The problem he's describing is certainly real. There are characteristic traps young founders fall into when thinking of startup ideas.
I don't think he's gotten to the root of the problem, though. The root of the problem is not certain categories of ideas. It's a half-baked way of looking at the world.
As long as you avoid that, there are good ideas to be had in several of the categories he describes. For example, I'm sure there will be huge new businesses that depend mainly on advertising. Is Google going to be the last, ever? And if “Flickr + ___” is a recipe for failure, it wasn't always. YouTube's goal was to be the Flickr of video, and that worked out well for them.
Agreed - worth considering too, that kids like to get into t-shirts because it "seems pretty easy, like, I could make cool t-shirts". Then when it comes time for logistics, shipping, dealing with returns/bad addresses, customers pissed that their shirt hasn't come in the mail, etc, etc, etc. - "I'm done. I quit this f*ing business."
It looks to me like most monumental successes are created one of two ways: Out of love, or out of messing around. Savvy, experienced entrepreneurs and investors can make some bucks just "doing business", but when you haven't got the experience, love or curiosity is the fuel that keeps you going.
For example, I'm sure there will be huge new businesses that depend mainly on advertising. Is Google going to be the last, ever?
For better or worse, Google defines the baseline in online advertising. New companies can't compete on ubiquity, so their service has to be superior in how it targets specific demographics. Assuming that succeeds, they then have to then figure out how to leverage that limited dominance into something broader.
It's certainly possible, but it's also certainly more difficult than it was ten years ago.
The problem with startups comparing their potential success to Google is that your business model probably isn't Google-like at all.
The standard startup ad-based model is: offer content, show ads. This is not Google's model.
Google's model is rather: build up a massive 3rd-party network of ad displays, and then broker ads onto this ginormous network.
Google is not a ad-displayer, they're an ad-broker. Unless you want to tackle things much the same way, you won't be replicating the success of Google.
I thought about pointing this out, but Google displayed ads on their site before anything else, and the ad network was an outgrowth of their initial success.
Anyone who has enough people wanting to advertise with them can create an affiliate network. Creating that initial demand strikes me as much more difficult.
It's true they did - but bear in mind that (AFAIK) displaying ads just on their own pages was never profitable. Google didn't actually start raking in the cash until they got into adwords and adsense.
IMHO it's more difficult to create the affiliate network by virtue of the fact that to be profitable, your affiliate network needs to be obscenely large.
Search ads have much more clicks per page view because they are better targeted. Google generated 67% of their revenues in Q4 2008 from their own site and just 30% from the AdSense network.
>so their service has to be superior in how it targets specific demographics
I think you are mistaken. You are taking ideas from the old magazine world of advertising. I don't think demographics, appealing to a certain demographic or any such thing. Google's success has nothing to do with this. In fact, in many ways it is the opposite of magazine advertising.
The normal ad model is distribute a magazine & plaster ads on it or create an event & plaster sponsors on it. The ad has nothing to do with the thing the ad is on. Google's model is different (for search anyway).
For some businesses, being found on Google means business. They are willing to pay for Google to do what they do anyway, send searchers to web pages. They're genius is that their ads are not ads.
There's always an intermediate step between advertising and making money off the consumer interest it generates. The Internet hasn't changed that.
Google targets people who are searching for a keyword. In some cases, these may be people who are looking to buy a product. However, people looking to hire (say) expert C++ programmers can do better than advertising against a keyword, because searching for that term implies nothing about skill or experience. In this particular case, something like LinkedIn would be a much more valuable advertising resource, because it has much more relevant information about the audience.
Google has an extremely clever advertising model. In many cases it is much more efficient and effective than traditional print and television advertisements. But it's still advertising.
It's not the internet that changes that. It's Google specifically. IE, they are not following an advertising model in the sense that magazines or radio shows are.
They are certainly monetising, but I think it is a mistake toi think of it in those terms. Google is more similar to classifieds, service directories or even ebay then it is to the traditional advertising model.
I did a variation of this my freshman year, by actually buying about $10k of books from students on campus and then selling them on Amazon. We made about $3k all told... I guess the author is right that it didn't "really succeed" and become a huge business, but I definitely learned a ton. (And notably, Chegg is in this space and seems to be doing well enough to get Kleiner Perkins to join their $25m series B.)
THERE IS NO MONEY IN T-SHIRTS.
Nonsense. There's a lot of competition, but plenty of people are making tons of money.
Anything where you plan to make your money exclusively from ads
Bashing ad-supported business seems to be popular these days, but somehow those people are overlooking the fact that Google made $21B last year doing just this. Making significant money from ads requires getting to scale, but if you have the drive and the right mindset, getting there isn't as hard as you might think.
Google-owned sites generated $3.81B while partner sites generated $1.69B.
I think the act of comparing the amount Google makes from AdWords to AdSense is moot -- Both of these channels are very successful. Both of these numbers end with a capital "B".
So question: Do I become an ad broker and take on Google or simply utilize Google to display ads on my property and make some coin?
At this point, I don't care how much Google is making off of me as a percentage, but I do care how much money I actually do put in my own pocket.
Now that the article mentions coffee shops: A good friend of mine started a coffeeshop six years ago, and today he has four of them. He drives a mercedes and has a huge house overlooking the ocean. He started with nothing.
This is largely off-topic: Speaking as a guy who used to work for a local technology incubator, I really really hate the "most startups fail" factoid because it unintentionally distorts the statistic.
The statistic is that most new businesses will not be going concerns X years after inception. This is true, but it does not indicate failure. I find this to be clarifying: if someone asked you for advice, saying (with wavering voice) "I'm considering taking a... job... where this company, like, pays me money every other week... is this safe?!", would you say "Pfft, most jobs fail"? Because most twentysomethings who start a job today will not be employed at the same job, by the same company, in 5 years.
My second "real job" was with the aforementioned technology incubator. I worked there three years, made decent money and learned a lot, and had a better opportunity when it came to contract renegotiation, so I took it. If I had been a startup at the same incubator, that would have put me in the "fail" column. Is there any sanity in that definition of fail? (Give me another few months and I'll be failing my way forward out of the better opportunity, hopefully.)
Can you clarify your argument? It sounds like you're saying, "sure, most businesses will cease functioning within 2 years, but you get so much out of starting your own company that it doesn't matter".
I'll tell you a story. I started a business, worked about 50 hours/week on average for about a year, and made $12,000. That's 2500 hours at a rate of... $4.80 per hour[1]. When I could've made $15/hour right away at a boring office manager job doing estimates, phone support, and yelling at the men when they leave their tools a mess. Or could've gotten an entry level job at BigCorp and been making... I don't know, whatever people who work hard and get promoted fast make within a couple years.
So when I start a new company that pays me more the next year, my first business "closed" - that means it's not going. You could say it "failed", but really, I learned the lessons, made a tiny bit of coin, and then promoted myself into the next business. I know lots of entrepreneurs who leapfrog themselves the same way - and similarly, lots of small companies get bought and integrated or stripmined by a bigger company. This is actually a hard part of being a businessman - that's your baby, y'know? - but if you're ready to move on, it's certainly not a failure.
Paul Graham sold Viaweb. Viaweb company is no longer a going concern. It didn't fail by any stretch of imagination, but will be included as a "failure" in these silly "most small businesses don't exist (fail) within five years" statistics.
[1] Numbers might be off a bit, my memory's kind of hazy. I remember calculating at one point that I was making something like $2.20 an hour, maybe after six months or so. $5,500 net split with my partner after six months? I'm smiling now, but it's kind of ugly to remember those days...
I think it's reasonable to consider a business that does not make the investment + minimum wage a failure. IMO, it's more a question of how large the failure was. If you made 2/3 what you could have been making at a normal job and then quit it's a failure but not a major one. If you end up with 30k of debt then that's a major failure.
I think that business continuity is a poor proxy for "success" and that lack of it is a poor proxy for "failure".
For example, let's say you hang out your shingle as a self-employed software consultant today. Two years and 3 successful projects from now, one of your clients offers you enough money to convince you to go full time for them. You, accordingly, close your business. While that is counted as a "failure" by most metrics, that doesn't look like a failure to me. (Losing all your money and being reduced to bankruptcy, now I'll agree that certainly looks like a failure, but nobody tracks that.)
I'd like to see that data. Specifically, I'd like to see the data that starting the types of businesses he mentions are less likely to succeed than the majority of the types of businesses started by the people on this site. Almost all businesses fail.
Every idea is a "frat-boy idea" until it succeeds. Ignoring the naysayers is one of the necessities for being successful (I think, from my unsuccessful perspective...).
Even though I had none of the ideas he mentioned, reading this article gives me a strange urge to start a business in each of these categories, just to prove him wrong.
Well, there's a lot of value in appreciating how your predecessors have failed. I think his objection is not so much against the list of ideas, but rather people who ignore the mountain of failed attempts in the same field, who seem to believe that they're magically different, and somehow destined to succeed despite the sheer number of failures in the past.
I stopped reading at t-shirts because that's (kinda) my business. While it's not just about the t-shirts, I run a video game community and we sell legally unofficial merchandise like t-shirts and hoodies to support the website. If you have something you cannot advertise to (because there's no money in ads), and you cannot provide a 37signals style of direct service, never underestimate the power of merchandising.
If you're making money on merch, your business is your brand, not the t-shirts themselves. The article's only critical of people who think they're witty enough to sell t-shirts based just on the screen-printed content.
This article started well, but the list of "frat-boy ideas" was actually quite poor and unhelpful... seemed more like examples of business types the author doesn't like rather than inherently stupid ideas.
Also, he seems under the fallacious impression that better ideas are somehow easier to implement. Sorry, pal - good ideas are just as hard to pull off as bad ideas.
Good ideas have a better chance of success - but they also take stupid amounts of work, luck, timing, skill, etc.
The t-shirt idea that he mentions, for instance, is a good example of an idea that is neither good nor bad. Basing a business around a handful of t-shirts is obviously a bad move, but a t-shirt business can certainly be created - and in fact that has been done many times already. There's nothing inherently bad about the idea.
You could say that building a search engine in 1996 is an very difficult idea - lots of hard work, little chance of success, lots of established competitors, and requires a rare breakthrough, incredible amounts of work marketing the new engine and getting all sorts of larger companies to use it, etc, etc. Does that make it a bad idea? Hardly.
Ideas are only a small component of success - execution is far more important. If the aforementioned frat boy are willing to give it their all and are competent enough, they can likely make any of these ideas succeed. Even if they fail, it's at least a great learning experience. I say go frat boys, go.
Actually, I threw together a book exchange in a weekend and sold most of my books on it. Quite a few people are still using it. Granted, it doesn't make any money, and it's operated through the Engineering Student Society, so I guess it doesn't count.
There was an article linked to from there on Slate where this quote ended the piece "The most dangerous species of owner ... is the one who gets into the business for love."
That quote is both very true and very wrong. It's true that you can get into entrepreneurship with very idealistic values that drive you to ignore some of the more important financial aspects of running a business, and wrong in that if you don't do it for at least some type of love then you are probably going to fail for lack of passion.
Loved the article. Going to school during the internet bubble, I heard most of these a lot. People want the independent business lifestyle, but don't spend more than 90 seconds thinking of the business idea. Then they convince themselves on the concept by how much they'll enjoy the lifestyle, not how viable the business idea is.
Hence the lack of analysis on if the business has been tried before, has current competitors, or what your costs per product would be comparatively.
> Then they convince themselves on the concept by how much they'll enjoy the lifestyle, not how viable the business idea is.
On the other hand, if you don't price out the lifestyle you want (in terms of money and time), then you have no metric to determine whether a given business will be viable for you.
>Anything that is “the Netflix of ___,” “Flickr + ___,” or “MySpace + ___.” >
Those are just ways to describe an idea, not necessarily the idea itself. People do this to quickly convey their message or business; it's straight out of the excellent book Made to Stick.
I read this article about 3 years ago. I found it again today while googling around or something of the sorts. Hacker News wasn't around the first time I found the article, so I was curious to see the HN comments around the article, hence the submission. Some of my notes:
* These ideas aren't destined to fail. Look at chegg.
* Just because it's been done before, doesn't mean you can't. ie- busted tees. This goes back to our is there room for another photo sharing site discussion from last week.
Here's why I don't particularly agee with the article, despite Ramit being a badass:
*It focuses on the business types MORE than it focuses on why they won't work. It doesn't focus on things like: uniqueness, execution, design, segmenting growth at first to niches,etc.
Also remember: There's rarely money in the most glamorous stuff. Simple supply and demand there: Everyone wants to run an airline, no one wants to run a sanitation company. If you're in tech, it's cool to play for first-mover, but don't forgot about markets people don't want.
"What are other people unwilling or unable to do?"
That's your play. After social networking has been firmly established, everyone wants to Lord over the next Facebook. "Yeah, I could see myself running a social networking empire" they say. Yeah, you and 150,000 other people. Good luck with that.
Things other people are unable to do - because you're better, or think "outside the box", play on. Things other people are unwilling to do - sanitation, rehab, WYSIWYG website creators for people who are bad with computers - play on. T-shirts, coffeeshops, airlines, social networks? Might want to go back to the drawing board there...
I think the point is that the "frat boy" ideas come most often to people who have a romantic idea of business, but lack the will to actually make it happen.
So if they don't really have the will to do it, then yes, one should discourage them from doing it. For their own good.
People with will will ignore the advice anyway. (Will will will!)
That said, the desire to build a book exchange is like a nerd disease.
I don't think he's gotten to the root of the problem, though. The root of the problem is not certain categories of ideas. It's a half-baked way of looking at the world.
As long as you avoid that, there are good ideas to be had in several of the categories he describes. For example, I'm sure there will be huge new businesses that depend mainly on advertising. Is Google going to be the last, ever? And if “Flickr + ___” is a recipe for failure, it wasn't always. YouTube's goal was to be the Flickr of video, and that worked out well for them.