Startup Ideas: a response

This reminds me of the most frustrating conversation I have ever had:

This summer my startup, located in Virginia, was in final talks to join a large seed fund/accelerator in SV and both sides were trying to decide if it made sense. Our only issue was our lead software engineer was still in college and needed to convince his mother that taking time off (or dropping out if things went well) to do this program was a good idea.

His mother was, shall we say, less than receptive to the idea. She decided to have her brother, an executive in the valley, reach out to his VC friends to see if this accelerator, an extremely well thought of and prominent accelerator, was worth doing.

He reached out to a former partner at KPCB who said he'd never heard of the accelerator, which is in itself insane, but also that our startup wasn't doing something "differentiated" enough to even justify continuing to do.

I reached out to him to clarify, and he said "you've got to find something that truly stands out, that nobody else sees. For instance Google didn't win because they built the best search engine, but because they figured out how to sell those little ads better than anyone had ever sold them before".

I stared at my screen reading that sentence over and over again. I couldn't believe it. There was a former PARTNER from KPCB that led a round of investment at Google that did not know that Google actually got the idea for Pay Per Click advertising from Overture and Adsense from Applied Semantics. This person thought that what made Google great was they had an idea so different from what everyone else was doing, NOT that they just out executed everyone by a country mile.

I was so dumbfounded by that, it barely even registered with me that a partner at a huge VC firm had never heard of the largest seed accelerator in the world. I never responded to that email, I get too sad every time I try.

Yes, there are two reasons something might not seem worth doing: because someone else already owns the market, and because the market doesn't seem big enough. I addressed that here:

  A startup can't hope to enter a market that's obviously 
  big and yet in which they have no competitors. So any 
  startup that succeeds is either going to be entering a 
  market with existing competitors, but armed with some 
  secret weapon that will get them all the users (like 
  Google), or entering a market that looks small but which 
  will turn out to be big (like Microsoft).

Although the examples used in PG's article can be framed in a lot of different ways, I thought the general advice was pretty useful and echos much of what's been said about product development in the last 5-10 years: don't sit around trying to come up with ideas--get out there and talk to people in other industries about their problems and solutions will naturally present themselves.

I also thought the concept of the "sitcom idea" was really clever and dead on--I hadn't heard that one before.

Re: next big markets--retail is an interesting one and it occurred to me that Walmart is going to have a RIM like crisis of its own over the next decade. E-commerce growth probably will continue as consumers grow increasingly comfortable with it, and the economics make so much more sense than building walmart's everywhere. I suppose they will start getting rid of their stores and moving to online, finding themselves looking like Amazon at the end of it, or out of business.

AIs--or approximations of them--are going to be a big thing. Self driving cars--google won't be the only company that makes that software. Big data--data is important for these types of applications, someone will find that it might make sense to standardize this data and simply sell it to the various AI/something-like-it makers rather than try to do all of it. Meanwhile, AI/something-like-it startups will not want to build a fleet of vans to drive around taking pictures of everything. This is going to be a really interesting industry over the next ten years and people won't remember what they were doing before.

The key concept of pg's essay is the prepared mind.

It is a variant of the very old idea that we cannot see that we don't know. This is called blindness of ignorance.

The rest is a list of examples of what could be seen and have been seen by others and some hints to how to train your mind.

What could be seen does not matter. What matter is how to gain the ability to see, which means to overcome ignorance.

It is quite possible that pg himself saw it as a meta-model, or it was just an insight of the one, who already made his way to "enlightenment".)

btw, being familiar with Pirsig's book in ones twenties is a very telling factor.)

First off thank you for writing the article. It doesn't seem to me that Facebook or Google saw a huge market inflection and decided to create a company in the hopes if hitting it at the write time. To me it seems they were doing something PG mentioned which is building something they themselves wanted regardless of the market potential. It just so happens that by doing this they built something that a lot of other people also wanted and were able to execute it in such a way. Sometimes I feel "looking for an idea" is the wrong approach but instead viewing the world from behind a critical lens we will see problems that need to be solved. By solving them we feel our lives will be better and maybe that is enough to begin with and by solving these types of problems, once in a while we may just discover that others feel the same way.

Online- and Software-centric startups are way overhyped right now. I believe that the commoditization of personal computing, smartphones and websites and the emergence of giants like Google, Apple, Facebook has made these much less interesting than people might think so the best long-term startup opportunities lie elsewhere (robotics/AI, biotechnology, sustainable living ... ). But internet startups are still good for a quick buck due to crazy valuations and low entry barriers, so VC will still pour down on them (sadly...).

At the end of the day, there's still things we need (food, medicine, health, production of goods) and things we don't (yet another website or SaaS/PaaS startup or electronic gadgetry).

Then again, right here, we're all biased ...

Maybe I'm wrong but I think PG's article was focussed towards startup founders. And this article is more towards investors.

From a founder perspective, it is not just enough to know which market has the biggest potential in near future but also in which market can I execute my idea successfully. Just getting into a good market is not enough but you should be able to have the arsenal to execute an idea. And this is where organic ideas are way better than thought-up ideas. When you have actually faced a problem, then your path is a lot easier and you know where do you want to take your product/service.

No other social network successfully kept a lid on who could join like FB did in the beginning.

Anyone who started a social network at the time wanted as many people to sign up as possible but could care less who they were or where they were from. This resulted in lots of random people signing up but few connections that existed in the real world translating to the social network. Consider Myspace (or many others) where your "friends" were often people you did not know. Sometimes you didn't even know their names!

Facebook did the exact opposite. They wanted to transfer the real world connections to the web. By getting almost everyone at Harvard on the service they were able make this happen. They repeated the success at many other schools. It was a long time before just anyone could join FB and at that point so many real world connections were already in place that when a person joined there were already people they knew on the site.

The inherent flaw in both arguments: citing exceptions.

Facebook, Google, Amazon et al succeeded _despite_ being bad/unknown quantities on paper. They specifically should _not_ be used as examples of "how to do it right."

Look at smaller sustainable startups that are flying under the radar to unearth proven, repeatable best practices. You can't establish patterns in methodology by citing exceptions.

For a $10mm company to become a $1bn company, know what you need? Luck.

EDIT: To those below, you're both validating my point. Luck isn't the sole driver of success, but it's the difference between a modestly successful company and an insanely successful company. The other skills the founders have to exploit opportunities are already there. The x-factor is luck. Nobody says "okay, all we need is 500 million users and we're successful!"

Interesting write up. However, I don't see the point of picking apart a small paragraph, which, IMHO, was meant to provide mere guidance and perspective. All the other points made in this 'response' are all fairly obvious and again, IMHO, already being worked on. I think PG was spot on with his guiding essay; many things stand out and serve as a guide for people formulating ideas for a start up. If I am going to seriously undertake the task of building a start up, and dedicating an important part of their life to building something, I'd take all the sound guidance I can get.

Especially liked how this was put together:

     Live in the future, then build what's missing.

I think sometimes there's too much emphasis on finding the problem, but that's not why companies like Google or Microsoft were successful.

The reason Google won at search was that they had the best results. They probably still would have won if they started a couple of years earlier or later. Maybe eventually it would have been harder to enter the market against bigger players, but the hard part if figuring out the best solution, not figuring out the problem.

I think a fundamental point missed is that Google, Facebook and the iPhone were better than Altavista, MySpace and the smartphones of the time. The untapped market was unimportant, that's an AOL play. I recall a general frustration that things should be better and a pleasant feeling of confirmation when each of the winners launched.

Not unlike AAPL, renewables and 3D printing right now.

The poker analogy is an interesting one - I believe that it's been said that advertising is the only differentiation among products (or services) of equal value. Paradise Poker had a better interface and a wider variety of poker variations, but Party Poker (along with Ultimate Bet and Poker Stars soon thereafter) became the household names due to advertising.

I still think the PG post is way ahead. I remember why I started using google, it was just massively better than yahoo. It just worked. The same happened with facebook, I almost didn't use my myspace account because it was so limited the way to use it. Also it scared lots of my friends because if you wanted something cool you had to pimp your account. Facebook just was come in and use it, share stuff and locate people easily. The market was found acter the use, they developed an amazing product and then discovered how to monetize. It doesn't have to be that way, good ideas don't need to be . But there are lots of broken things around and if you feel amazed(living in the future) that nobody is doing the right stuff then it is probably a good idea waiting to be developed. Of course a good development is a huge part of the equation (and good luck too). He is right that there are too much picture apps though.

True that about the growing market. And true that few of these products/companies are really anything novel. But you have to do things better than the rest (I've discussed that more extensively here http://web.bozho.net/?p=125)

I like some of the points made in that article and I would like to add that pg and the y-combinator startups he works with are a small part of what is out there and what is possible. The only thing I disagree with is the need (I think even many VCs feel) is to need apps that connect to hardware for it to feel more real. We don't even have decent social networks yet that solve basic problems for us. Facebook, twitter etc, in perspective, are just the first few truly global networks but... are they really the best we can make?

"Here, off the top of my head, are three things that sound like a formula for success, and here's three companies you like that I'm going to say had all three of these ingredients and you will believe me because it is convenient."

> ... few others realize are worth doing.

Pursuing. I'm pretty sure Paul meant "pursuing."