If we build it, why would anyone care?(hackernoon.com)
hackernoon.com
If we build it, why would anyone care?
https://hackernoon.com/if-we-build-it-why-would-anyone-care-a278393accd8
20 comments
Regarding the point about Google/other large company easily being able to build something that can put your company out of business: it's a valid concern, but what if the exit strategy is to be purchased by Google?
And here is a great example of the valley dysfunction in action: why would you found a start-up predicated on an exit strategy?
As far as I know, having an "exit strategy" is a way to ensure that the founder(s) have a planned far enough to know if this idea->product->business is one that can stand on its own feet or is it one that can only survive as a part of a much larger company.
Are those who have an exit strategy necessarily worse than someone who has none?
What does my being in Silicon Valley have anything to do with it?
If I sound indignant, it is because blanket criticism almost never captures any nuance.
Exit strategies are like any other tool: Used well, they discipline the founder's thoughts and help maintain focus in the team. Used badly, they're likely to set the worst example for the team, for other founders and for people outside the Silicon Valley.
Exit strategies are like any other tool: Used well, they discipline the founder's thoughts and help maintain focus in the team. Used badly, they're likely to set the worst example for the team, for other founders and for people outside the Silicon Valley.
Companies are started for all sorts of reasons. Getting rich off of an exit is one of many valid reasons to start.
It isn't about an exit strategy; it is hard to get funded if you have little defensibility.
No startup is truly defensible against a company with tens of billions at their disposal. "Google could clone it" is so obvious that it doesn't seem rational to even consider it a problem. Yes, they could. You can't let that stop you though.
It's far more sensible to worry about your idea being cloned by a teenager in her bedroom who could give the same product away for free a week after you launch. That's the real threat for most startups.
It's far more sensible to worry about your idea being cloned by a teenager in her bedroom who could give the same product away for free a week after you launch. That's the real threat for most startups.
to get rich?
Right, and not to create a healthy business.
I repeat: The valley dysfunction in action.
I repeat: The valley dysfunction in action.
You make it sound like acquisition is an economic net negative.
Very simply, a healthy business creates value. It figures out how to do something people will pay more than cost for.
My hypothetical startup won't have the resources of a Google, but could be made much better if it did. Why is it unreasonable then to target acquisition as a way of ending my responsibility for nurturing the business and handing it off to another party?
Very simply, a healthy business creates value. It figures out how to do something people will pay more than cost for.
My hypothetical startup won't have the resources of a Google, but could be made much better if it did. Why is it unreasonable then to target acquisition as a way of ending my responsibility for nurturing the business and handing it off to another party?
Your hypothetical business is clearly not built on the requirement of an exit as the only path to success (unless you and I have a profoundly different definition of the word "healthy").
If the business is healthy and you simply want more resources to scale, it absolutely makes sense to entertain an acquisition.
But if you start up knowing full well that the only path to success is through acquisition (that is the idea, on its own, cannot be used to build a sustainable, going concern), then you're simply gambling and contributing to the speculative bubble that is the Valley.
And you're also a heck of a lot more likely to fail.
If the business is healthy and you simply want more resources to scale, it absolutely makes sense to entertain an acquisition.
But if you start up knowing full well that the only path to success is through acquisition (that is the idea, on its own, cannot be used to build a sustainable, going concern), then you're simply gambling and contributing to the speculative bubble that is the Valley.
And you're also a heck of a lot more likely to fail.
But if you start up knowing full well that the only path to success is
through acquisition (that is the idea, on its own, cannot be used to build a
sustainable, going concern), then you're simply gambling and contributing to
the speculative bubble that is the Valley.
[deleted]
Is there a problem with people whose only goal is to acquire a lot of money? Not everyone wants to build a benevolent company that makes the world a better place - some people just want to be rich.
Why is that actually considered dysfunction? And why just valley?
I think it is really hard to plan on get acquired. Even if it seems logical that Google might want to acquire the company, funding it would be hard. The startup would have little leverage in negotiations, if they were lucky enough to have them. Investors would have a hard time imagining a good return, if there was a successful outcome, i.e. the acquisition.
My example doesn't add much more value than conveniences. That's good, but it probably isn't a sustainable business.
If I were really considering my example as a viable startup idea, my comments about Google (in the post) would push me to dig deeper and look for more value than the just the cross product search feature.
My example doesn't add much more value than conveniences. That's good, but it probably isn't a sustainable business.
If I were really considering my example as a viable startup idea, my comments about Google (in the post) would push me to dig deeper and look for more value than the just the cross product search feature.
Not a bad heuristic tool and set of questions. I think the 3rd step Economic questions are the most difficult for new founders and where people get tripped up:
Are your costs viable?...What is the effort for a user to switch to the product?...Is it easy for a competitor to copy the startup’s ideas?...How might user adoption grow?...etc.
Potential founders see some startups bootstrapping costs very early and see other startups unprofitably burning dosh for years and years even past their IPO (eg hello Twitter, with Snapchat about to join them).
Competitor risk analysis can be paralyzing for a new founder who reads the news. Google, Facebook and Amazon et al. can essentially build anything they want. While copycat startups can pop up overnight. Sure the big guys might buy you, but they might also build themselves or acquire one of these competitor startups that started after you. 1st means nothing anymore. Even the example doesn't really overcome Google as a competitor. Competitor risk can be very subjective and VC forecasts are not much better than founders here - this is the easiest area to disagree on and get pushback on.
Honestly these 1-page biz planning tools are fine for college kids learning about startups. Or for VCs keeping their public profile active. But before VCs give a founder real money I think most VCs do a set of "common sense tests". This is what this is, a version of a common sense test for a founder. If you're overly optimistic as a founder while not having thought out potential future scenarios Plan A thru Plan C that would fail a common sense test.
Seems like the stronger your idea, your I.P. or your team's technical skills, the less common sense needed, you are worth mentoring even though you don't get it yet. Still do a common sense check regularly...
Are your costs viable?...What is the effort for a user to switch to the product?...Is it easy for a competitor to copy the startup’s ideas?...How might user adoption grow?...etc.
Potential founders see some startups bootstrapping costs very early and see other startups unprofitably burning dosh for years and years even past their IPO (eg hello Twitter, with Snapchat about to join them).
Competitor risk analysis can be paralyzing for a new founder who reads the news. Google, Facebook and Amazon et al. can essentially build anything they want. While copycat startups can pop up overnight. Sure the big guys might buy you, but they might also build themselves or acquire one of these competitor startups that started after you. 1st means nothing anymore. Even the example doesn't really overcome Google as a competitor. Competitor risk can be very subjective and VC forecasts are not much better than founders here - this is the easiest area to disagree on and get pushback on.
Honestly these 1-page biz planning tools are fine for college kids learning about startups. Or for VCs keeping their public profile active. But before VCs give a founder real money I think most VCs do a set of "common sense tests". This is what this is, a version of a common sense test for a founder. If you're overly optimistic as a founder while not having thought out potential future scenarios Plan A thru Plan C that would fail a common sense test.
Seems like the stronger your idea, your I.P. or your team's technical skills, the less common sense needed, you are worth mentoring even though you don't get it yet. Still do a common sense check regularly...
I agree that the heuristic is far from complete. I've been tempted to add to it many times, but for me, it starts to diminish its usefulness.
I'll use "my test" to indicate areas that might have less consideration. For example, solution design tends to get the most attention from founders. You have an idea and start to run with vision and possibilities.
But, as you noted, the attention given to economics may be lacking. This can help remind you to try to balance your planning.
I'll use "my test" to indicate areas that might have less consideration. For example, solution design tends to get the most attention from founders. You have an idea and start to run with vision and possibilities.
But, as you noted, the attention given to economics may be lacking. This can help remind you to try to balance your planning.
My experience is similar that adding to these tools starts to diminish usefulness. I use a 4-point sheet that sort of resembles SWOT analysis and I think that is about as far as it can go for me. Also worth mentioning what and when these tools are relevant, for coffee shop meetings or initial/weekly KPI meetings a "back of the envelope" type tool makes complete sense. But whether a founder or an investor, at some point it's worth a deep dive into each piece of the puzzle to really back up initial thinking with more info and data (market research, user feedback, comp discounting, sanity checks, etc.)