Essays

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It seems that, for the average engineer, more options just means more rope to hang yourself. So if you want to start a startup, you can take almost any existing technology produced by a big company, and assume you could build something way easier to use.

Design for Exit

Success for a startup approximately equals getting bought. You need some kind of exit strategy, because you can't get the smartest people to work for you without giving them options likely to be worth something. Which means you either have to get bought or go public, and the number of startups that go public is very small.

If success probably means getting bought, should you make that a conscious goal? The old answer was no: you were supposed to pretend that you wanted to create a giant, public company, and act surprised when someone made you an offer. Really, you want to buy us? Well, I suppose we'd consider it, for the right price.

I think things are changing. If 98% of the time success means getting bought, why not be open about it? If 98% of the time you're doing product development on spec for some big company, why not think of that as your task? One advantage of this approach is that it gives you another source of ideas: look at big companies, think what they should be doing, and do it yourself. Even if they already know it, you'll probably be done faster.

Just be sure to make something multiple acquirers will want. Don't fix Windows, because the only potential acquirer is Microsoft, and when there's only one acquirer, they don't have to hurry. They can take their time and copy you instead of buying you. If you want to get market price, work on something where there's competition.

If an increasing number of startups are created to do product development on spec, it will be a natural counterweight to monopolies. Once some type of technology is captured by a monopoly, it will only evolve at big company rates instead of startup rates, whereas alternatives will evolve with especial speed. A free market interprets monopoly as damage and routes around it.

The Woz Route

The most productive way to generate startup ideas is also the most unlikely-sounding: by accident. If you look at how famous startups got started, a lot of them weren't initially supposed to be startups. Lotus began with a program Mitch Kapor wrote for a friend. Apple got started because Steve Wozniak wanted to build microcomputers, and his employer, Hewlett-Packard, wouldn't let him do it at work. Yahoo began as David Filo's personal collection of links.

This is not the only way to start startups. You can sit down and consciously come up with an idea for a company; we did. But measured in total market cap, the build-stuff-for-yourself model might be more fruitful. It certainly has to be the most fun way to come up with startup ideas. And since a startup ought to have multiple founders who were already friends before they decided to start a company, the rather surprising conclusion is that the best way to generate startup ideas is to do what hackers do for fun: cook up amusing hacks with your friends.

It seems like it violates some kind of conservation law, but there it is: the best way to get a "million dollar idea" is just to do what hackers enjoy doing anyway.

Notes

[1] This phenomenon may account for a number of discrepancies currently blamed on various forbidden isms. Never attribute to malice what can be explained by math.

[2] A lot of classic abstract expressionism is doodling of this type: artists trained to paint from life using the same gestures but without using them to represent anything. This explains why such paintings are (slightly) more interesting than random marks would be.

[3] Bill Yerazunis had solved the problem, but he got there by another path. He made a general-purpose file classifier so good that it also worked for spam.


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