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Comment by duxup | Hacker News Reader

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.

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"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.

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)

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.

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

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

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.

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.

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.

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/

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

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.

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 ;)

Gumroad?

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