Excellent point. On a related note how does one legally manage vesting in the case of a merger between two startups? I'm considering a merger with another founder. My startup has been around for a little longer. Any thoughts?
Extrapolating these little nuggets of wisdom to every situation is meaningless. For instance it simply does not apply to a startup that is looking to build something complex. And in that case you absolutely need to scale before someone else does and pushes you out of the game. Small before big does not make sense, unless small is a meaningful and reasonable number.
I thought that Godin's point was that you need to make something one person will want before you can make something lots of people will want. If you don't have a useful product, it doesn't matter how much advertising or PR or scalability you throw at it, nobody will use it.
You need to scale before others push you out of the game, true; but before you need to scale, you need to have something worth scaling. A complex system that does everything for everybody and can stand up to a million users isn't worth anything until somebody finds it useful.
"and can stand up to a million users isn't worth anything until somebody finds it useful."
Often times it takes a team and not an individual to build something somebody wants. The complexity lies in its functionality and it does not have to do everything for everybody.
If I am not mistaken you are referring to scaling production and marketing and possibly premature diversification while I am referring to scaling development to meet the needs of that initial customer base.
Agreed, then. But I don't think Godin's talking about what you're talking about. He's a marketer: his point is about trying to get a million customers before you've built something that one customer will use.
There are many counterexamples to Godin's point, such as wikis. Wikis are useless with few contributors but extremely useful with many.
A secondary advantage (mentioned in pg's essays) is that you can more effectively take a "constant beta" mentality. Rolling a web app out to many users can certainly speed up the process of detecting bugs versus rolling it out to a few.
They aren't, though - I've used Wikis for teams of as little as 2 people. In fact, I'd argue that Wikis are more useful with few contributors: the sweet spot seems to be in the range of a couple dozen regular posters, and they tend to deteriorate (unless rigid procedures are put in place, like with Wikipedia) as the community grows beyond that.
A small base of contributors to a wiki may be OK for a very specific domain, but as the subject area broadens, you will certainly need more contributors or you risk having very superficial contributions on some of the subjects.
Anyway, if you don't like the wiki example, what about Digg or Reddit? How about a dating site? Something like epinions?
The notion that a product that isn't useful to a handful of users won't be useful to many users clearly is not one-size-fits-all.
Reddit, at least, was useful back when it was just spez and kn0thing submitting all their favorite links to their own site. There was a lot of nifty information there. Comments and the community didn't come until several months later.
I suspect several dating sites grew in a roundabout way. HotOrNot.com, for example, started as a site where you could submit photos and rate them. The initial appeal wasn't dating, and they didn't even offer it at first. It was just a lark: how much time can I waste at work, and how attractive do other people think I am.
I don't know the history on ePinions, but it looks like they could've grown in a similar fashion. Send it out to all your friends; have them share reviews on the products that they buy. It's a distributed, asynchronous form of calling your friend up and saying "Hey, you know of any good DVD players?"
A couple more examples of businesses that people think need many users, but actually were useful to small groups in their infancy:
I joined FaceBook in fall 2004 when it was just beginning to expand beyond the Ivy League. There was no messaging, no status, no platform, and no photo-sharing (they did have The Wall and Poke). Instead, people used it as a glorified directory. Meet someone at a party, and instead of having to ask their contact information, you just get their name and you can look it up on Facebook.
When Ning started, it was supposed to be a platform for creating social networks. At the time, everyone thought a social network was supposed to grow really big, get millions of users, and then get bought out and make everyone rich. Ning never really took off in this environment, because in order to get big you have to start small, and the large number of social networks hosted on it meant that each individual network had to compete for the same users.
I just checked again after reading some of Marc Andreesen's blog entries, and the current Ning incarnation is very different from when I had a friend consulting for them. It focuses much more on niche social networks, providing an online home for groups that number in the dozens, not millions. And judging from Marc's recent blog entries, it seems far more successful than the original incarnation of Ning.
When a site begins as one incarnation with a small user base and later transforms into something else when the user base has grown, it suggests that critical mass is necessary to make the transformation happen. If HotOrNot started out trying to build a dating site, they'd have been foolish not to consider scaling early on.
Right, the point is that if HotOrNot started out as a dating service, they wouldn't have gotten any users at all. People join a dating site to find other users to date - they only find other users to date if the site already has users. So you end up with a chicken-and-egg problem where everybody is waiting for everybody else to join. I'm curious how other dating sites have solved this - my guess is that they either tapped a large network of friends or they recruited users from an existing singles community.
"If I were LinkedIn, I'd sell. Facebook is going to crush them."
Where's the intersection?
I like linkedin. I've had a few recruiters and business folks contact me through there. I'd be very reluctant to put my career stuff on fb. Perhaps some people mix business and pleasure?
I agree, I don't think most of the comparisons out there are apt, other than the fact the two companies are both at the center of IPO speculation in the valley.
Granted I'm still in college, but my Facebook profile and my LinkedIn profile are like night and day. I do put some of the information from LinkedIn on Facebook (they do have a Work & Education section in profiles), but that's not why people look at my profile.
I certainly wouldn't want the comments on my wall showing up when people are analyzing my profile as a job candidate.
The two services just don't mesh very well on a high level.
...yet. If all the college (and now graduate) students on Facebook start using the service as a recruiting tool, then I can see it being a real threat to LinkedIn.
Exactly. Man I wish I had rich parents, even helping out $10k a year or so could go a long way when you're fresh out of school and expenses are still low.
An ex of mine got something like $25k cash for her college graduation present. Assuming she earned 10% or so on that for the next 40 years, she was already guaranteed to be a millionaire by retirement. Anything she did on her own was gravy.
While getting a $25000 college graduation present would be fantastic (although I bet she just bought a car), your projection is a bit optimistic. While yes, she would have a million dollars, that million dollars would only be worth $295712 after accounting for inflation (at a constant 3% yearly.) Still great, but she's not exactly ready for retirement.
Good comment. A recent article from businessweek talked about the 10 top employers favoured by new grads. Three of them were fed. agencies, one established accounting firm, google, etc. New grads crave job security, comfortable lifestyles, cars, houses and growing bank accounts. After racking up large student loans you can't blame them. And this would be a major impediment to them starting a business in general.
I think this article refers to maybe 0.05% of new grads.
Spot on. If you don't have rich parents you have to go into debt to attend private school. You HAVE to take the real job when you graduate.
I chose to be Joe State (@ motoko). I graduated in the black and was free to start a startup. I'm thinking it was a good decision. That and studying engineering. Thanks Dad.
"If you don't have rich parents you have to go into debt to attend private school."
That's not really true. Most top private school have really, really generous financial aid programs. And they give the money in outright grants instead of loans.
I come from a very middle-class family - father is a househusband, mother is a teacher. I went to Amherst College, which has a $40K/year sticker price. Amherst picked up more than 2/3 of my tuition in outright grants. It didn't cost me much more to attend than it would've at UMass (well, not quite true, I would've gotten a full ride at UMass, but it wasn't much more than the UMass sticker price). I ended up graduating with $4000 in loans, which I could pay back with internship earnings.
