How to Beat Silicon Valley Competitors (2018) | Hacker News Reader

How to Beat Silicon Valley Competitors (2018)

alexcrompton.com

69 pointsliumaiyi46 comments

I feel like we "beat" our SV competitors (we have several) by simply providing better customer service. Everything else is secondary to us. My definition of a "win" in this context is a customer advocating for our solution over a competitor's solution at a trade show or lunch meeting.

A lot of SV culture appears to me to be biased towards the shiny tech and less towards the customer relationship. My recent interactions with some SaaS enterprise sales teams really drove that home for me. The only tech vendor that "gets us" and the kind of business we do (B2B software/consulting w/ US banks) appears to be Microsoft.

We constantly ask ourselves "what is the simplest thing that will still make the customer happy". After asking that for several years, we have arrived at a robust technology stack. Very few moving pieces. Server-side forms. SQL does most of the scary stuff. It's a profoundly boring flavor of SQL too. We spend far more hours per week thinking about the customer's problems than we do any particular piece of technology.

Put more concisely, I think a key advantage non-SV companies have is that they aren't trapped in some shiny tech rabbit chasing olympics mindset. Boring tech + customer focus will likely beat most competition, regardless of where their offices reside.

> I feel like we "beat" our SV competitors (we have several) by simply providing better customer service.

That and refusing to give up. Grit counts for a lot.

>Boring tech + customer focus will likely beat most competition, regardless of where their offices reside.

Reminds me of this classic post: https://mcfunley.com/choose-boring-technology

Your addendum on customer service feels spot on too. What good is any software, if its users are unsatisfied.

Word of mouth is the best advertisement. Focus on quality (product, support, etc.) is the best marketing strategy.

Best wishes for your continued success.

I think another way to beat silicon valley competitors is to not take as much VC funding. In some ways, it reminds me of when boxers try to move up weight classes beyond their "natural" weight. Often the abilities required at the new weight comes at the expense of the very things that made them excel at their previous weight. Similarly, successful companies who need to hit X00s millions in revenue to justify its funding level are forced to work on features or business models that aren't actually viable, and thus are vulnerable to smaller competitors.

How do you define "beat" here? It seems you're advocating for not playing the game at all so there's nothing to beat.

Fair point, by "beat" I mean create a sustainable business. I think that in a lot of cases orienting a company around building a $100M/yr business and a $1B/yr business are mutually exclusive, because product/sales/marketing teams invariably are incentivized to focus only on the high upside speculative future stuff rather than shoring up the existing business lines. So agreed, you're not really beating them at becoming the "Uber for X", you're just building a business that is in the X space?

The implication is that the go big or go home pretenders may crash while you remain in the game.

Survive and prosper at the scale that makes sense for your business, rather than VC scale.

Yeah to expand on that a bit, I think VCs have a portfolio of bets and need extreme, outlier wins in order to come out ahead. So even if the scale doesn't make sense for a business, VCs will push them to pursue it because it is optimal for the VC.

This works unless they have so much VC cash that they lower their prices into massively negative margins for long enough to kill competition. Then they either die or jack the prices up.

This has happened to two companies I've worked at. It's the biggest problem with VC funding. It creates an unhealthy ecosystem.

And that tactic is usually called dumping in international trade, it's one aspect of the VC-funding tech culture that I don't understand how hasn't been fought with regulation, it's incredibly anti-competitive since the price is artificially low and only sustained by losses through a massive amount of capital. It isn't healthy for the free market, it might lower prices for customers for the period while dumping makes sense and a competitor outlives others but it will inevitably lead to increased prices when a company finally engulfs a big enough marketshare to be safe.

Predatory pricing is a ridiculous practice, killing a lot of innovation.

If you can outlive the capital returns cycle (10 years is the standard for VC), you'll beat all but the 1-2% of the investor-funded competitors that eventually develop into self-sufficient, "going concern" businesses.

Obviously, this means you have to be continuously profitable, not take on outside capital yourself, operate lean, and be willing to work on the same project for 8+ years.

May people "can" do it, I think, but it requires a lot more patience and determination than the alternative, so few do.

We've been at it for over a decade now. For the first time ever, we will turn a profit next year.

We almost gave up many times. There is no way anyone involved today would walk away at this point.

It feels to me like that part of the casual StarCraft match wherein we are about to warp our cloaked carrier fleet into the enemy base without any prior detection or hope for recourse. Quitting the game now would be absolutely insane.

Isn't making money the best way to beat VC-funded companies? (Or any competitor for that matter.) In other words, sell something people will pay for right from the start. You won't be building SpaceX or Tesla but you can build 1Password. Software companies in particular don't have to be capital intensive.

Not when VC money subsidizes your competitors in the name of customer acquisition. They can slowly strangle you and then raise prices when you're dead. Classic trust behavior laundered through investment dollars.

Is there any hope for the culture changing? Interest rates are up. "Enshittification" started trending this year.

I recommend reading The Republic for Which It Stands: The United States during Reconstruction and the Gilded Age [1] if you'd like some hope.

All of this has happened before and all of this will happen again. It's mostly just part of the cycle between labor and capital. Teddy Roosevelt vs Bork. etc

[1] https://www.amazon.com/Republic-Which-Stands-Reconstruction-...

A bit ironic you linked to Amazon no?

Frankly I think the only reason the revival of antitrust legislation in the current administration isn't already tackling this is because this pattern has already gone on so long that there are much more impactful anticompetitive behaviors being done by the biggest entrenched players and they have to triage. Most people even passingly familiar with SV's ecosystem recognize this pattern and that it's a problem, and by any sane antitrust interpretation it's blatantly illegal. Just hard to enforce in a regulatory environment where antitrust law enforcement went through 50 years of systematic gutting

How would this be legislated or enforced? You're not allowed to sell a product or service at a loss?

Do we really want the government dictating a company's pricing? What about free tiers or loss leaders? Many small companies use these too.

Not to mention that we're talking about private companies, so the government currently only has a very broad idea of unit economics from tax info. It would require a whole new level of reporting from private companies.

Overall, I highly doubt such legislation would end up being beneficial for small companies, however good the intentions might be. Most likely it would make their lives even harder due to an increased reporting and compliance burden, and VC favorites would do even better by comparison since they can afford to hire people to fill out all the paperwork and make friends with the regulators.

The main way to prevent this is to end 0% interest rates. Now that the cost of capital is higher, I think we will see a lot less of these "ZIRP" (Zero Interest Rate Policy) strategies. Some companies like Uber seem to have been able to transition out of that, but we'll see about others like Instacart and Grubhub...

First off, I think loss leaders are an almost textbook example of anticompetitive tactics indicative of detrimental dominance in a market. We should expect tactics that need regulation to seem normal, because if they weren't effective, they wouldn't be a problem in the first place. But also, given the pervasiveness of VC in this environment, and the tendency of investors to exert influence on the direction of businesses they invest in, the practices of VC and PE is where antitrust should aim

You don't need anti-trust violations to make this a problem. Well-funded companies can always undercut competitors at least for a while.

The cure is to be able to survive at low[er] gross margins. Many VC-backed companies need monopoly rents to achieve return on investment.

I know that is a thing that companies do, but what are the examples of this actually working out?

I have a hard time working out the economics of it. Unless there are strong network effects that advantage incumbents, as soon as they raise prices isn't there immediately an opportunity for another VC to swoop in and undercut?

Yes, this is the way. Unit-profitability and patience. It's a long game.

You won't grow nearly as quickly, but most middling-sized markets (you mention 1Password as an example) favor the tortoise over the hare in the long-run.

Stay small. Aggressively fight cost centers, but pay good people well. Avoid high real estate costs unless it's a value-add. Hire outside of the Valley. Build amazing relationships with customers, and I don't mean funny memes or TikToks. I mean literal on-the-phone or face-to-face time with the people giving you money.

Thoughtful and still true. Even within the USA, there are still places that can compete against SV by arbitraging talent and regulation.

Lots of people don't want to move to SV and many SV startups want in-office workers.

We're seeing a resurgence of industrial policy and I don't think tech is any different. Take for example Georgia's 'Alternative Fuel and Advanced Vehicle Job Creation Tax Credit'. https://afdc.energy.gov/laws/all?state=GA or Miamis focus on AI startups: https://www.foxbusiness.com/technology/watch-out-silicon-val...

(I'm less sure about the third option, business models.)

I'm not sure how many of these claims are true.

The article claims that hiring outside of Silicon Valley is easier. I agree that there's more competition from other companies inside of SV, but there's just a lot fewer people to hire if you're based outside of a big tech hub (Bay Area, Seattle, NYC, Austin). Less competition to entice prospective employees, yes, but there's a lot fewer prospective employees.

I'm also totally not understanding how regulation is advantageous to non SV companies. Both companies in Silicon Valley compaines and non-SV companies are subject to regulation. I don't see why lobbying for favorable regulation would be an easier outside of SV. The examples given here (e.g China) are not advantages of non-SV companies, it's the advantage of a government deliberately favoring domestic companies.

The article doesn't really offer any alternatives to fighting fire with fire (money vs money). More like different approaches to how to use your fire money. Source talent outside of the Valley, compete in a newer market and utilize smaller governments to avoid regulations. They touch on culture at the end, but explains it only as having access to new/untapped talent to hire which is basically their first point.

I think the best way to fight monoliths and huge money pits is with your company's ideals such as share everything, privacy at all costs, don't be evil tech, focused on the best user experience/optimization/features, building an open source metaverse, etc...

As well as letting your users have a say in someway or another into what the end product is. Allowing them to be invested in how it turns out, the way it is used and whom it benefits the most. I believe this is the best way to get sticky users who are not just looking at the bottom dollar and those users become your biggest advocates helping you grow more and more.

Maybe not a way to 'beat' them per se, but I wonder if support could be a good differentiator for some companies here? Silicon Valley companies, especially the FAANG ones, treat customer support as an afterthought at best, with Google and co doing everything in their power not to try and automate all of it.

If you don't have a need to expand to everyone in the world in the chase for infinite growth, having a company that's actually possible to get in contact with can be valuable in many areas, especially if your customers are large corporations or those willing to pay more for the privilege.

Similarly, see Kagi and their paid search offering. It's clear there's money to be made there, but it likely won't be enough to appeal to venture capitalists and FAANG companies, so that gives them something of a unique selling point/market.

I'm at a small scrappy little startup where the founders handle calls/emails/zooms and interact with the customers directly for any and all support issues. It absolutely makes a difference. Is it THE difference? Probably not, but it is A difference that customers definitely appreciate.

A lot of VC is a Ponzi scheme. I don't think "venture scale" is a real thing. It's more or a gimmick to sell to the next sucker down the rounds. I think it is overall healthy for the real world to have real companies.

If it was possible to beat silicon valley competitors we'd see a lot more unicorns outside silicon valley. You certainly can hide but you can't run ;-)

Most unicorn value is predicated upon the petrodollar/US Power and influence.

Actually, this is indicative of the SV mindset where "biggest wins". I hope that's not the case for many businesses, and there are plenty where "successful" means having sustainable income growth, and "win" means "being the obvious choice in your niche".

"Unicorn" is a term meaning a billion dollar valuation, without being listed as a stock. If I go spend a billion dollars on a company it is a unicorn, even if has zero success or sustainability.

So of course there are fewer unicorns outside of SV. The entire concept of a unicorn is tightly coupled to VC dollars.

Do you even have to spend $1B? If you spend $100M for 10% or $10M for 1% of the company will get you to “unicorn” status, technically.

Lets go all the way then - if I spend one dollar on one billionth of a company, it is a unicorn.

OK, someone go launch UaaS - Unicorn as a Service: I'll buy a billionth of any company for a dolla, and you get to claim to be the latest unicorn!

Convincing someone to pay $100 million for 10% of a business is quite a feat. Not for average joes.

Yeah, sorry if my jest wasn't clearly jesting. I'm actually not overly concerned with successful VC-backed companies, I'm just pointing out that the term "unicorn" is fairly contrived.

> a lot more unicorns outside silicon valley

The problem I see is that the massive funding available to "SV Startups" often skews what a success really is. Say you have a startup that's received several rounds of funding and based on those rounds it's now valued at $1B+, what is that valuation really worth if you're burning cash so fast you're only 1 or 2 failed rounds away from bankruptcy. Sure it's nice to be able to say "we have a 1 billion dollar company" but what is that worth if the valuation only holds if investors keep pouring cash into it? IMHO a company that is worth $100M and can stand on it's own feet without constant infusions of cash is inherently more valuable than a company "worth" $1B but needs to make every funding round to keep the lights on.

I found the "Arbitrage regulation" section very confusing. Perhaps some examples would have made it clearer?

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