Should startups bother having original ideas if big companies can clone them? | Hacker News Reader

Should startups bother having original ideas if big companies can clone them?

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50 pointsshlema55 comments

There are certainly startups which have, as a strategy, a "clonable" idea, bring it to market and then sell themselves to BigCorp.

The reason this works is because BigCorp has lots of things it is trying to get done but isn't working on your idea because they aren't sure its a winner and they have things they are more sure of all ready in the plan. Thus StartCo shows up, does this thing, and shows it to be valuable, it gets on to BigCorp's planning horizon and the question will always come up, ok if we want to compete here can we build that capability? (yes/no) What is it worth to us? How long will it take? Will the market wait that long for us to catch up?

Now the "buy" price of StartCo is going to be something like 2x - 5x the amount of money raised at a minimum. So StartCo can't have raised too much money or this fails. And then there is the retention cost of the team which is going to come out of BigCo's operating plan.

Those three things get thrown up on the board, market opportunity, cost to acquire, cost to build. And then they make a decision. The difficulty is predicting how "big" the impact of this change is, because it needs to return 10x its cost over its lifetime to be 'obviously' a good deal. Further those benefits have to align with what BigCorp is looking for (more users, more traffic, more revenue, wider reach, Etc.)

FWIW, the most common ways these things fall down is that BigCorp thinks what ever StartCo is doing is easier than it really is, so they under-estimate the value of StartCo, pass on it, and then pour way more money than they intended into a 'homegrown' version. In those scenarios everyone loses, StartCo misses out and BigCorp misses out. The flip side is that BigCorp over values the work StartCo does, then they look silly to the market. Not as bad an outcome but harder on the ego.

BigCorp is rarely a rational actor. When someone inside wants to buy you, they may justify it this way to sell it to decision-makers, but this is not how companies really approach the market in my (admittedly limited and non-US centric) experience.

I would strongly advise against anyone launching a company if a successful outcome is contingent on a potential purchaser knowing what is best for them....

I think 'rarely' is too strong a characterization. My experience is that in the absence of malfeasance BigCorp is locally rational. They have convinced themselves, either for or against, about how they should proceed. We rarely get to see their reasoning though so its hard to evaluate. I've worked with M&A teams at a couple of places and have seen deals that looked irrational until the reasoning was uncovered but I certainly accept the claim that not all of them would past muster, even when all the information was known.

Hi Chuck,

I agree that inside any company, purchases are rationalized and the process you describe is probably spot on. The reason I posted was that I've seen several cases where acquisition behavior in multiple industries was profoundly illogical in terms of what the same money would buy: either companies didn't pull the trigger on offers when they should have and a product would have been ridiculously cheap, or (more often with unprofitable companies) a sale was engineered by investors, and/or the purchasers did not explore the market and only considered narrow options before them.

Not intended as a complaint. I just really wouldn't advise anyone to do a startup that required any BigCorp to purchase them in order to have a successful exit, that's all. You could have a way to print people money and still have a hard time forcing it down their throat.

I think we're in agreement, I think anyone who creates a start-up with the intent to sell it to a larger corporation is making a sucker bet. Worse their company generally suffers as they pivot from fad to fad once they get somewhat long in the tooth and the chance of acquisition becomes more and more remote.

But just because you and I see that, doesn't mean some starry eyed CEO wannabe won't. They use the fact that Apple, Facebook, Google and even Microsoft have billions in their bank accounts and have stated a desire to acquire "key technologies" as validation of their own efforts to be a "key technology."

Most people learn in High School (or at worst College) that trying to be something you aren't in order to win friends is a losing bet.

The only thing I disagree with is characterizing BigCorp as strictly irrational. It makes sense to someone, and generally if you find them they can reason to their choice which is the very definition of rational behavior.

The biggest fallacy in this way of thinking is the notion that your idea is "original" in the first place. Maybe you're the first to market, but that doesn't mean there weren't 10 guys a month behind you, and it doesn't mean that your idea and execution can't be improved upon.

While it's easy to list unoriginal innovators (Ford, Edison, Eastman, Jobs, Gates) I can't name anyone that's had a truly original idea that no one else soon before or after thought of. That's because our ideas are improvements upon current technology. DaVinci didn't imagine things like the Apple I because electricity hadn't been harnessed. All of the great innovators we talk about didn't invent the entire world around them, they just took an idea and added their own "claim to fame" to it.

It seems to me that chances are your idea won't be even remotely original, but more likely it's just now technically feasible to build. I'm sick of hearing about software patents "stifling innovation" then seeing people act as if there isn't enough protection of intellectual property.

I think this should be rephrased more accurately as "Should You Start A Business?"

Or perhaps "Should You Start A Non-monetizable, Easily-clonable Business In An Already Crowded Market?"

Exactly what I wanted to say. "Should you start a business without any competitive edge?". This seems like a harsh move because we're used to calling everything that is related to mobiles 'innovation'. That makes us (working on these kind of projects) feel better.

> Facebook has the resources to take any idea from anywhere and turn it into an app that gets a heap of attention and rockets to the top of the App Store chart in less than a day.

The scale of Facebook resources (or Google's for example) makes it easy to clone pretty much any product that fundamentally enables two or more users to interact. At a certain scale of resources, most software products are easy to clone because rarely are they based on some fundamentally new/patentable/distinguished technology. What's hard to clone is the interaction, and it's for that reason that this probably wont make much difference to Snapchat. I've only used Snapchat a couple of times in the past and the type of interaction it enables doesn't relate to the way I think of Facebook at all (and I suspect this will be true for most Snapchat users). Ultimately, almost any app, at infancy, is easy to clone - Facebook could have cloned pinterest/twitter/path/quora etc (and at times it tried), but that's not what killed them/would kill them. If they do die, it will more likely be from not tending to their community & executing on their vision. Frankly having Facebook clone your product is probably worth its weight in press alone.

Let's rephrase the question a bit:

1) Should a startup bother if all they have is an idea that anyone can easily clone? I'd argue no - As many here already know having an idea is only one piece of the puzzle. You have to have initiative, good execution, perseverance, and good tactical leadership. Failing all that, you better hope your idea is patentable but even then to survive as a patent troll you have to be willing to commit the legal resources and talent to make that work.

If all you have is an idea, even if it's an original one, you probably should rethink whether you want to be a startup. Nobody said starting a company and displacing/disrupting/surviving in a highly competitive environment would be easy, nor should it be.

2) Snapchat isn't an original idea. It is one of many examples of a destructable message service. A quick Google search returns this site from 2006:

http://www.destructingmessage.com/

And this site from 2007:

https://privnote.com/

Self-destructing email services have also existing for quite a while, from retractable email (AOLs "Unsend Email" feature that worked between AOL email accounts) to full self-destructable email services. A few of the BBS' I used to visit also had "hacked in" expiry dates for message.

So question 2 is: Why should Snapchat be given special consideration for being just the latest implementation of an idea that has existed both in popular culture (Mission Impossible) and in the real world for decades? They really shouldn't be.

Snapchat's CEOs "bring it on" message seems to be appropriate and shows he is aware of all these facts. He is up for the fight and the fight will ultimately benefit all of us through competition. If he has the right toolset to keep Snapchat in relevance, then it doesn't matter who clones him.

> Failing all that, you better hope your idea is patentable but even then to survive as a patent troll you have to be willing to commit the legal resources and talent to make that work.

I think you're conflating ideas that are easy to clone with ideas that are easy to derive, and thus leading yourself to the pejorative "patent troll" for something that's nothing of the sort.

If you spend years designing something, figuring out the optimal way to do things, doing experiments and testing, etc, and then patent it and license it (and sue those who copy without licensing), you're not a troll, you're using the patent system for precisely the purpose for which it was designed: to protect investment into ideas that are hard to derive but easy to copy.

I'm not actually trying to use patent troll in the pejorative sense, so I should have clarified that. I agree entirely with your point, but it doesn't disagree with my primary argument that patenting an idea and licensing it isn't a simple endeavor and still requires you to put more into it than an idea.

I'm not aware there is a non-pejorative sense of the term "patent troll." Using it to cover pure IP companies puts ARM, MIPS, etc, into the patent troll category.

The founders of snapchat should be pretty happy right now -- they have an idea worth stealing. And to push your apple vs IBM analogy farther, it seems that they could potentially still win, by building a product that is far and away better for a certain segment of the market (i.e. as apple did).

To address the deeper philosophical claim -- are big companies morally obligated in some sense, to not encroach on ideas currently dominated by some startup, I think not. The whole crux of your argument is that there's some well ordering on the timestamp of ideas, and whoever is earlier in the well ordering has some moral claim to executing the idea. As far as I can see, there's no a priori reason why this should be so, and there are lots of utilitarian reasons why this ought not be so. Just because someone came up with the idea does not mean they are the best agent to execute the idea. I might be a brilliant military tactician, but I might lack the charisma or fortitude to lead an army. In the same way, I might be a brilliant social based startup, but my same product under the influence of the most complete social graph might be tons better.

I am not saying facebook poke is better than snapchat. I don't use either, but I do think competition is healthy. Now what would be problematic is if startups did -- as your article asserts -- stop having original ideas just because they were afraid big companies would clone them. In that case, the government should probably seriously consider penalizing companies like facebook for scooping up the idea, if not by making them disable the app completely, but by making them retroactively purchase or pay a large sum to snapchat. I don't have any data to discern whether a "chill" effect is happening, but I would guess an answer in the negative.

Many seemingly easy to clone businesses get dominated by startups. Facebook copied SnapChat, but had to buy Instagram. Why?

The Innovator's Dilemma[1] explores this question in detail. The gist is that the processes at big companies are very well suited to certain kinds of innovations, while they preclude other kinds (known as "disruptive innovations"). One example (not the only one) has to do with margins. Big companies tend to assume that their cost structures are more or less fixed, and will tend to pass over products that seem to be lower margin than their current business. For example, home computers seemed to be much less profitable than mainframes, so a lot of manufacturers missed the boat on the personal computer revolution.

It's worth reading the book and learning which ideas are likely to be copied by big companies, vs. which ideas big companies will fail at executing.

[1]: http://www.amazon.com/The-Innovators-Dilemma-Revolutionary-B...

Rockefeller did this in the 19th century. He would enter a new field and go around and offer a good payout to competitors. If they took it and he liked their company he would put them on his board. If they didn't take it, he would push them out of business. Eventually he had a monopoly.

Seems like smart business to me, just as long as you offer competitive compensation first and you don't do it all the time.

I think it is backwards; [most of the time] large companies do things so slowly, why not have a startup clone the idea of a big company? Most of the time, execution is slow and the only benefit a large company has is capital and existing infrastructure.

Disclosure: I went from a start-up that was purchased by a large company (same group).

An overlooked point here is that in this example the "big company" is the platform operator. It is much easier for Facebook or Apple to brush aside a competitor on their own turf than it is for Microsoft to brush aside Dropbox.

So I think the question should be phrased as "Should a startup implement an idea on a platform when the platform provider can clone it?"

I'd say yes for 3 reasons:

1) BigCo's are usually slow to recognize a good idea is a big enough idea for them to implement until the idea is a big company at which point you have already won.

2) If BigCo does somehow realize that the big idea is a big enough idea for them to implement early on, they are just as likely to acquire you rather than build it out which isn't the worst situation in the world.

3) If the remote chance that BigCo comes along and crushes you, you have a great story to tell in your next investor presentation or interview.

[ADDED] If the idea requires a lot of BigCo's resources or API you have to be more careful. For example, if you need to build a full mapping company to implement a feature google could just turn on that is probably not a good strategy. Likewise, if you need to use a google maps API (if there is one?) you run the risk of them shutting off access to it and implementing themselves.

You need a better idea. Too many companies are starting companies that can really just be a feature of a big company.

ie. Just because Facebook hasn't implemented a feature, doesn't mean you should start a company over said feature. You may pickup a quick paycheck, but many won't survive the long run.

The title of this article is clearly linkbait.

It's never been solely about "having original ideas". I would argue that if a startup fails to build up a competitive advantage or a barrier to entry, then they indeed should not bother.

I think the more interesting question is that of software patent discussions: What is sufficiently novel, non-obvious, and useful that we should protect it to promote innovation? Could Snapchat's messages that expire been protected? Should they have been?

Edit: kapnobatairza seems to have shown the answer is "no", in which case hopefully Snapchat has another plan to remain competitive in its crowded market. We shouldn't expect anything else for a business to succeed.

I wonder if the snapchat / facebook situation is more a suggestion that the MVP-then-launch approach to startups is more risky than some allow for. If you just release an MVP it may not have enough in there to be a solid finished defensible product, containing just your hook to test if you can get momentum. Then when BigCorp sees the hook, if you get enough success with the MVP they're heavily incentivized to take the next leap before you do, and they have more resources - you're still working at the underfunded MVP stage. Then you go from Lean Startup to No Startup in short order.

Just thinking out loud.

Dropbox had a good idea, big companies cloned them, and they're still around.

Clearly some ideas are more easily clone-able than others. It also probably matters how quickly BigCo clones your idea vs how much mindshare and traction you already have.

That being said, Snapchat definitely doesn't have some kind of birthright to make heaps of money off the idea. If there are few barriers to entry and they can't out-execute FB, then they will end up losing, and there is nothing wrong with that.

Maybe the discussion should center more on how inherently dangerous it is to build something on the FB platform vs pursuing other opportunities.

You hit the nail on the head here: "Snapchat definitely doesn't have some kind of birthright to make heaps of money off the idea."

This is called "competition". I think what's really telling is that it took facebook less than 2 weeks to roll out.

Dropbox wasn't an original idea, it's just a good implementation.

Dropbox was (and is) a great implementation. Photostream is basically hit or miss as to whether it will sync a photo to my personal photostream, and we wait for hours for "shared" photostreams to pick up.

Meanwhile, when I share anything in my Dropbox, personal or shared, it basically syncs real time - as in, while we are talking on a chat, I drop a file into my shared folder, and seemingly at the same time I say, "I dropped a file in our shared folder" the person at the other end says, "Yup, I got it"

It's beyond me why Apple still can't get photostream to be that responsive with their resources and control over the platforms.

Dropbox had to figure out when a file landed in a OS X folder - Apple controls the operating systems!

Good point.

Netflix had a good idea, then Blockbuster cloned them, and guess what.

Just goes to show that there are no hard rules, everything is case-by-case.

I'm currently building a business (not a startup by acceptable HN standards) and our key point of differentiation could easily be copied by our competitors, but none currently are. I'm worried every day that one of them will launch a similar product before we do. Has anyone here been in a similar position?

Work on your USP http://en.wikipedia.org/wiki/Unique_selling_proposition

If your idea can easily and effectively be copied by a giant, brain-dead, bureaucracy laden business then your idea is probably not terribly novel. You might as well just blog about it, let people steal it, and move on. Concentrate on ideas that it's difficult for big businesses have trouble executing on.

REALLY GOOD innovation will disrupt established big players, because it changes the rules of the games in a way that competing may represent loosing the established market that the big fish feed from..

personal computers did that,

im working in something like that right now and i can barelly wait to see it giving its first steps out of the doors :)

some big players will get scared if this technology starts to spread around too much fast..

even if i miss the target by some odd detail.. inovation is unstoppable..

Who would predict that the almight wintel would start to fall someday??

Novelty and defensibility aren't the same thing.

Funny, the answer to this is like an anti-Betteridge's Law of Headlines. The reason being is summed up in Christensen's seminal book The Innovator's Dilemma.

Facebook, clearly, is not stodgy enough to always be subject to its effects yet, but they've had plenty of failures, like their Q&A feature.

This is a short sited move by Facebook. If they do this enough, the platform will be abandoned by developers and they won't have any more ideas to cherry pick. So over time the platform gets stale and their fickle user base will move on.

No they won't. Twitter was doing this sort of stuff for the longest time and no matter how many warnings were given, people still hacked away at the nth Twitter app and they would've continued to had Twitter not imposed those limitations on their API.

This is wishful thinking.

Should companies bother having original ideas if open source can clone them?

Sure as long as you provide value that people will pay for. Many companies support open source projects.

I am not sure what would be the better thing here. To donate $500 million to charity or Let the little guys live to foster innovation and entrepreneurship ?

Sorry, I couldn't get past implied flattery of 'original ideas.' I'd say these are at least a million times more rare than people believe.

The assumption here being that big companies can simply "clone" another business. In reality, this is not the case.

In this specific case, Snapchat vs FB Poke, it really is the case.

Snapchat is a product, not yet a business.

It's the only part of the business (which is also named Snapchat) that's worth cloning. Or are you suggesting that we're talking about something else?

i was merely correcting that Facebook copied the product. If SnapChat had a business (users + revenue + customers + relationships + goodwill), it would have been much more difficult to "copy".

Your definition of 'business' excludes many, if not most, startups.

that's why we call them startups

You can't clone the Network Effect.

Large human organizations have a ridiculous number of talented people-- something that would be truly frightening to have to compete with-- but a negative correlation between intelligence/talent and decision-making capability.

You know how hard it is to get an idea approved in a typical BigCo? And how much harder it gets if it's actually a good idea? If your startup idea's legit, you have at least a 2-year head start.

If your startup idea's legit, you have at least a 2-year head start.

This isn't necessarily true. Poke, for example, was supposedly developed and deployed in 12 days, including App Store approval time. Powerful companies like Facebook do have the ability to steal great ideas and crush the start ups that created them. However, this has been known for a very long time and it has yet to have a discernible impact on innovation.

I think you make an insightful point. Counter-intuitively, large businesses nurture the generation of ideas but not the execution of them.

A corollary: lots of resources helps concoct lots of wacky ideas and the execution of none of them, while startup culture makes extremely boring ideas but delivers.

Nevermind all the companies that fail of course...

The problem at large companies is that the reward and feedback structures are completely broken.

Annual reviews are a lot less convincing and effective, in general, than 'we need to increase revenue 10% next month or you don't eat'

Your "original idea" was probably thought of by one of the pioneers of computing in the 1970s, if not earlier.

The real question is whether you should develop something that is a feature, not a product. And as per Betteridge's Law, the answer is no.

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