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Comment by think814 | Hacker News Reader

The subtitle starts like this: "Even the worst-run startup can beat competitors if investors prop it up."

This is clearly written by someone that has little to no startup experience. As someone that has spent 15 years as a founder I can tell you that the opposite is true: I have seen startups racking in seemingly endless funding only to be beaten by much smaller / less well funded competitors that happened to have better strategy or execution. The examples are endless, more recently we heard about Quibi ($2B funding!) failing, Yik Yak, WeWork etc

There are markets that are capital intensive, and others that are really commodity spaces where winner takes all (Uber comes to mind) but for the most part, the smartest VCs in the industry will tell you that you should worry about strategy and execution, not raising a ton of cash which creates a bunch of problems on its own.

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This depends on the market structure. If your competitive advantage is product/market fit, it matters how you run the startup. If you are selling a commodity at a loss in order to acquire a market share, all that matters is the depth of your pockets.

And, well, if your competitive advantage is access to legislators to carve out special legal exemptions for yourself [0], good luck competing with that, mom-and-pop startup.

[0] https://ballotpedia.org/California_Proposition_22,_App-Based...

This is true, except that the "selling commodity at a loss" and "legal exemptions" examples both presuppose that you already have product-market fit for the commodity you're selling or the thing you're getting an exemption for. If people fundamentally don't want what you're selling, aggressive pricing and legal lobbying will only lead to you killing yourself that much faster.

This is something we tend to take for granted with already-successful companies, but there was a time when everyone — even Uber and DoorDash — were struggling in obscurity to build something people would use.

Maybe? Car services and taxi services kind of already validated product market fit long before Uber, lyft, etc.

While yes, they have some benefits that people like, but it's not clear that those services would have been able to compete against existing services without heavily subsidizing to undercut existing market players.

By "legislators" do you mean members of government? You linked to a California proposition, which any citizen can create:

"In a special election held on October 10, 1911, California became the 10th state to adopt the initiative process. That year, Governor Hiram Johnson began his term by promising to give citizens a tool they could use to adopt laws and constitutional amendments without the support of the Governor or the Legislature. The new Legislature put a package of constitutional amendments on the ballot that placed more control of California politics directly into the hands of the people. This package included the ability to recall elected officials, the right to repeal laws by referendum, and the ability to enact state laws by initiative."[0]

[0] https://www.sos.ca.gov/elections/ballot-measures/how-qualify...

You're free to dislike prop 22, but what you're describing is really nothing like what actually happened.

The special carve-out in this scenario was AB5, which was specifically designed to target Uber & Lyft (effectively every other industry you can imagine was made exempt from it).

And the "access to legislators" was non-existent, that is literally the point of ballot propositions. Apparently these companies tried to work with legislatures first but they were unwilling to compromise. But anyone with a few signatures can put up a ballot prop in California without any special connections, and that's what they did. It was then approved by a majority of voters, it's hard to frame that as some kind of shady backroom deal.

Lastly, it's pretty hard to imagine a mom-and-pop startup this might hurt. It hurts the legacy taxi industry but that is the very type of intrenched interest with their own special rules and special access to legislators that we're better off without. Any new rideshare or delivery app competitors get all the benefits of prop 22 that incumbents do.

Sure, a few signatures to get it on the ballot, then just a few hundred million to get voters to vote for it.

Not to mention, they're supposed to be competitors, but they're cooperating so sweetly.

The article describes in detail how the WeWork saga decimated the coworking industry, but you don't care because that doesn't match your experience and you don't depend on coworking spaces. That is really cold.

I've been working with startups part or full time since 1991 and am amazed at how disruptive they are to the markets in which they participate. Getting a huge pool of money and then spending it to achieve dominance in the shortest possible time does lots of damage to markets, in particular in makes the bootstrapping path nearly impossible since customers can't compete with investors.

Are you arguing that WeWork hasn't outcompeted any other office space leasing companies thanks to its funding? The article revolves around testimony from firms that WeWork beat.

Also, even if we assume WeWork is an aberration, "beat" here is on a long timescale, after all. There are by now plenty of tech companies that have been around more than a decade having never made a profit. At some point you have to accept that the market dumping these firms are engaging in, does in fact lead to less well capitalised firms being unable to compete.

Precisely, and this is a form of anti-competitive "dumping".

There are laws to regulate it, but they aren't enforced because Washington is both incompetent and corrupt.

https://en.wikipedia.org/wiki/Dumping_(pricing_policy)

Ehh, of all the industries that exist in the world, I find it pretty unlikely that the office space industry is going to be monopolized by a company that is price dumping, and that this is going to put everyone else in the office space industry out of business.

Fair point. Given their business model, it seems like the whole segment of co-working (renting long term leases and reselling as short term ones) never really made sense to begin with. (Despite it being to many people's advantage, including myself).

I wonder if it has more of a place in a post Covid world? At least some companies are interested in divesting themselves of office space and going 100% remote. A flexible office space arrangement or even just a small space that can be rented to meet with clients sounds like it could be useful.

I'd say they aren't enforced because they are really vague and thus hard to enforce, and if they weren't, all sorts of things would be different and weird. For instance Google might not exist (the search engine) because for the first few years of its life it was basically giving the web search engine away for free and hoping to make money by selling search appliances for intranets. That business plan didn't work out and they eventually pivoted to making money on the main search engine.

But what if they'd not been allowed to do this and been forced to charge for web search from day one? With no ad network and without being allowed to take VC money to build up traffic, they'd not have been able to establish a market for ads and thus, would have had to rely entirely on revenue from search appliances, which was tiny. Search would have ended up dominated by their competitors simply because they could never bootstrap themselves to the point where they'd be interesting to advertisers.

So this stuff is complex and even though there seems to clearly be a problem here with VC money subsidising broken businesses forever that suck all the oxygen out of the room, it's unclear that governments effectively setting prices is better (after all, setting price floors is a form of price control). SoftBank will eventually run out of money unless Son finds another Alibaba. Government controls don't run out like that.

> unless Son finds another Alibaba. Government controls don't run out like that.

Thanks, you made me think. You might be right. An unsubstantiated part of me wants to think that oil being pegged to the dollar and the dollar being pegged to nothing is the ultimate root cause. What allows western aligned funds like Softbank to accumulate so much mis-managed money that WeWork is even a thing. I feel like this whole thing will collapse and Bitcoin will look honest in comparison.

Well, oil is traded in dollars but not pegged to it. To be pegged to it, there'd have to be a constant oil price but the price floats freely.

SoftBank is something of an aberration caused by the growth of China. Son would have lost all his wealth in the first dotcom bubble but he sprayed so much money around he got in on Alibaba early, and it turned into the Chinese Amazon. Or at least, that's the uncharitable view. The charitable view is that placing a lot of bets on a lot of firms and hoping one gets huge is a perfectly valid strategy to create wealth, and Son reaped the rewards. However, the risk involved is huge. Lots of people lost lots in the dot com bubble because they sprayed money around and did not find that magic lottery ticket.

Chiming in, as a founding member of a venture backed startup, the idea that our success is guaranteed strictly because of the capital investment is honestly a bit insulting. If only that were true, I wouldn't have to worry about half of my compensation being worthless — a statistical likelihood.

> the idea that our success is guaranteed strictly because of the capital investment is honestly a bit insulting

Nobody but you has that idea. The article is a story about other companies who have maybe shown indications that some can "run amok" with an influx of capital, at the expense of all other stakeholders, including the user.

This article is not a story about you or the non-corporal entity you are birthing and even pretending for a minute that it is, is just silly.

This isn't about your success, it is about the failure of others. WeWork is dying a protracted death, but it did a huge amount of damage to coworking providers before it blew up. You seem to be arguing that disrupting markets is okay as long as failure eventually happens, but that dynamic causes a lot of suffering and waste.

> I have seen startups racking in seemingly endless funding only to be beaten by much smaller / less well funded competitors that happened to have better strategy or execution

The usual rags-to-riches feel-good story.

Reality is more nuanced, and "worst-run startup can beat competitors if investors prop it up" is true most of the times.

Exactly, the number of startups which have failed or never even got a chance to start because they had to compete with an unprofitable VC-backed unicorn is unfathomably greater.

How do you know?

It seems like the opposite cliché of "Endless VC funding leads to success over better alternatives" is just as much of a fantasy.

After all, people with little marketing experience on Hacker News often believe a marketing budget is the only thing that separates huge success from complete failure.

As you say, reality is more nuanced.

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