4 ms·

"We have a gigantic amount of funding" and "We have a gigantic amount of domain knowledge" are two "true" competitive advantages. one allows you to out-mark

"We have a gigantic amount of funding" and "We have a gigantic amount of domain knowledge" are two "true" competitive advantages. one allows you to out-market the competition, the other allows you to out-think them.

webwright 16y ago
Knowledge doesn't allow anyone to out-think anyone. Who has more domain knowledge in mobile 3 years ago-- Motorola or Apple? Most of the successful founders I can think of didn't know much about their space before they jumped into it.
- fookyong 16y ago
  good point, but then I could counter-argue that Apple had more domain knowledge in the area of building and marketing consumer electronics that people love :) depends where you see the domain as being.
  - webwright 16y ago
    Bah, that's not a domain-- but I agree with you. The best "domain" is being awesome and making stuff that people absolutely love. That often trumps domain knowledge, funding, etc. Might be challenging selling that idea to investors, though! :-)
- Gormo 16y ago
  In fact, deep knowledge can often be an encumbrance if it reinforces assumptions that may not be exclusively true or prevents you from visualizing viable alternatives.
- HilbertSpace 16y ago
  "Knowledge doesn't allow anyone to out-think anyone." Tell that to the pilots in the Gulf War who few F-117s over Baghdad with the sky lit with flak and without any plane getting even a scratch. Then tell this to the people where the bombs fell or the people shooting the flak. Tell this to the Japanese military in 1945. Can there be any such examples in information technology entrepreneurship now? Hmm ....
  - yxhuvud 16y ago
    This is much more a case of budget advantage than knowledge advantage.
btilly 16y ago
To the contrary, a gigantic amount of funding is a millstone around your neck. Frequently you have to pivot and head in an unexpected direction as you discover what the market really is. If you have a lot of funding, then you are unable to pivot in any direction that doesn't offer a fairly near term prospect of making enough money to justify your funding. It is even worse if the funding comes from a source that has the classic VC "strike for the fences" mentality - because they will insist on handsome returns on investment rather than just making their money back. For a detailed explanation of the dynamics by which over funding prevents success, I highly recommend reading The Innovator's Solution. It is written in the context of an existing company doing a spin-off, but it applies in spades to startups as well.
- fookyong 16y ago
  that's the "build it and they will come" approach. sorry, the real world doesn't work like that for 99% of companies. you will get further with an average product and a shit-ton of money to spend on marketing, than having a great product and zero money to spend on marketing. we like to hear stories about the latter, and it does happen, but those companies are outliers. you can't bank on it happening. bottom line is, it costs money to acquire customers. if you want more customers than your competition, a safe starting point is having tons more cash than them.
  - btilly 16y ago
    Not at all. That's the conclusion that was drawn by researchers at Harvard from many postmortems of companies who tried (occasionally successfully) to create spinoffs to address disruptive innovation. Their strongest finding was how over-funding the spinoff killed it. The key problem is that if you've been given $10 million by investors, you're going to be unable to go after a $5 million opportunity that you find. By contrast if you've bootstrapped up from $100,000, that same $5 million opportunity is very tempting. It is in the nature of disruptive innovation that those $5 million opportunities tend to grow over time. But by the time they do that, it is too late for the over-funded startup. Back in the startup world, when you start you have no idea what your potential market is. At the beginning you're generally wrong about what the market is. You generally can't even judge to within an order of magnitude. However if, along the way, you find it clearly enough defined that success becomes about acquiring large numbers of customers on a fairly well defined value proposition, then you're in a great position to go look for funding. And if, along the way, you find a comfortable business that makes you happy, you have the freedom to go after it without having to justify to anyone why you're not going to generate decent returns on a large investment.

webwright 16y ago

Knowledge doesn't allow anyone to out-think anyone. Who has more domain knowledge in mobile 3 years ago-- Motorola or Apple? Most of the successful founders I can think of didn't know much about their space before they jumped into it.

fookyong 16y ago
good point, but then I could counter-argue that Apple had more domain knowledge in the area of building and marketing consumer electronics that people love :) depends where you see the domain as being.
- webwright 16y ago
  Bah, that's not a domain-- but I agree with you. The best "domain" is being awesome and making stuff that people absolutely love. That often trumps domain knowledge, funding, etc. Might be challenging selling that idea to investors, though! :-)
Gormo 16y ago
In fact, deep knowledge can often be an encumbrance if it reinforces assumptions that may not be exclusively true or prevents you from visualizing viable alternatives.
HilbertSpace 16y ago
"Knowledge doesn't allow anyone to out-think anyone." Tell that to the pilots in the Gulf War who few F-117s over Baghdad with the sky lit with flak and without any plane getting even a scratch. Then tell this to the people where the bombs fell or the people shooting the flak. Tell this to the Japanese military in 1945. Can there be any such examples in information technology entrepreneurship now? Hmm ....
- yxhuvud 16y ago
  This is much more a case of budget advantage than knowledge advantage.

btilly 16y ago

To the contrary, a gigantic amount of funding is a millstone around your neck. Frequently you have to pivot and head in an unexpected direction as you discover what the market really is. If you have a lot of funding, then you are unable to pivot in any direction that doesn't offer a fairly near term prospect of making enough money to justify your funding. It is even worse if the funding comes from a source that has the classic VC "strike for the fences" mentality - because they will insist on handsome returns on investment rather than just making their money back. For a detailed explanation of the dynamics by which over funding prevents success, I highly recommend reading The Innovator's Solution. It is written in the context of an existing company doing a spin-off, but it applies in spades to startups as well.

fookyong 16y ago
that's the "build it and they will come" approach. sorry, the real world doesn't work like that for 99% of companies. you will get further with an average product and a shit-ton of money to spend on marketing, than having a great product and zero money to spend on marketing. we like to hear stories about the latter, and it does happen, but those companies are outliers. you can't bank on it happening. bottom line is, it costs money to acquire customers. if you want more customers than your competition, a safe starting point is having tons more cash than them.
- btilly 16y ago
  Not at all. That's the conclusion that was drawn by researchers at Harvard from many postmortems of companies who tried (occasionally successfully) to create spinoffs to address disruptive innovation. Their strongest finding was how over-funding the spinoff killed it. The key problem is that if you've been given $10 million by investors, you're going to be unable to go after a $5 million opportunity that you find. By contrast if you've bootstrapped up from $100,000, that same $5 million opportunity is very tempting. It is in the nature of disruptive innovation that those $5 million opportunities tend to grow over time. But by the time they do that, it is too late for the over-funded startup. Back in the startup world, when you start you have no idea what your potential market is. At the beginning you're generally wrong about what the market is. You generally can't even judge to within an order of magnitude. However if, along the way, you find it clearly enough defined that success becomes about acquiring large numbers of customers on a fairly well defined value proposition, then you're in a great position to go look for funding. And if, along the way, you find a comfortable business that makes you happy, you have the freedom to go after it without having to justify to anyone why you're not going to generate decent returns on a large investment.