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Ask HN: “Competition is for losers”, but it seems YC investments ignore this

8 points by bhayden ↗ HN
Take EventJoy for example - at a glance, it seems like they're niche. Event registration. You've likely never heard of an event registration company before unless you're in the industry or have hosted an event. It seems like it would be a very small subset of web development available, but then you look at a this[1] and it's obvious that there are literally dozens upon dozens of companies offering very similar services.

It seems like there are very few YC companies that are even close to being unique, so I don't understand why they are pushing this as being so important.

[1] http://www.quora.com/What-are-the-best-mobile-event-apps-for-conferences-and-corporate-events

4 comments

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nostrademons
Competition is for losers if you're a winner. The problem is that winning requires beating all the losers.

The context of Peter Thiel's quote is that the really profitable companies are all ones where there are no real substitutes in their problem domain. But that's looking at the situation after-the-fact. In the process of getting there, they usually had to enter a very crowded market with a unique take on the problem; over time, other people realized their take was better, and so when the market consolidated, they were the last one left standing. Google entered a crowded search market (Altavista, Excite, Infoseek, Hotbot, etc.), Facebook entered a crowded social networking market (Livejournal, Xanga, EZBoard, MySpace, Friendster), Dropbox entered a crowded filesharing market (YouSendIt and dozens of clones).

If you read Steve Blank's books, one of his points is that it's basically impossible to take over a market where a single firm controls >74% of the market, and if a single firm has >26% of the market, you must spend 3x them in sales & marketing to have a chance. So the only markets that can be attacked by startups are the ones that are very competitive, or the ones that nobody knows exists. Of course, not all of those competitors are going to survive.

I suspect YC does select for companies that have a unique take on the market: "What do you know about the market that your competitors do not?" has been on the application form forever. They may not always get it right, but then, they don't have to: YC's unique take on the market is that they can fund hundreds of startups, take a small amount of equity, and still raise the expected value of your startup enough to be worth having as an investor.

bhayden
Thanks, this makes it clearer. I am re-reading the transcript of Peter Thiel's presentation and it seems like it might be more accurate to say, "competing in non-niche areas is for losers".
swatow
That's a great explanation. It's unfortunate that Peter Thiel chose to express his idea is such a confusing way, and also to imply that what he was saying somehow was counter to conventional economics.
api
He expressed it in a bit of a one-sided way, and did that with a few other things too. I think he has the common tendency to do this when the other side of the equation is over-represented in popular discussion.

For another example, he takes a virtually opposite position to some versions of the Lean Startup dogma -- he advocates making plans and thinking conceptually instead of just engaging in "gradient descent" to find a product-market fit. But the truth is that both approaches have their place and are important. The latter is just over-represented in the popular mind these days, largely as a reaction against the rash of high concept "this should work because we've reasoned that it should work" failed startups in the late 90s. (Lean Startup itself is a reaction against the late 90s.)