All the low hanging fruits are gone, most new startups are all solving really dumb problems and exiting in the 7-8 figure range either to big tech or dumb late investors. If you look at YC (which are the top) companies, they all sound pretty BS and trying hard to fix a problem that doesn't really exist. B2B SaaS is the most accepted type in YC because they can just sell to each other and exit when valuations go up, it's essentially a well crafted ponzi scheme. Bigger companies will most likely cancel their B2B SaaS subscriptions in the next recession. This is just a rant, I just hate how over engineered the world has become. Open to hearing other points of views, but seriously first go look at the list of BS startups YC is funding.
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Digital world is over engineered
- Thread starter caljreich
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- startup y combinator
@caljreich There are still under the radar/overlooked industries where B2B SaaS is still valuable/where the incumbents are like 30 y/o fossils. But I agree, I especially don’t get how many dev tools startups there are in the YC portfolio in the last 3 years lol
thejoshbro
New member
@rick83 There is a looot of organizational inertia and other non-obvious challenges with those industries. So if you have a ton of background knowledge and can answer the question of "why has this not been done yet" then yes you can make a successful business in these fossil industries. Otherwise if your answer is "because it's too old school so no one thought of it!" then likely you'll face an unexpectedly large attack surface for your MVP and will fail before launch.
eclipse122778855
New member
@thejoshbro explain "unexpectedly large attack surface"
thejoshbro
New member
@eclipse122778855 Because of organizational inertia and the many systems and processes they'll typically already be using to overcome the problem you're looking to solve better, you generally will be fighting a multi-front battle in terms of features, decision makers, and fighting off piecemeal legacy providers who are currently handling 1/8th of the bigger picture. And then there's legal, standards compliance, and regulatory compliance.
This creates needs for a super robust MVP and you'll be fighting against a lot of different influences. You'll have a large attack surface in terms of attacks from current partner offerings, internal stakeholders, and the organization.
Again, if you know the business very intimately by working in the industry for 5-10 years, you'll be able to pick out the right beachhead to start your battle with a reasonable sized MVP. But at that point, you'll be able to answer the "why hasn't this already been done?" question accurately.
A lot of these opportunities seem obvious and easy to go after when you lack the knowledge to know why things are the way they are currently. There's a blend of optimism with a pinch of arrogance which lends people like us to wrongly assume it's just because "they're old school and don't know better".
This creates needs for a super robust MVP and you'll be fighting against a lot of different influences. You'll have a large attack surface in terms of attacks from current partner offerings, internal stakeholders, and the organization.
Again, if you know the business very intimately by working in the industry for 5-10 years, you'll be able to pick out the right beachhead to start your battle with a reasonable sized MVP. But at that point, you'll be able to answer the "why hasn't this already been done?" question accurately.
A lot of these opportunities seem obvious and easy to go after when you lack the knowledge to know why things are the way they are currently. There's a blend of optimism with a pinch of arrogance which lends people like us to wrongly assume it's just because "they're old school and don't know better".
psalms91baby
New member
@thejoshbro Solid answer!
@thejoshbro It's important to point out though that "a super robust MVP" isn't actually an MVP. This is why most companies fail with this approach when tackling these huge incumbent products. It's built into the name; Minimal Viable Product. An MVP that's super robust and has many fronts (features) isn't actually an MVP.
This is where everyone fails. They claim they're building an MVP, but they're building a 'version 1'.
The difficulty is getting to the MVP. So much of a startups alpha is simply understanding what the MVP needs to be. How do you take a problem with all this "organizational inertia and the many systems and processes" and address it via an MVP within ~2 months?
The answer is, you don't. It's just not possible.
Instead you focus on 1 single, highly targeted aspect of the businesses pain point that needs to be addressed. Likely this will take the form of augmenting the existing system. So build a tool that does this one thing way better and solves a more local, targeted pain point.
Now that you have this MVP solving this tiny pain point get X customers (maybe just 2 or 3 customers). Then what will happen is you can talk to the tool's users and add functionality to improve another piece of the broken system.
Then repeat. Build a small tool. Get another customer.
Now you have several adjacent tools that solve pain points that you've managed to build through an MVP along with several fast iterations from high touch customer/user contact. And your Product is actually starting to take shape
Also, you have established a relationship with your users so they can email, or call, or slack etc you the moment they have a question or problem they need solved. The customer will never have experienced a situation where they can get fast dev work done. They will love working with you.
As you build more and more features you start to take over more of the legacy's system value. Then 10 years later you've built all of the legacy system's functionality into your app along side all the more efficient and new features. Now IPO.
This is where everyone fails. They claim they're building an MVP, but they're building a 'version 1'.
The difficulty is getting to the MVP. So much of a startups alpha is simply understanding what the MVP needs to be. How do you take a problem with all this "organizational inertia and the many systems and processes" and address it via an MVP within ~2 months?
The answer is, you don't. It's just not possible.
Instead you focus on 1 single, highly targeted aspect of the businesses pain point that needs to be addressed. Likely this will take the form of augmenting the existing system. So build a tool that does this one thing way better and solves a more local, targeted pain point.
Now that you have this MVP solving this tiny pain point get X customers (maybe just 2 or 3 customers). Then what will happen is you can talk to the tool's users and add functionality to improve another piece of the broken system.
Then repeat. Build a small tool. Get another customer.
Now you have several adjacent tools that solve pain points that you've managed to build through an MVP along with several fast iterations from high touch customer/user contact. And your Product is actually starting to take shape
Also, you have established a relationship with your users so they can email, or call, or slack etc you the moment they have a question or problem they need solved. The customer will never have experienced a situation where they can get fast dev work done. They will love working with you.
As you build more and more features you start to take over more of the legacy's system value. Then 10 years later you've built all of the legacy system's functionality into your app along side all the more efficient and new features. Now IPO.
thejoshbro
New member
@wedsinger
Except in the situation I explained, it literally is.
MVP = Minimum viable product
The threshold of what constitutes viability varies dramatically. It will drastically increase when the sophistication of the problem or the diversity of the stakeholders increases.
In a lot of these cases, and specifically the case I painted out in my prior response, the burden to viability can be high as hell. The minimum viable product isn't some stupid trinket a script kiddy coded up with GPT over a weekend to suddenly unlock $1bn of enterprise value. Going back to the OP's sentiment, the digital world HAS moved on past those low hanging fruit opportunities. But a lot of people think they can still try this type of play, which to be fair did often work in the early 2010's when there wasn't very much tech penetration into these non-tech-first legacy markets.
That's why a lot of people fail there. Because they don't understand their target market and legacy industry enough to actually grasp that the problem might just be complex as hell, despite surface appearances. To be a rip-and-replace solution requires covering a large surface of use cases and corner cases.
You have two choices here.
Do a "robust MVP" or "do-things-which-don't-scale" level customization for each of the first 20-30 customers and have high account churn. Pick your poison but it leads to the same place which is a robust product before you actually get product-market fit.
Now to avoid this, you have to choose a better opportunity. To do that you in the legacy industry space, you must have a ton of industry specific knowledge. This will allow you to accurately answer the "why this has not been done before" question. And then also correctly identify a beachhead market within the market that you CAN build a smaller product which will actually be viable.
Again we're talking in circles here and I think I made my point prior. With these legacy businesses, there's a ton of process and organizational complexity which will be opaque to the outsider. This will lead you to failure because you'll just follow the startup-meme trope advice, to "BrEaK tHiNgs" and "mOvE faST". That works way better when you don't have a legacy industry where everyone knows each other and word of your shitty product will spread like wildfire and kill you before you even get a second chance. And if you do actually build something business-critical, you're going to have a short leash for early problems. They'll be biased to jump back to what they're comfortable doing previously at the first sign of any hiccup or problem. Really screwing up here can get your internal champion fired or demoted, and then I can promise you you're fucked.
If you build a minimal non-viable product and try to confidence man your way through early sales, you walk into a minefield you don't even understand and wonder why it's not working.
I am a tech CEO who's literally in one of these legacy markets and have been doing this for 10 years and raised my first round of investment back in 2014. Take what I'm saying at face value and either find something worth taking away from it or don't. This has just been my experience.
There are solutions, products, and industries which you can build light products to solve a small problem in legacy industries. But these are drying up and you're not going to build a $1bn company on sharing signatures or other things like that in 2024. They also require that you, the founder, actually know what the hell you're doing and aren't just throwing a dart at a spinning globe and going after a market because "My uncle sells forklifts and he seems unsophisticated, so clearly that industry needs a _______ specifically for forklift sales. When I worked there for one summer when I was 17 it seemed dumb how things were done." isn't going to cut it.
It's important to point out though that "a super robust MVP" isn't actually an MVP. This is why most companies fail with this approach when tackling these huge incumbent products. It's built into the name; Minimal Viable Product. An MVP that's super robust and has many fronts (features) isn't actually an MVP.
Except in the situation I explained, it literally is.
MVP = Minimum viable product
The threshold of what constitutes viability varies dramatically. It will drastically increase when the sophistication of the problem or the diversity of the stakeholders increases.
In a lot of these cases, and specifically the case I painted out in my prior response, the burden to viability can be high as hell. The minimum viable product isn't some stupid trinket a script kiddy coded up with GPT over a weekend to suddenly unlock $1bn of enterprise value. Going back to the OP's sentiment, the digital world HAS moved on past those low hanging fruit opportunities. But a lot of people think they can still try this type of play, which to be fair did often work in the early 2010's when there wasn't very much tech penetration into these non-tech-first legacy markets.
That's why a lot of people fail there. Because they don't understand their target market and legacy industry enough to actually grasp that the problem might just be complex as hell, despite surface appearances. To be a rip-and-replace solution requires covering a large surface of use cases and corner cases.
You have two choices here.
Do a "robust MVP" or "do-things-which-don't-scale" level customization for each of the first 20-30 customers and have high account churn. Pick your poison but it leads to the same place which is a robust product before you actually get product-market fit.
Now to avoid this, you have to choose a better opportunity. To do that you in the legacy industry space, you must have a ton of industry specific knowledge. This will allow you to accurately answer the "why this has not been done before" question. And then also correctly identify a beachhead market within the market that you CAN build a smaller product which will actually be viable.
Again we're talking in circles here and I think I made my point prior. With these legacy businesses, there's a ton of process and organizational complexity which will be opaque to the outsider. This will lead you to failure because you'll just follow the startup-meme trope advice, to "BrEaK tHiNgs" and "mOvE faST". That works way better when you don't have a legacy industry where everyone knows each other and word of your shitty product will spread like wildfire and kill you before you even get a second chance. And if you do actually build something business-critical, you're going to have a short leash for early problems. They'll be biased to jump back to what they're comfortable doing previously at the first sign of any hiccup or problem. Really screwing up here can get your internal champion fired or demoted, and then I can promise you you're fucked.
If you build a minimal non-viable product and try to confidence man your way through early sales, you walk into a minefield you don't even understand and wonder why it's not working.
I am a tech CEO who's literally in one of these legacy markets and have been doing this for 10 years and raised my first round of investment back in 2014. Take what I'm saying at face value and either find something worth taking away from it or don't. This has just been my experience.
There are solutions, products, and industries which you can build light products to solve a small problem in legacy industries. But these are drying up and you're not going to build a $1bn company on sharing signatures or other things like that in 2024. They also require that you, the founder, actually know what the hell you're doing and aren't just throwing a dart at a spinning globe and going after a market because "My uncle sells forklifts and he seems unsophisticated, so clearly that industry needs a _______ specifically for forklift sales. When I worked there for one summer when I was 17 it seemed dumb how things were done." isn't going to cut it.
@thejoshbro
I agree with everything you said except this.
This is what I was trying to say in my post and what the crux of my beliefs are. I think we might just be in semantic disagreement.
I argue that to disrupt Huge Legacy System, you must first build Tiny Legacy System Adjacent tool. And then over years this evolves into a Huge Legacy System killer.
Largely in part because the Tiny Legacy System Adjacent tool you build has the same customers that are paying for the Huge Legacy System.
But during the fist X number of years people will look at your product and say "Oh that's cool, but that's not at all what Huge Legacy System is so why are saying you're building Huge Legacy System when you're clearly not".
A cononical example is the ERP space. I would argue that it's impossible to build an MVP of an ERP.
So if you wanted to build an ERP find 1-3 of SAP's customer and built a tool that does something SAP can't do. That's the MVP. This tool isn't in anyway an ERP, but it's an MVP that can be built in 2 months, and it gets you on your way to having an ERP 10 years from now.
I'm a tech CTO with 12 professional years in Silicone Valley. Raised first round of money 2015 (and failed horribly). I definitely haven't figure it all out. But I've wasted thousands of hours coding what I thought were MVP's but actually weren't and have largely focused on huge legacy data heavy systems.
Most recently I've founded a new company 12 months ago and got to 600k ARR in 4 months building a small adjacent product that looks nothing like what the legacy system we're targeting to displace in 10 years.
In a lot of these cases, and specifically the case I painted out in my prior response, the burden to viability can be high as hell.
I agree with everything you said except this.
And then also correctly identify a beachhead market within the market that you CAN build a smaller product which will actually be viable.
This is what I was trying to say in my post and what the crux of my beliefs are. I think we might just be in semantic disagreement.
I argue that to disrupt Huge Legacy System, you must first build Tiny Legacy System Adjacent tool. And then over years this evolves into a Huge Legacy System killer.
Largely in part because the Tiny Legacy System Adjacent tool you build has the same customers that are paying for the Huge Legacy System.
But during the fist X number of years people will look at your product and say "Oh that's cool, but that's not at all what Huge Legacy System is so why are saying you're building Huge Legacy System when you're clearly not".
A cononical example is the ERP space. I would argue that it's impossible to build an MVP of an ERP.
So if you wanted to build an ERP find 1-3 of SAP's customer and built a tool that does something SAP can't do. That's the MVP. This tool isn't in anyway an ERP, but it's an MVP that can be built in 2 months, and it gets you on your way to having an ERP 10 years from now.
I'm a tech CTO with 12 professional years in Silicone Valley. Raised first round of money 2015 (and failed horribly). I definitely haven't figure it all out. But I've wasted thousands of hours coding what I thought were MVP's but actually weren't and have largely focused on huge legacy data heavy systems.
Most recently I've founded a new company 12 months ago and got to 600k ARR in 4 months building a small adjacent product that looks nothing like what the legacy system we're targeting to displace in 10 years.
@caljreich You see over-engineering, I see continuous refinement. Cars are over engineered, homes, electrical circuits, mobile phones, computers, planes, etc. That's literally what makes each iteration a little bit better than before and keeps the world moving forward.
aachen_hexagon
New member
@caljreich > All the low hanging fruits are gone
Another way of saying this is "I am not aware of many problems I/other people have".
A lot of the biggest unicorns are ideas that I would have immediately written off:
- Instacart: just buy your own groceries.
- Uber: Drive there yourself and drink responsibly.
- AirBNB: Why would anyone want strangers in their house?
- Gusto: What's so hard about paying people?
- Slack: IM is already a thing.
But they work. Why? Because they solve real problems for real people.
I bet if you met a successful entrepreneur or high up business exec and asked them about pain points in their business, they'll give you a laundry list of things they wish would be better. And I bet if you shadowed them for a month, you'll come up with your own long list.
Another way of saying this is "I am not aware of many problems I/other people have".
A lot of the biggest unicorns are ideas that I would have immediately written off:
- Instacart: just buy your own groceries.
- Uber: Drive there yourself and drink responsibly.
- AirBNB: Why would anyone want strangers in their house?
- Gusto: What's so hard about paying people?
- Slack: IM is already a thing.
But they work. Why? Because they solve real problems for real people.
I bet if you met a successful entrepreneur or high up business exec and asked them about pain points in their business, they'll give you a laundry list of things they wish would be better. And I bet if you shadowed them for a month, you'll come up with your own long list.
@aachen_hexagon I guess it’s that most YC B2B seem more like consulting software services
@aachen_hexagon
This. Our startup launched with a product that was mediocre at best, but what we were really doing was using it as a conversation starter to talk to execs about their pain points and what they feel isnt being addressed. We ended up with 2 major pain points they were willing to pay $100/mo/user. The crazy thing? There are other startups already doing the stuff they want, but not *exactly* the way they'd want to use it. Moral of the story is: Talk to execs, there are often non-obvious gaps in any market that you can turn into a decent business.
if you met a successful entrepreneur or high up business exec and asked them about pain points in their business, they'll give you a laundry list of things they wish would be better
This. Our startup launched with a product that was mediocre at best, but what we were really doing was using it as a conversation starter to talk to execs about their pain points and what they feel isnt being addressed. We ended up with 2 major pain points they were willing to pay $100/mo/user. The crazy thing? There are other startups already doing the stuff they want, but not *exactly* the way they'd want to use it. Moral of the story is: Talk to execs, there are often non-obvious gaps in any market that you can turn into a decent business.
ctheatheist
New member
@aachen_hexagon I'm over in Europe so no idea what Gusto does, but for the others I'd disagree:
Instacart - since most shopping has moved online it was only a matter of time until groceries did as well. But I'd have thought to myself that this is not a technology company, but a conventional grocery retailer adding an online shop. It's not like their logistics can't handle it.
Uber - convenient taxis, sign me up!
AirBnB - this is the one that puzzles me the most. Over in Europe there were already similar services around 2008-2009 (Homelidays), what made AirBnB take off the way they did?
Instacart - since most shopping has moved online it was only a matter of time until groceries did as well. But I'd have thought to myself that this is not a technology company, but a conventional grocery retailer adding an online shop. It's not like their logistics can't handle it.
Uber - convenient taxis, sign me up!
AirBnB - this is the one that puzzles me the most. Over in Europe there were already similar services around 2008-2009 (Homelidays), what made AirBnB take off the way they did?
@ctheatheist Bingo! So in a gist what you’re saying is old ideas new marketing! That’s what most new startups are.
Because mom and pop stores sale the same things as Amazon but who does the better marketing and thus who makes most revenue.
It’s very simple, probable monopoly is what VCs want to fund.
Because mom and pop stores sale the same things as Amazon but who does the better marketing and thus who makes most revenue.
It’s very simple, probable monopoly is what VCs want to fund.
eclipse122778855
New member
@mr3 it's not just the marketing. sometimes it's subtle differences in the way the product interface and sometimes the use cases are developed, that make those new kids on the block more desirable.
I mean, when zoom came around, how many ways we already had to videocall for free?
I think my problem has been to look at these products from a technological perspective (=="problem has been solved already"), rather than a product / marketing perspective. and unfortunately most customers will just have to "vibe" with the product, which is user interface and marketing. They don't give a flying fuck about the system behind it.
I mean, when zoom came around, how many ways we already had to videocall for free?
I think my problem has been to look at these products from a technological perspective (=="problem has been solved already"), rather than a product / marketing perspective. and unfortunately most customers will just have to "vibe" with the product, which is user interface and marketing. They don't give a flying fuck about the system behind it.
helarikoski
New member
@aachen_hexagon You are describing consumer companies. These companies are innovative because they changed consumer behaviour single handedly and extracted value. Slack is technically B2b but looks feels and works like a pure consumer company (network effects, etc). Consumer is way harder than b2b and it is truly surprising how safe YC has been playing it by only funding b2b ideas that are traditional SaaS companies with a GPT offering.
eclipse122778855
New member
@aachen_hexagon I'd say even more "no need for this" than those... I mean when WhatsApp came out, how many messaging systems we already had?
And snapchat?
And how many people have made money with the various iterations of dating sites?
And snapchat?
And how many people have made money with the various iterations of dating sites?
@aachen_hexagon He's not talking about these startups with massive tam.
Yc funded a company that integrates stickers into your wyswig editor. It's the gotta be the dumbest fucking funding event in the history of mankind.
YC is run by some bone heads. When you fund hundreds or thousands of startups, you're bound to have some winners and that's the game yc apparently plays. They don't go after quality because they don't know what it is.
Yc funded a company that integrates stickers into your wyswig editor. It's the gotta be the dumbest fucking funding event in the history of mankind.
YC is run by some bone heads. When you fund hundreds or thousands of startups, you're bound to have some winners and that's the game yc apparently plays. They don't go after quality because they don't know what it is.
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