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Imagine you build an AirBnb like solution limited to Switzerland market. AirBnb will eventually come and eat your lunch. In today's globalized world - if you a

Imagine you build an AirBnb like solution limited to Switzerland market. AirBnb will eventually come and eat your lunch. In today's globalized world - if you are not one of the bigger players and do not have moat (govt contract, some other kind of exclusivity) - other bigger players will come after you.

quickthrower2 9y ago
Yeah plus the Y-combinators of this world won't want to throw cash at a 10-1 chance of making a few million, when they can do the same on a 100-1 chance of making a few billion.
- toomuchtodo 9y ago
  This is a great observation: we need better accelerators to incubate startups that are more realistic and not willing to salt the earth to win at all costs [1]. [1] I'm not referring to YC specifically, but investors and incubators who are comfortable with Uber-esq behavior.
  - timewarrior 9y ago
    Not all global mega corps need to salt the earth. To some extent disruption will have side effects. Some like Uber are deliberately evil and others like Apple, Salesforce etc might not. My original point was that people were attempting ideas which were in the realm of potential global mega corps. If you don't grow to be one, you get eaten up!
  - ZenoArrow 9y ago
    > "This is a great observation: we need better accelerators to incubate startups that are more realistic and not willing to salt the earth to win at all costs [1]." We already have that. They're called banks.
    - beatpanda 9y ago
      There's a huge gap between investments banks consider too risky and the kinds of things SV investors in particular want to fund.
      - ZenoArrow 9y ago
        Depends on your growth strategy. If you're prepared to start lean and can demonstrate early signs of revenue then I'd imagine you'd find banks willing to cut a business loan.
        tormeh 9y ago
        You can't build a product company like this. Products require lots of development before any revenue arrives. Underdeveloped capital markets (VCs, stock exchanges etc.) is why Europe's software industry is mostly services. The difference between SV and anywhere else is access to risk-tolerant money. SV is not primarily an IT cluster, it's a VC cluster.
        ZenoArrow 9y ago
        > "You can't build a product company like this." Sure you can, you just bootstrap through monetising the ground work. For example, if you want a product company you can start out as a freelance design agency. The bulk of the initial design work will be for clients, but you can be involved with low volume manufacturing on the side. As the company grows, not only do you have the funds to take on progressively more ambitious product manufacturing projects, you've also built up a team of designers that can help push these projects forward. You're going to need designers right? Why not get them making you money from day one. To give an alternative example, let's say you want to manufacture mobile phones. A good way to start small would be to manufacture accessories for existing phones. This is within the grasp of anyone within the Western world, given enough drive to do it. The revenue and knowledge you can gain doing so allows for increasingly sophisticated accessories to be built until the point where you have your own manufacturing premises (or have access to one at low rates, due to the volume of products you're pushing). The step from this point to manufacturing mobile phones is not that great. Does this require more patience than burning through VC money? Sure, but it's also lower risk. Building a company gradually from the ground up means you get a better sense of what it takes to run a successful business (or in other words, experience is the best teacher).
  - kjksf 9y ago
    If you're talking about morality, when a VC is funding a company they don't know if it's going to act like Uber or like Lyft. The post you're responding to is about economics, though, and VC math doesn't work for funding modest successes. A VC can fund 10 businesses and have 9 of them fail (high risk) as long as the remaining one provides 100x+ return (high reward). If you don't fund that one blockbuster then you can't fund the failures. If you want to be in low-risk and low-reward business, then you're a bank and you're providing loans, not giving out no-strings-attached cash.
yequalsx 9y ago
This seems a bit simplistic. I mean, it's not the case that all markets are dominated by huge mega corps. There are thriving businesses that are not on the scale of Google, AirBnB, Microsoft, etc. If a startup in Switzerland gets traction and it's a space that can scale globally then it seems like it naturally will scale. I doubt anyone would not want to grow if it can.
- timewarrior 9y ago
  I agree. But my point was that there was a natural resistance to scaling to global levels. Which is detrimental if you are in a market which has a potential to be dominated by a global mega corp.
- lenzm 9y ago
  Tech and software tend to be more dominated by large players though because of economies of scale - launching new companies in every country would be wildly expensive and inefficient compared to AirBnB's trivial costs for adding a new country.
matte_black 9y ago
So don't build an AirBnB-like solution.
- barrkel 9y ago
  This means you will never build anything with zero marginal cost. That cuts out a lot of opportunities - and with software eating the world, more and more opportunities over time.
  - coldtea 9y ago
    Only few companies can "win the world" by definition -- and besides work, it takes tons of luck, relinquishing control to VCs and stock markets, and boards, and all the right stars aligned. Plus the personal toll. One is better off building something smaller, where work and talent is enough to maintain it. There are more opportunities in those companies (e.g. a $1 to $50 million dollar business) of which there are tens of thousands, than to build the 1 in 100 behemoth. You'll have more chances of success, and you'll live and sleep better. Because money, above a certain amount, also has a marginal utility curve and diminishing returns.
    - barrkel 9y ago
      I agree the costs are high, but if you don't pay them, someone else will. $1..50 million dollar businesses: I agree, great stuff. I'm just not sure that such businesses have realistic long-term moats against the Amazons of the world.
  - matte_black 9y ago
    Software will never truly eat the world until there is a way to move matter and collect energy and resources through software alone, without having to create new infrastructure. Until that is solved there is plenty of opportunity everywhere.
soperj 9y ago
You say that, but there are cases even in small countries where this didn't happen. Like trademe in New Zealand which was just like ebay. Ebay still hasn't become the major place to do auctions in new zealand.
- dbrgn 9y ago
  In Switzerland, ricardo.ch is much bigger than Ebay.
- timewarrior 9y ago
  Bigger a part of your business software is, faster the growth happens. Ebay like marketplaces still have a big physical world component present. Even if it isn't ebay, it might be some other company in Australia. Or maybe trademe becomes the company which tries to take over in Austrlia. It's inevitable and just a matter of time!
  - jpatokal 9y ago
    Australia's eBay is Gumtree.com.au, which was purchased by eBay quite some time ago.
- toomanybeersies 9y ago
  On the other hand, Trademe has never managed to penetrate markets outside New Zealand with any of its products, which limits its value. Xero, however, has massive potential for growth, because it's international.
  - pm90 9y ago
    > On the other hand, Trademe has never managed to penetrate markets outside New Zealand with any of its products, which limits its value. I don't understand why that is necessarily a bad thing. If someone is looking to make a shit ton of money, have a chance to monopolize or dominate the international market, then yes, that makes sense. But if you're happy and content serving nationally, and so are your customers, I really don't see why someone would want to expand internationally.
farnsworthy 9y ago
I should think they would come and buy your lunch.
md_ 9y ago
> Imagine you build an AirBnb like solution limited to Switzerland market. AirBnb will eventually come and eat your lunch. I don't think this is born out by the evidence. There are many social reasons that smaller markets prefer a local solution--both because of network effects and just because of branding. In the Swiss case, Swiss people (often) don't use Google; they use Search.ch. They don't use Amazon (which is mostly unavailable in Switzerland); they use Galaxus. They don't use OkCupid; they use Parship. They don't use Zappos; they use Zalando (which is European, not Swiss, admittedly). They don't use eBay; they use Ricardo. Many larger examples do involve the kinds of moats you describe--the Chinese Internet is a key example of that (where censorship and government backing contribute to the superiority of local alternatives)--but I think the phenomenon of Swiss startups having what an American might consider to be reduced ambitions has to be viewed in the context of Swiss _consumers_ also often preferring local options. I would also add a subtler point here: to an American observer, the often-American-centric perspective of American startups--which are often slow to expand to foreign markets, but for whom "America" and "the world" are often near-synonyms--is less glaring than the Swiss-centric perspective of a Swiss startup. Americans--both entrepreneurs and their observers--are just less likely to realize the extent to which American companies equate national and international markets; it's far more obvious when observing a foreign company, especially one with as small a national market to dominate as Switzerland's.
- ithkuil 9y ago
  IIRC Amazon Germany will soon service Switzerland as well.
  - haeffin 9y ago
    It does already and did for a long time, but customs are a hassle.
    - ithkuil 9y ago
      https://ecommercenews.eu/amazon-launches-switzerland/ https://ecommercenews.eu/amazon-launches-switzerland/ [Amazon] has signed a cooperation agreement with Swiss Post, which means the postal agency will carry out customs clearance for Amazon in the near future. Customs clearance is said to take a maximum of three hours, which makes 24-hour delivery from abroad possible. Amazon offers this delivery method as part of its Prime offer in Germany
reaperducer 9y ago
> Imagine you build an AirBnb like solution limited to Switzerland market. AirBnb will eventually come and eat your lunch. Not true. Domestic alternatives are often preferred over foreign competition. Two examples that leap to mind are eBay and Uber. Both failed in Japan because people preferred Yahoo! Japan auctions, and the Japanese taxi system. eBay and Uber can't compete there. To take it down to the niche level, the big national real estate blogs all failed in Houston because they can't compete against HAIF or Swamplot.

quickthrower2 9y ago

Yeah plus the Y-combinators of this world won't want to throw cash at a 10-1 chance of making a few million, when they can do the same on a 100-1 chance of making a few billion.

toomuchtodo 9y ago
This is a great observation: we need better accelerators to incubate startups that are more realistic and not willing to salt the earth to win at all costs [1]. [1] I'm not referring to YC specifically, but investors and incubators who are comfortable with Uber-esq behavior.
- timewarrior 9y ago
  Not all global mega corps need to salt the earth. To some extent disruption will have side effects. Some like Uber are deliberately evil and others like Apple, Salesforce etc might not. My original point was that people were attempting ideas which were in the realm of potential global mega corps. If you don't grow to be one, you get eaten up!
- ZenoArrow 9y ago
  > "This is a great observation: we need better accelerators to incubate startups that are more realistic and not willing to salt the earth to win at all costs [1]." We already have that. They're called banks.
  - beatpanda 9y ago
    There's a huge gap between investments banks consider too risky and the kinds of things SV investors in particular want to fund.
    - ZenoArrow 9y ago
      Depends on your growth strategy. If you're prepared to start lean and can demonstrate early signs of revenue then I'd imagine you'd find banks willing to cut a business loan.
      - tormeh 9y ago
        You can't build a product company like this. Products require lots of development before any revenue arrives. Underdeveloped capital markets (VCs, stock exchanges etc.) is why Europe's software industry is mostly services. The difference between SV and anywhere else is access to risk-tolerant money. SV is not primarily an IT cluster, it's a VC cluster.
        ZenoArrow 9y ago
        > "You can't build a product company like this." Sure you can, you just bootstrap through monetising the ground work. For example, if you want a product company you can start out as a freelance design agency. The bulk of the initial design work will be for clients, but you can be involved with low volume manufacturing on the side. As the company grows, not only do you have the funds to take on progressively more ambitious product manufacturing projects, you've also built up a team of designers that can help push these projects forward. You're going to need designers right? Why not get them making you money from day one. To give an alternative example, let's say you want to manufacture mobile phones. A good way to start small would be to manufacture accessories for existing phones. This is within the grasp of anyone within the Western world, given enough drive to do it. The revenue and knowledge you can gain doing so allows for increasingly sophisticated accessories to be built until the point where you have your own manufacturing premises (or have access to one at low rates, due to the volume of products you're pushing). The step from this point to manufacturing mobile phones is not that great. Does this require more patience than burning through VC money? Sure, but it's also lower risk. Building a company gradually from the ground up means you get a better sense of what it takes to run a successful business (or in other words, experience is the best teacher).
- kjksf 9y ago
  If you're talking about morality, when a VC is funding a company they don't know if it's going to act like Uber or like Lyft. The post you're responding to is about economics, though, and VC math doesn't work for funding modest successes. A VC can fund 10 businesses and have 9 of them fail (high risk) as long as the remaining one provides 100x+ return (high reward). If you don't fund that one blockbuster then you can't fund the failures. If you want to be in low-risk and low-reward business, then you're a bank and you're providing loans, not giving out no-strings-attached cash.

yequalsx 9y ago

This seems a bit simplistic. I mean, it's not the case that all markets are dominated by huge mega corps. There are thriving businesses that are not on the scale of Google, AirBnB, Microsoft, etc. If a startup in Switzerland gets traction and it's a space that can scale globally then it seems like it naturally will scale. I doubt anyone would not want to grow if it can.

timewarrior 9y ago
I agree. But my point was that there was a natural resistance to scaling to global levels. Which is detrimental if you are in a market which has a potential to be dominated by a global mega corp.
lenzm 9y ago
Tech and software tend to be more dominated by large players though because of economies of scale - launching new companies in every country would be wildly expensive and inefficient compared to AirBnB's trivial costs for adding a new country.

matte_black 9y ago

So don't build an AirBnB-like solution.

barrkel 9y ago
This means you will never build anything with zero marginal cost. That cuts out a lot of opportunities - and with software eating the world, more and more opportunities over time.
- coldtea 9y ago
  Only few companies can "win the world" by definition -- and besides work, it takes tons of luck, relinquishing control to VCs and stock markets, and boards, and all the right stars aligned. Plus the personal toll. One is better off building something smaller, where work and talent is enough to maintain it. There are more opportunities in those companies (e.g. a $1 to $50 million dollar business) of which there are tens of thousands, than to build the 1 in 100 behemoth. You'll have more chances of success, and you'll live and sleep better. Because money, above a certain amount, also has a marginal utility curve and diminishing returns.
  - barrkel 9y ago
    I agree the costs are high, but if you don't pay them, someone else will. $1..50 million dollar businesses: I agree, great stuff. I'm just not sure that such businesses have realistic long-term moats against the Amazons of the world.
- matte_black 9y ago
  Software will never truly eat the world until there is a way to move matter and collect energy and resources through software alone, without having to create new infrastructure. Until that is solved there is plenty of opportunity everywhere.

soperj 9y ago

You say that, but there are cases even in small countries where this didn't happen. Like trademe in New Zealand which was just like ebay. Ebay still hasn't become the major place to do auctions in new zealand.

dbrgn 9y ago
In Switzerland, ricardo.ch is much bigger than Ebay.
timewarrior 9y ago
Bigger a part of your business software is, faster the growth happens. Ebay like marketplaces still have a big physical world component present. Even if it isn't ebay, it might be some other company in Australia. Or maybe trademe becomes the company which tries to take over in Austrlia. It's inevitable and just a matter of time!
- jpatokal 9y ago
  Australia's eBay is Gumtree.com.au, which was purchased by eBay quite some time ago.
toomanybeersies 9y ago
On the other hand, Trademe has never managed to penetrate markets outside New Zealand with any of its products, which limits its value. Xero, however, has massive potential for growth, because it's international.
- pm90 9y ago
  > On the other hand, Trademe has never managed to penetrate markets outside New Zealand with any of its products, which limits its value. I don't understand why that is necessarily a bad thing. If someone is looking to make a shit ton of money, have a chance to monopolize or dominate the international market, then yes, that makes sense. But if you're happy and content serving nationally, and so are your customers, I really don't see why someone would want to expand internationally.

farnsworthy 9y ago

I should think they would come and buy your lunch.

md_ 9y ago

> Imagine you build an AirBnb like solution limited to Switzerland market. AirBnb will eventually come and eat your lunch. I don't think this is born out by the evidence. There are many social reasons that smaller markets prefer a local solution--both because of network effects and just because of branding. In the Swiss case, Swiss people (often) don't use Google; they use Search.ch. They don't use Amazon (which is mostly unavailable in Switzerland); they use Galaxus. They don't use OkCupid; they use Parship. They don't use Zappos; they use Zalando (which is European, not Swiss, admittedly). They don't use eBay; they use Ricardo. Many larger examples do involve the kinds of moats you describe--the Chinese Internet is a key example of that (where censorship and government backing contribute to the superiority of local alternatives)--but I think the phenomenon of Swiss startups having what an American might consider to be reduced ambitions has to be viewed in the context of Swiss _consumers_ also often preferring local options. I would also add a subtler point here: to an American observer, the often-American-centric perspective of American startups--which are often slow to expand to foreign markets, but for whom "America" and "the world" are often near-synonyms--is less glaring than the Swiss-centric perspective of a Swiss startup. Americans--both entrepreneurs and their observers--are just less likely to realize the extent to which American companies equate national and international markets; it's far more obvious when observing a foreign company, especially one with as small a national market to dominate as Switzerland's.

ithkuil 9y ago
IIRC Amazon Germany will soon service Switzerland as well.
- haeffin 9y ago
  It does already and did for a long time, but customs are a hassle.
  - ithkuil 9y ago
    https://ecommercenews.eu/amazon-launches-switzerland/ https://ecommercenews.eu/amazon-launches-switzerland/ [Amazon] has signed a cooperation agreement with Swiss Post, which means the postal agency will carry out customs clearance for Amazon in the near future. Customs clearance is said to take a maximum of three hours, which makes 24-hour delivery from abroad possible. Amazon offers this delivery method as part of its Prime offer in Germany

reaperducer 9y ago

> Imagine you build an AirBnb like solution limited to Switzerland market. AirBnb will eventually come and eat your lunch. Not true. Domestic alternatives are often preferred over foreign competition. Two examples that leap to mind are eBay and Uber. Both failed in Japan because people preferred Yahoo! Japan auctions, and the Japanese taxi system. eBay and Uber can't compete there. To take it down to the niche level, the big national real estate blogs all failed in Houston because they can't compete against HAIF or Swamplot.