- So, should you work on a startup idea that already exists?
Well, Snapchat wasn't the first messaging app,
Facebook wasn't the first social network
and Discord wasn't the first chat app.
You don't have to be first,
but you do need to be different.
Being better, faster and cheaper matters.
In fact, it matters a lot.
It matters so much that if you don't have that,
you can't succeed,
your startup will die
and neither you or I want that to happen.
So let's talk about it.
Let's get started.
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When we started my startup Posterous back in 2008,
it was definitely not the first blog or social network.
However, it was better in one specific way:
we supported post by email,
in a way that was really easy to remember.
If you knew how to send an email,
well, you could post something online.
And that was enough.
That's the thing,
you don't have to be the first.
WordPress today runs some crazy percentage
of the world's websites,
but it was first released in 2003.
Posterous was late by five years,
but we still grew fast
and had as good a shot as anyone to build something great.
It's often a disadvantage to actually be first.
Before Instacart,
there was the flaming disaster that was Webvan.
Before Facebook,
there was Friendster and Six Degrees.
If being first is sometimes a disadvantage,
why do people still look for things that are so new?
Here's the thing,
investors do love novel approaches.
If you are trying to start something,
it's an important bias to be aware of,
and it's going to be hard to fight against it,
so don't even try.
You just have to take it into account,
people who get a lot of startup pitches,
will use this as a filter right out of the gate.
Is it fair?
Not always.
There's a reason for this,
brand new business models are usually driven
by just a few things.
New technologies,
new online behaviors,
new needs,
changes in society's demographics,
new capabilities
and new regulation.
But not everyone will be lucky enough
to find one of these brand new blue ocean spaces.
Sometimes you have to wade into a red ocean:
a space with lots of competitors.
And if that is you,
then there's one thing I need you to have clear
in your head.
Is it better, faster or cheaper than alternatives?
(water whooshing)
Let's take these three things in turn.
First off, being better.
Here's some great examples of top startups,
that got there just by being that.
Google was just clearly better than AltaVista
and all the other search engines.
PageRank was an incredible advantage,
it just gave you better results.
It was clear they had better engineering talent
and thus that talent could build a better product
that could give a better experience.
They got there through technical excellence.
Dropbox, when it first came out was just clearly better
than a USB drive.
Again, technical excellence.
It was a breakthrough experience that just worked.
Discord, when it first came out, focused on gamers.
They had low CPU requirements,
which meant their initial users wouldn't get bogged down,
and they could still play their high frame rate games.
That was enough to get Discord their first users
and put them on the map.
Airbnb started with an audience that had no alternatives.
They were focused on conference goers,
when there were no hotels available.
What else could you do?
Actually, nothing.
You basically wouldn't go to the conference.
Having a place to stay was just clearly better.
That was a great first set of customers.
Coinbase is a great example of being better as well.
I was one of the first investors in Coinbase.
And for me,
it was because it was clearly better than Mt. Gox,
one of the first places you could buy Bitcoin.
Back then, you had to wire money using Western Union
to an overseas bank,
and it somehow appeared
on this kind of sketchy looking website that sold Bitcoin,
that was originally built
to trade Magic The Gathering trading cards.
That's the entire reason
why it was even called Mt. Gox.
Today, Coinbase is worth over $8 billion,
because they focused on a fringe and new crowd,
early believers in cryptocurrency.
Remember, this was 2013.
So being better is pretty obviously great.
And we just ran through a bunch of tried and true ways,
to be better.
You could get there through pure technical excellence,
like Google or Dropbox.
Or you could pick a particular customer
or situation that's underserved
like gaming for Discord,
conference goers for Airbnb,
or fringe groups like crypto in 2013 for Coinbase.
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Second, being faster.
At Initialized, I funded Flexport,
which speeds air freight by as much as two to three days,
compared to other methods of shipping cargo.
Because they replaced traditional methods with software,
their freight insurance can actually be six times faster
to resolve a claim.
So then those are both things
that shippers care a lot about.
It's just clearly faster for them.
Uber, when it came out,
was just significantly faster to find a car.
They focused on matching supply and demand,
and built teams to increase supply very quickly,
city by city.
And finally,
Facebook was just significantly faster than Friendster.
Friendster early on was sort of notorious
for using Java Server Pages and unoptimized MySQL.
It was often impossible to even log in,
and Facebook in contrast, remained fast throughout.
Speed matters a lot especially for consumer scenarios.
Look, there's a whole internet of other things
to occupy someone's time,
if that particular website is slow.
Speed matters.
So those are a few ways to think
about how you could make your product or service,
faster for your customers.
First, if you're using software,
you're beating paper and pencil,
and that makes things a lot faster by default.
That is Flexport story to be sure.
It's easy to be faster than your competitors,
when your competitors are literally using paper and pencil.
Second, delivering more supply liquidity like Uber.
They managed to use software
to scale one of the world's largest mobile workforces.
More drivers meant faster response times.
There you go, faster.
Finally, technical excellence yet again comes out
when you're looking at what Facebook managed to do,
to scale their website,
especially as the hockey stick graph went up into the right.
Faster is a great way to go.
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Finally, don't forget about cheaper.
If you can get the same or better product or service,
for much less money,
customers are smart, they're rational
and they will vote with their feet.
Shopify is a great example of this early on.
They were significantly cheaper
than running your own Magento Server,
and all you had to do is pay a flat fee of $29 a month.
Shopify enabled a new generation of brand and store,
that just couldn't have existed without them previously.
Lyft is another great example of being much cheaper.
They were the first to come citizen-based ride sharing.
Uber was new, but at the time only black cars.
Lyft was originally called Zimride
and they were already doing car sharing
over much longer distances.
When they saw Uber they said,
"Why don't we, we try to do that,
"but instead of using taxis or black cars,
"why don't we use
"the community we already built for Zimride?"
And that resulted in a service that was far cheaper.
Uber in fact had to fast follow them pretty quickly
because they realized UberX needed to exist.
Otherwise, Lyft was just going to run away with it.
So cost matters a lot.
Instacart was grocery delivery but asset light.
People had tried to do traditional grocery delivery before,
but they had to buy warehouses
and buy huge fleets of cars.
Being able to do this almost entirely in software,
with a workforce that was deployed by mobile phone,
meant that the cost to deploy the service came down a lot.
And as a result, Instacart is now available
to more than 85% of people in the United States.
That's crazy.
Amazon of course is famous for saying,
their margin is our opportunity,
especially when it came to retailers.
And retailers had 10 to a hundred percent margin.
Margin they needed to cover physical stores.
Amazon said we don't have that,
so why don't we pass it on to our consumers?
And that's a powerful way to get customers.
Robinhood did something very similar
when they brought fees to zero for trading.
And they decided to make money in a different way,
they sell data about retail investors to hedge funds.
Making your product or service cheaper matters a lot.
You could take advantage
of major shifts in technology cost curves
like what was enabled by cloud computing
and SaaS businesses like Shopify,
or you could look for emergent new behavior,
like applying the business model
of Uber's early Black Car Service,
powered by a mobile workforce,
deployed by software to your own space,
whether it is grocery delivery with Instacart
or the first citizen ride sharing with Lyft.
Finally, you can just lower prices
in a way that cuts the margin for the whole business,
but gives you massive market share,
the way Amazon and Robinhood did it.
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So that's it,
I wanted to walk you through what better, faster
and cheaper looks like when it works.
At the end of the day,
great startups just clearly solve a need.
It might be a brand new need,
that people don't even know they had, like Google
or a replacement for an old and antiquated industry
that should have run in technology years ago,
like Uber or Flexport,
either way you have to be better, faster or cheaper
than the alternatives,
no matter how old or new those alternatives are.
And if you aren't,
then you should find a way to become that.
Or you need to find a new idea.
I want to see you succeed as a startup.
Better, faster, cheaper.
You can do this.
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I'm still trying to reply to pretty much every comment
and I read them all.
So I really appreciate you watching this
and thinking about starting a business,
and maybe a startup.
I'll catch you next time.
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