. And most of them end up converting a very good core product into a big mess.

If you want to be bold, start your Slack replacement now. Do whatever you can to make it easy to transition to your product (API compatibility, integration compatibility, etc.). Be ready to pick up the people who will be disgruntled by Slack in two or three years.

You may never be as big as Slack but there's probably a business there.

There probably is but it’s really hard to compete with a company with deep pockets. That’s what I find pretty worrying about these unicorns. They kill a lot of potentially good smaller businesses just by being able to burn a lot of money.

I think they idea was to pick up the pieces when Slack implodes. Most of these businesses, looking for 10x growth, do so at some point.

gitlab and bitbucket ain't github, but as github started burning, they started picking up steam. github sold for $7.5 billion. If they can get 1% of that value, that's still $75 million. If they can do so on the cheap, maintaining control, that's not a bad return. I doubt something like gitlab requires more than 5 people to do well enough to achieve that, given patient, low-overhead investors. Done well, that's $75 million returns for a $10 million investment. If you toss the investor $50 mil, and each employee $5 mil, it's not bad.

On the other hand, as far as I know, patient low-overhead investors are a myth.

I'm not sure if you're trying to say that GitLab could be five-person company, but it's much larger. I don't think they list the number of employees, but say 56 countries so I'd wager at least two or three times that.

GitLab has 736 team members - https://about.gitlab.com/company/team/

I am saying, exactly, that it could be, waiting in github's wings with 5 employees. They were exactly that at some point. They started in 2011, and they went for Y Combinator in 2015. They waited, and waited, and then grew. The $100 mil raise was right after MS bought github.

Gitlab also raised 100 mil on a 1.1 billion valuation fairly recently: https://www.businessinsider.com/gitlab-valuation-microsoft-g...

How do they “kill” the competition exactly? I understand they have a lot of money, but what do they do with it that makes it impossible to compete? (Honest question)

I work in an industry that is a bit niche and weird SaaS world.

There are two companies backed by deep pocket investors who are happy to lose money, their products are straight sold at a loss because they desperately need market share gains to hopefully dominate and survive when they finally worry about profits.

Now the company I'm at is doing fine as we're small and such and we haven't lost customers to do the absurdly low cost pricing from the other two companies. But I know of others who have lost customers, nobody can match the pricing, and simply because they don't have the backing they will not survive.

It's very possible the two deep pocket companies won't survive either, but it seems like a fairly destructive pattern to have a market torn up ... when the driving force isn't even creating a stable company / what I would think of as typical market forces that help everyone.

That's very true of niche businesses; one competitor price-warring can wipe our half your enterprise customers and they sometimes haven't got any way of growing except trying to pick up their customers. Not sure it's quite so true of general purpose SaaS sold to a market as big as "people that want to collaborate", especially not when the 800lb gorilla's pricing starts at $60/user/year and their apps aren't universally loved or difficult to replicate at smaller scales

It's much easier to develop a product if you don't need to make money for financing the development. Selling is also easier if you can afford marketing budgets and sales people. As long as they are losing money they are basically selling 1 dollar bills for 90 cents. Hard to compete with that.

It's not impossible to compete but just much harder.

For one, they can stay free while your coffers run out and suddenly you are the competitor that charges money while the others don't.

Why would you enter a market where one company publicly has 1B+ valuation? It's Goliath crushing David based on reputation alone.

You’d want to look at the market fundamentals carefully: if that company has high fixed costs and lacks strong customer lock-in, problems with satisfying customer needs, etc., you might reasonably think you could pick up customers with better pricing or support.

A great example is Uber: they’re dominant but they have a ton of debt and neither their customers nor, especially drivers, have a reason to stick with them if the money is better somewhere else. They could conceivably make that up through superior logistics but if you thought you could do better, say in a particular geographic area where you can get drivers who know where anything is, it might be reasonable to compete if the absence of such a huge amount of debt gives you enough leeway to support an app development team and treat your drivers enough better that they’ll favor your clients.

I have seen cases where the big guys gave things away for free or super cheap to get rid of the competition . Oracle and MS definitely do that.

Mattermost, it's awesome. My company already left Slack

Build fast, sell out faster.

This also opens up the opportunity for a lot of lifestyle businesses. It may, at first, seem like a major downside having a venture backed startup competing directly with you. However, they are likely following an all or nothing strategy and there is a chance they go bust.

If they end up closing down or pivoting they have helped to create the market and all their users will be looking for an alternative.

Completely true, Pinboard is a good example in regard to Delicious going bust.

I wish there was a way to know about ... what followed, I was wondering what happened after Delicious just sort of rotted away.

IIRC pinboard actually ended up buying delicious

@idlewords can tell you about it.

> Unicorn style world domination or nothing, result in some business opportunities being lost

Most business activity in America is far from the Bay Area. It concerns itself with the sorts of quotidian businesses opportunities you speak of.

You're thinking of Sahil Lavingia, CEO of Gumroad.

Yes, thank you!

Investors want another Google, some people are perfectly happy with niche boutique product, and when all that investor money comes in it obscures what made that original product great. It's a shame that some great products only failed because of inflated expectations. If they had just stayed the course, they would've been fine.

I'd like to read that; it sounds like a good story. Do you happen to have a link?

https://medium.com/s/story/reflecting-on-my-failure-to-build...

Thanks to rutierut who remembered it better than I did ;)

https://medium.com/s/story/reflecting-on-my-failure-to-build...

Gumroad?

There's the question of whether such companies would have reached the point of a solid business without the help of a massive cash infusion though.

The failure is that start up founders and investors fail to recognize that revenue is your KPI to optimize for in the long run, with a goal of making a profit in the not so distant future. Business is not a social network, and success isn't measured by how many friends/users/downloads you have. Money is the bottom line.

Of course if you give something away for free or sell it cheap enough at a loss, you'll get a lot of "customers". I could do the same by opening a free taco stand on the street. But it is in no way a sustainable business model.

What if your business model were to get a huge investment from some rich friends, give away free tacos, put all the other taco stands in your town out of business, become a taco stand monopoly, and then charge for tacos at any price you want?

If you put other taco stands out of business, their assets are cheap to buy. Tada! You are now competing with someone whose cost base is lower than yours.

Value creation doesn't come from the absence of other value creators.

I see what you're getting at, and that's the logic some VCs seem to be using. But rarely does it ever work, because you'll need to start charging sooner than later, even at a loss. And once you do, competition will show up.

See Uber vs Lyft.

You'd be better off investing in a real business with a real revenue plan. Still, yes, your model works in an environment where collusion can take place. Which is why collusion and the VC aristocracy is so damaging.

> ...if it fails to live up to valuations.

Or it was the failure of the investors to gauge the potential properly and start out with too high expectations. Why should that count as company failure?

If the only thing a company achieves is wealth transfer from investor to founder (in the form of wages and/or a sub-valuation exit), then it's not a success but a failure. Unless you take founder economic gain as the sole success metric, but them it's not a company but a fraud scheme. The line between victim and perpetrator blur in interesting ways when a sub-valuation exit is a win for some investors and a loss for others.

It's a somewhat funny situation: if you feign optimism to access stupid money you're a fraud, but if you are just as stupid as the money and believe it yourself, everything is fine.

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