I find it interesting that the two example companies of Uber and AirBnB that succeeded by “focusing” solving problems, did so breaking the law and pushing externalities onto others. AirBnB runs afoul of the hotel laws and makes the neighbors of AirBnb hosts have to deal with the problems while also decreasing supply of housing and pushing up housing prices in cities and communities. Uber basically was an illegal taxi service and succeeded by paying their workers often times less than minimum wage by classifying them as contractors. They also took shortcuts on their self-driving cars and killed a pedestrian. They have also tried to suppress rape victims stories going so far as to invade their medical records.
To succeed as a business, you have to do something that others can’t do or won’t do. If you have a tech advantage, you can do stuff that others can’t. If you don’t develop a tech advantage, you have to do stuff others won’t. In these two cases of AirBnB and Uber, it was breaking the law.
You left out "be first" which is an advantage that is much harder to find these days, which creates even more pressure to differentiate by other means, legal or otherwise.
VRBO was loooong before AirBnB. AirBnB reduced friction by handing the payments and provided social mechanisms for buyers and sellers to vet each other, among other things. In the days before AirBnB I remember booking an apartment in Paris by sending half the payment by wire transfer and the other half in cash on arrival. The apartment was great and the host even better, but the payment was painful, and something very few of my friends and family would have done. AirBnB made it as easy as booking a hotel, and that made a huge difference.
AirBnb is the canonical example. They weren't first, so they built a business around doing something that in most places is illegal, and it caught on in a big way.
I'm not discounting their UX, I'm sure it was a big part of their growth.
As an aside, "be second" isn't bad, either. There was an article about European businesses copying successful American startups. Why innovate when you can profit/learn from others' ideas?
I think these examples are dated and don't hold up in the modern, mature tech ecosystem. Facebook bought Instagram and copied Snapchat's main features to put big pressure on them. It's not as easy to overthrow the king as it used to be.
If all that AirBnB did was break the law, then why did cities have to pass anti-AirBnB laws? Why couldn't they enforce the existing ones? I'm not saying that there was no breakage of any law, I'm saying that your comment implies that AirBnB's only advantage was breaking the law, and that's wrong.
The main part of AirBnB's success is that it fixes/fixed an imperfection in the market: In the places with demand, AirBnB took the low priced housing and made it available for short term lets. Yes, long term renters were the beneficiaries of the old model as it gave them a larger and thus cheaper supply of housing, but the real price is the post-AirBnB price. The old model had externalities too, they were just paid by different people like landlords and people who seek short term stays.
From a social point of view, for the long term renters, AirBnB does have an impact but the ways to combat it are similar to other phenomena that drive up rents: simply build more cheap housing. In many places in the world, there is a massive immigration wave of people from the countryside into the cities. China has recognized the problem and built housing. In the west, people are more skeptical and rather prefer the value of their homes to increase instead of people getting cheap rents. In the period after WW2, it was much different, at least in europe. Back then, we built lots of houses, for everyone, poor included.
Reading this comment has made me think about the effect of technology on increased competition, whether that be globalization, online dating, or physical retail. With the rental market, that increased competition for a fixed housing supply translates into an increase in prices. Without any shifts in the supply curve, changes in demand effectively become a zero-sum game. Kind of strange to ask, but does that mean “demand” is more sensitive than “supply” to improvements in technology?
AirBnB caused an increase in the supply of short-term rentals, which caused an increase in the demand of housing. I don't you can say either was more affected.
Whether it's "breaking the law" depends on the jurisdiction, but they certainly managed to sidestep regulation and taxation, at least temporarily, giving them an advantage over competing taxi and hotel services, more so if the latter used employees rather than "independent contractors."
To be fair about one thing, the pedestrian would not have survived with a human driver either. They crossed the road in pitch black darkness. The only reason it was news was because it was a self driving car.
This is not so clear, especially on the darkness point (though I'm sure uber is pleased their message has taken the day in some circles). The car knew it needed to brake over 1 second before impact but failed to apply the brake. [0] A second of hard braking would have made a large difference in the survivability of the crash. What's more, the video uber released was misleading with respect to how dark it was. [1]
You can make what you will of the first point - uber had their reasons for disabling automatic emergency braking (who knows how many times erroneous stops would have caused accidents). The second point is fairly clear, though - the pedestrian in fact had every reason to feel very visible.
"the pedestrian in fact had every reason to feel very visible." Why because the pedestrian was high? Otherwise the NTSB report state:
"the pedestrian was dressed in dark clothing, did not look in the direction of the vehicle until just before impact, and crossed the road in a section not directly illuminated by lighting. The pedestrian was pushing a bicycle that did not have side reflectors and the front and rear reflectors, along with the forward headlamp, were perpendicular to the path of the oncoming vehicle. The pedestrian entered the roadway from a brick median, where signs facing toward the roadway warn pedestrians to use a crosswalk, which is located 360 feet north of the Mill Avenue crash site. The report also notes the pedestrian’s post-accident toxicology test results were positive for methamphetamine and marijuana."
I don't know how you derive that the pedestrian had every reason to feel visible.
> I didn't get that impression at all when it happened...
What impression?
>> the pedestrian would not have survived with a human driver either.
Car meets pedestrian at speed causes death often. I don't think this is questionable.
>> They crossed the road in pitch black darkness.
The circumstances of the incident were well publicized by the media, and the video released shows this is obvious.
>> The only reason it was news was because it was a self driving car.
All the statistics around pedestrians being injured or killed ... how many of those stories result in reports across the country in most media outlets?
The part where a human driver would have hit them. The dark video I just googled myself isn't any proof of that, it was on a road with at least sparse overhead lights and the car had headlights. The poor quality video is not equivalent to human eyes or something adequate for driving a car. There was no reason to downvote me.
I've worked for so many companies with a really shitty tech stack. Most of the time they just threw as much mediocre devs at it until it worked. Mind you I was often one of them!
Most of their business people weren't too good either in terms of leading a company or such things, working at those companies was horrible!
The only thing they were good at was finding people with problems.
It seems to me the only thing that matters.
If you find enough people bothered by something, the will throw money at it like no tomorrow. You can't imagine how much money makes up for bad tech and shitty leadership.
But somehow this is the hardest part for me. Solving problems is one thing, but finding problems worth solving is another discipline.
It's actually pretty hard for developers to find problems worth solving at startup scale. Your average developer doesn't encounter the kinds of problems non-tech people will pay money to solve very often. Developers are also often likely to look at a problem and come up with their own "simple" solution that non-tech people wouldn't even think of.
Dropbox is a good example here - developers were largely perfectly happy with rsync for a decade, but your run of the mill mom wanting to keep her Word documents synced at home and the office doesn't even know what Linux is, let alone how to run a terminal.
If you want to find non-b2b problems that are worth solving and which people will pay you to solve you generally have to step out of the tech bubble, talk to non-tech people at length, and imagine a solution that your mom could use.
Far and away my most common experiences with business ideas others try to give me:
"Oh man you should make an app/website to do X! God it'd make my life/job so much easier."
"Cool, yeah, great idea"
Then I unlock my phone, check the app store, and yep, there are already 25 complete solutions to this exact problem on just this one platform. Oh but they would totally pay for it and it'll definitely make me rich, never mind they haven't even bothered to google for a solution, which already exists in exactly the same form I'd make it, and is free or cheap. Ok. Toss that one in the ol' round-file.
Here it only depends on whether its a zero-sum (winner takes all) market, or whether you can improve an existing model and eat chunk of it (look how many alternatives of Mailchimp spun out, I love all of the incl. mailerlite and EmailOctopus!). So I wouldn't through the towel just because there is competition, but rather look at the opportunity cost, do you really wanna spend time working on this?
What throws me is that they seem to think this would make their life much easier, and that there's no solution unless someone makes it... but there already is one. There are several. Specifically for their problem. Most of which seem to get the job done just fine. It'd be a big help to them, but they haven't even spent as much time as it took to describe to me what they want, looking for an existing solution. I'd bet they've never even asked anyone else in their line of work if they have a solution. Anyone who has, doesn't have the problem anymore. They don't need me to write an app, they need me to teach them how & when to effing google.
I'm aware of the ability to out-compete existing solutions on quality and UX and such, but most of the time when this happens, there aren't really any clear pain points in the existing solutions that I'm being told about, the person suggesting it is just totally oblivious to their existence, and they sure appear to do exactly the thing they need.
I do like the affiliate link suggestion from the other poster, haha.
This strongly correlates with the fact that older (40-50+) founders tend to have more successful startups. It might be because a) they intimately understand the problem that needs to be solved and b) they have the network to sell to others with the same problem.
What I see as a problem from the business perspective is that devs are usually thrown into the surrounding of other tech folks and generally this particular tech bubble world we live in. And as someone smart said, for the man with the hammer, everything looks like a nail. Well in 99% of the cases where we split with my CTOs, in the end, wasn't because they were bad programmers, but because they were only keen to solve the issues that they perceived (DevOps, machine learning devops, cloud, encryption). That being said, there are a lot of amazing tech guys out there solving for completely non-tech related problems such as pigeon diapers but that's what it is in the end. It is the problem/solution paradigm, not whether you use rails, AI or blockchain to solve for it. Thats the hurdle I have seen in the past 10 years but maybe I was just unlucky.
It's not hard to think of the average user, though. Just imagine a version of yourself that doesn't enjoy learning technical minutiae to solve a problem.
I agree though it is hard for developers to find useful problems to solve. I too tend to get distracted from solving real-world problems when I find a technical problem that's interesting enough. There's a whole world of technical complexity which is easy to get lost in, and I start to care less about the real world problems that relate to it.
> The only thing they were good at was finding people with problems. It seems to me the only thing that matters.
It's certainly the bulk of the matter. Your average convenience store is nothing special, it's not a remarkable operation, it doesn't have geniuses running it, it has no overly interesting technology, it's not very innovative, it's not inventing the next great thing. It's doing nothing other than meeting a simple need - solving a problem - that its customers have, and frequently that's a boring, uninspiring business. There's definitely nothing wrong with that, the world functions because of tens of millions of uninspiring, boring businesses.
That is your average start-up, too. Tech founders - in my experience and observation - merely like to believe they're special and doing something exceptional versus the typical business. It's almost entirely a false sense of place in the universe, comically inflated ego (and it's why a show like Silicon Valley works so well).
People talk about Silicon Valley like co-founders are using raw genius to solve impossible problems. But the reason untrained twenty year olds can run startups is the problems they're solving ultimately aren't that hard. Building a web application is something people in offices do every day.
Now, once those web applications start scaling up and your core product fundamentally works there are certainly hard problems to be solved, but at that point you can start hiring adults, PhDs and people with deep technical expertise.
Theranos got into such hot water because you can't just jazz-hands your way out of solving deep scientific problems, like you can cover up the fact that your web application barely works (but will totally work in three months).
Entrepreneurs, forget about going to Chicago Booth for an MBA if you want to be an entrepreneur. You should be solving problems and learning business development and management by doing. These people have nothing special to teach you but will put you $175,000 in student loan debt. Instead, take loans from friends and family or find angel investors to raise funds that will pay developers to build your mvp. Don't outsource to an offshore development center in Bangalore. Use technology that won't just validate your idea but will help you achieve your goals.
It might be confirmation bias but some of the best leaders I've encountered were (ex-) craftsmen, engineers, creatives... and the greatest ones have a mindset of 'serving' their employees, firm and clients. They enable others.
From the original paper published by Sergey and Page..
In this paper, we present Google, a prototype of a large-scale search engine which makes heavy use of the structure present in hypertext. Google is designed to crawl and index the Web efficiently and produce much more satisfying search results than existing systems.http://infolab.stanford.edu/~backrub/google.html
They were solving a problem - a very common problem in the days when internet content exploded.
But they solved a problem, gaining a massive userbase, and only then became a great company because they were able to make money alongside the problem they were solving.
>They develop technology that they think will solve a problem, rather than first identifying and understanding the problem and then thinking creatively about how to solve it.
Can you hear the creaking sound as cryptocurrency startups shift uneasily in their chairs?
Of course solving a problem is the central tenet of a startup. Technology is an excellent tool to find problems to solve, though.
"Forgetting the technology" is dumb. Advances in technology enable novel ways of tackling existing problems. Keeping an eye on technology advances, and raising the question "Which problems can now be solved in better ways?" is an excellent starting point to find problems to center your company on.
People often state advice in rather extreme terms, then are surprised when people interpret them in a way that matches the meaning of their words. This seems like one instance of that.
Most successful businesses in the U.S. are not technology companies at all, they just solve problems in creative ways. Look at someone like Wayne Huizenga who started AutoNation, Blockbuster, and Waste Management. That is like if Computer/Math prodigy Reed Hastings started a couple billion dollar companies in the Auto and Waste industry alongside Netflix.
The point being that great entrepreneurs can repeatedly find problems to solve and create value from.
For example, the author of this article was a successful entrepreneur in his own right. "Previously, the Chief Executive Officer of The Tie Bar - the #1 e-commerce destination for stylish men's accessories. Prior to The Tie Bar, Alter was a co-founder and President/CEO of SurePayroll, a SaaS technology company that is now a wholly owned subsidiary of Paychex®. Alter co-founded SurePayroll in 2000 after six years with McKinsey and Company, where he was a co-founder and leader of its Service Operations Practice."
The mention of Steve Blank's methodology is interesting. The best work I've seen done on this phenomena of customer-value-driven entrepreneurship is from https://www.effectuation.org/....basically that entrepreneurs start with what they have and the problems they know and go from there.
The counterargument is the Steve Jobs/Mark Zuckerburg argument for having a concrete vision and stopping at nothing to achieve a goal. But let's not forget that Apple started selling the Apple I which was primarily for hobbyists, and the Apple II didn't blow up until spreadsheets came out. Zuck was about to dedicate as many resources to Wirehog as he was to Facebook in the early days. Not to mention YouTube started as a dating site and many more classic examples of entrepreneurs having to figure it out as they go along.
I wonder what Keith Rabois would have to say to this. He has an interesting perspective in that he thinks founders will their companies into existence with clear visions that are often unwavering, and doesn't believe in the "lean" approach to building companies. Interestingly enough, Khosla where Keith worked earlier is the namesake of Vinod Khosla who does like the Effectual model of entrepreneurship (which is basically "lean" customer development based entrepreneurship). Another interesting thing to note is that most academic research into the age-old management question of what makes a good entrepreneur has far more to do with an individual's unique approach and perspective in the world, than it has to do with technology. Very few researchers are looking into "technology driven entrepreneurship" as much as they are personality, disposition, persuasion techniques, idea generation techniques, macroeconomic factors. This might change, but if anything when researchers look at entrepreneurial skill, technology skills are not the main focus. Again, this may be changing.
Personally, I think the only type of entrepreneurship that makes sense is very bottoms up. Look at the U-Haul story. The founder of that company simply did things none of his competitors would do because they thought it too risky.
My VC professor was the other co-founder of SurePayroll. He and Alter actually presented the idea to the CEO at Paychex in the late 90's. The CEO told them it was an extremely stupid idea that would never take.
About a decade later that same CEO was writing a check to them for $100M+.
They didn't even know how to design the algorithm for calculating payroll. They put the site up and had some elderly ladies who loved doing payroll calculate everything by hand and then send it back to a user within 24 hours. This went on for two months until they had figured out the algorithm.
Could you elaborate? It sounds like this is just promoting a problem/product first mindset, which - to me - sounds like a reasonable outgrowth of the lean startup method which you hear a lot about in startup circles.
At Qbix.com we took the exact opposite approach. We are just in the Web / social networks apps space. But we reinvested half our revenues in new technology, for years, since 2011. Tortoise, not hare. Now we have superpowers. We can build anything, quickly, and we don’t need venture capital.
On the other hand, we have heard no from like 20 VCs over the years. We had 7 million downloads now, $1M in revenues but we were still “too early” ;-)
In the last few years we made pretty “altruistic” or “anti-capitalistic” moves. We open-sourced it (https://github.com/Qbix) and are exploring alternative financing to VC (ie actual paying clients worldwide). We are trying to build a micropayment network (https://qbix.com/token) that helps everyone, not just us.
So basically it seems totally backwards from the current VC model but is actually compatible with it. I remember being inspired partly by DHH from Basecamp, and others. Remember — this is your startup. Do you want to change the world? Innovate!
I'm having trouble reconciling your numbers here. You've been operating for 8 years, but your revenue is only $1M and you've been investing half of that into your tech stack every year, so your operating budget for core business operations is $500k or less? That's like... two and a half developers. I'm guessing you're not US-based with those kind of numbers, but even so, at a glance, I wouldn't invest in you as a VC, either. From the numbers, you've built a lifestyle business.
This set of distinctions and decision tree is the problem.
A startup that has actual early revenues, has been around for years with millions of people using its apps and doesn’t need VC to survive is called derisively a “lifestyle business”.
You’re right, most VCs wouldn’t invest in such a startup. But if I spin off a “hot” NEW company with a cofounder growing 10% week over week with zero friction (no revenues) then the hockey stick looks attractive even with tens of thousands of people and a series of rounds can be closed before any revenue is made.
Why is having revenues and years spent developing in-house code less likely to produce exponential growth and a unicorn? Why is that worse than two college dropouts who cobbled together a solution and went viral for a while, such as Lantern or Shyo or Videology? Or a viral sensation flash in the pan like Down to Lunch? I have never heard it articulated well.
At any rate, we have a factory for making VC-attractive companies, if we wanted to go that route. Companies that do one thing, grow the userbase exponentially with no revenues, etc.
As for the numbers... yes we did spend most of our revenues on development. The team is in Russia and Ukraine, I live in NYC.
To answer your original question... we put out apps that have generated $600K very little upkeep, from 7 million downloads. We got additional money revenues and from angel investors. The platform is all about reusability — money spent on it is money spent on our projects and core business. But we open sourced it also. Just like Basecamp open sourced Ruby on Rails, or Fabien open sourced symfony etc back in the day. Just because we give it away doesn’t mean it improving it isn’t directly tied to our core business.
I didn't mean "lifestyle business" to be a negative term and don't use it that way... ever. The opposite, actually - I think actually-sustainable small businesses are far better in general than bullshit startups. However, you specifically said you have been trying repeatedly to get VC money and have been getting turned away. VCs don't invest in lifestyle businesses because that's not how their funds work.
The entire VC business model only works if they invest in companies with high risk/high growth prospects and the potential to be unicorns. To answer your question, the answer is statistics - VCs have a large history to draw from and have seen that viral companies and flash in the pan businesses either grow to massive exits or fail completely in a short time far more often than businesses like yours. On average, businesses like yours will continue a slow growth trajectory and have mediocre exits, if any exit happens at all, after the expected fund payout period has already passed. Basically, it's a drag on the fund portfolio and time/resources of the VC, so they won't invest - it's better that a company fail quickly while trying for unicorn status than it is that it chug along in sustainable small business mode for a decade.
On the flip side, there is an entire industry of funding available to you that isn't available to startups with awful financials - banks love to loan money to small, sustainable businesses with decent profitability. If you need growth cash, get a small business loan.
https://github.com/Qbix/Platform seems to be mainly PHP, the DB is MySQL and I saw jQuery and Flash widgets mentioned in the docs. Isn't that exactly what the post says, not hot tech but solves the problem?
I would look into some smaller Private Equity firms that invest in the software space. You'd be surprised at the number of shops (regardless of size, even) that make non-LBO investments. You'll find some pretty unique sorts of investment strategies, and likely find a firm that will supply an amount of capital lower than what a VC would put up but higher or with better terms than a bank.
Also, a PE shop would likely provide some sort of advisory support. Which, even if it is minimal, can have immense value for you.
And yet every time I post about what worked for us, and links to code we give away and clearly articulated vision for next 2 years, it’s downvoted on HN silently with no explanations. I have come to expect it. Not soliciting anything — sales, investors, etc. Just trying to give away stuff to those who can benefit.
Of course, I am happy to learn why this is not welcome on Hacker News. Someone already down voted this particular comment. I am not opposed to getting more information, but a silent down vote doesn’t tell me very much.
To succeed as a business, you have to do something that others can’t do or won’t do. If you have a tech advantage, you can do stuff that others can’t. If you don’t develop a tech advantage, you have to do stuff others won’t. In these two cases of AirBnB and Uber, it was breaking the law.