Y Combinator staged its annual Startup School event last Saturday, attracting more than 1,700 young startup founders and would-be founders. Andreessen Horowitz partner (and Xconomist) Chris Dixon, the founder of Web startups SiteAdvisor (sold to McAfee) and Hunch (sold to eBay), gave one of the most interesting talks, under the title “Good Ideas That Look Like Bad Ideas.”
Riffing on earlier arguments advanced by Peter Thiel and Paul Graham, Dixon said that the best way to succeed with a technology startup is to find an idea that everyone thinks is terrible at first, but later turns out to be indispensable—like, say, the telephone. (According to legend, in 1876 Western Union declined the opportunity to buy Alexander Graham Bell’s patent for a meager $100,000, calling the invention an impractical toy. There’s some dispute over the veracity of this story, but whatever—it’s great for business textbooks.)
Dixon pointed to Google, Airbnb, eBay, Dropbox, and Kickstarter as more recent examples of ventures that initially seemed weird, niche-y, unnecessary, and unlikely to make money. To persevere in the face of such perceptions, Dixon said, an entrepreneur needs to know a secret: “something you believe that most other people don’t believe.” At Dropbox, for example, founder Drew Houston believed that the way to appeal to millions of non-technical users and beat the dozens of incumbents in the cloud-based storage market was to make sharing things on Dropbox feel just like dragging-and-dropping files to a local hard drive. So far, it seems he was right about that.
In this view of the world, the important thing is to keep plugging away, while competitors who don’t know your secret skate off in the wrong direction. Eventually, if your secret is correct, the people who initially thought your idea was idiotic will start to appreciate your true genius.
The risk with this strategy, of course, is that you’ll lock onto a seemingly dumb idea that turns out to be a truly dumb idea. As Graham points out, “the vast majority of ideas that seem bad are bad” (emphasis mine). That’s the reason Y Combinator invests in so many startups. Its partners know most of them will fail—they just don’t know which ones.
And what makes things even more difficult for entrepreneurs and investors is that an idea can start to look good once you’ve worked on it for a while, but still turn out to be bad. Webvan, the dot-com-era grocery delivery startup, is the archetypal example. The company was beloved by its customers and was widely thought by investors to have the “first-mover advantage” that would make it the Amazon of groceries. Venture firms were so convinced that they ponied up $1.2 billion—right before the business imploded, leaving a crater so deep that VCs have been scared of food-related startups ever since.
The law of averages says that there are probably still a few Webvans out there today. These companies may be raising money, hiring engineers, and adding users— the outward signs, at least according to the topsy-turvy logic of the startup world, that they must have a good idea. But many of them haven’t yet tested their ideas on a truly massive scale, or haven’t confronted key challenges that could sink their whole enterprise. Their secrets, in other words, might turn out to be wrong.
I’m going to list a few startups and products that I suspect fit into this category. In each case, there’s something about the company or the invention that I just don’t grok. Either it feels like there’s something missing from the value proposition, or there’s something that early adopters find valuable that doesn’t make sense to me. I wouldn’t be surprised to learn that a lot of other average folks (especially people outside Silicon Valley) share my views.
But I want to say up front that my suspicions could be wrong. In each case, I find myself disbelieving the company’s secret—but it could be that I just don’t understand it. Maybe I’m playing Western Union in these scenarios; maybe I’m so enmeshed in the technologies I currently use that I’m unable to see the alternatives. Or it might be, as I’m sometimes told by startup founders when I express uncomprehension or doubt, that I’m just “not in the target demographic” for these products.
I’d love to hear what you think about this list, or what other startup ideas you just don’t grok, so please leave your comments below.
1. BuzzFeed
If BuzzFeed is the future of journalism, just shoot me now. The site is dominated by photo-driven “listicles” with clickbait titles like “The 23 Most Boston Things To Ever Happen” and “15 Signs You Are Obsessed with Your Dog.” I don’t begrudge anyone a few giggles; I don’t have anything against lists (you’re reading one now); and I admit that it takes a special kind of skill to give an article BuzzFeed’s patented Ebola-like virality. But I wonder how often visitors would go back to the site if they understood that many of its articles are actually advertisements placed by BuzzFeed’s “featured partners.” And I just don’t see how BuzzFeed’s formula can keep working long enough to pay back the $46 million it’s raised from venture capitalists.
See also: Gawker, Upworthy, Distractify.
2. Uber
Uber is trying to use modern mobile technology and its network of private black limos to fix a real problem: the fact that procuring and paying for a taxi ride, in a lot of cities, can be a tedious hassle. The big stumbling block, in my eyes, is that Uber is about half again as expensive as a conventional taxi, with the difference growing even greater during hours of peak demand. As Reuters blogger Felix Salmon has pointed out, the company “doesn’t seem to have worked out how it wants to deal with the central question of cost.” Because it’s so pricey, Uber feels like a solution for the wealthy elite—a perception that’s unashamedly built into the company’s marketing and branding (and even its name).
Uber blogger Bradley Voytek says Uber costs more because it offers more: reliability, customer support, style, comfort, and reduced frustration. That may all be true. But for me, and I suspect for most people, the premium is too great. A much better service at a much higher price just doesn’t feel like a big innovation. The cheaper new UberX service available in some cities—which offers easy car ordering and payment, without the style and comfort of a black limo—may represent the beginnings of a fix for this problem. But it will still have to contend with opposition from the taxi industry, which sees the new, unregulated car services as unfair competition. I keep wondering why we can’t use technology to fix the existing industry.
See also: Lyft, SideCar.
3. Medium
If anyone knows that people are always looking for new ways to communicate, it’s Ev Williams, who co-founded Blogger (sold to Google in 2003), then Odeo (one of the first podcasting platforms), then Twitter. But it’s still unclear what need Williams is trying to fill with Medium, the online publishing platform he
