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Why There Aren't More Googles (2008)

175 points by allenleein 6y ago

Zhyl 6y ago
In related news, DuckDuckGo has gone up ~10m DAU in the last month (~12.5%) and has gone up ~30m average DAU since January (~60%). [0] [0] https://ddg.gg/traffic https://ddg.gg/traffic
- BlueTemplar 6y ago
  DDG doesn't have its own search engine though.
  - dredmorbius 6y ago
    Quibble: it has crawlers, though for small and specialised search, mostly Instant Answers IIUC. https://help.duckduckgo.com/duckduckgo-help-pages/results/duckduckbot/ https://help.duckduckgo.com/duckduckgo-help-pages/results/du... Its primary SERPs are baased on Bing and Yandex. (I'm a heavy long-term DDG user myself.)
- ant6n 6y ago
  Whenever Google only give me garbage results, duck duck go does as well. Apparently You cannot discover information on websites with a search engine these days, unless it’s news Or Wikipedia entries.
  - unishark 6y ago
    > Apparently You cannot discover information on websites with a search engine these days, unless it’s news Or Wikipedia entries. Certainly not if it's any search term that can be "monetized" with an automated scraping script. Web search seems like an extremely adversarial problem with people constantly hacking your search algorithm instantly as you change it. One would hope that the benefit a giant firm can provide is the amount of R&D they could afford to devote to countering this. But perhaps when they're paying for ads they don't seem so adversarial to google.
unnouinceput 6y ago
Except there is another. It's called Chinese Google also know as Alibaba. And with EU regulations coming up I suspect another one will rise in Europe as well in next decade. Just give it time, Splinternet will happen and then each country will have its own Google.
- ChuckNorris89 6y ago
  >And with EU regulations coming up I suspect another one will rise in Europe as well in next decade. lol, what?! Just because Europe loves to regulate itself to death so that the useless politicians can justify their salaries doesn't mean that will produce successful software companies. That's not how innovation works. Just look at Russia, who despite having less wealth than the EU, has managed to produce its own Google in the form of Yandex. The EU has no Google of its own. If we could have made our own Google we would have done it already, without regulations. But we can't. I mean, we could do it if we would put our minds and money to it just like we did with Concorde or Airbus but we're too cheap and ignorant to do it when we could just use and work for the OG Google from across the pond. Increasing regulation in tech will only benefit the huge and bloated big consultancy corps and no way help with innovation.
  - multinational 6y ago
    Google has 80-90% of the market share. In practical terms, they control if your website gets visitors or not. If you throw Yandex in the ring, then Europe has several search engines Qwant, a French search engine Mojeek, a search engine in the UK YaCy, p2p search Koreans seem fond of Naveer. Chinese use Baidu
    - ChuckNorris89 6y ago
      Here's where you're wrong: Yandex is not just a search engine, it's the fifth largest search engine in the world(!) and is also an email provider, a social network service, a payment service provider, a smart assistant, a ride sharing service, a cloud provider, a ML/AI and autonomous vehicle researcher, a V.C. fund. Basically most if not all of what Google/FAANG is doing. Which European company does all those things and at such a large scale? Having some random small search engines that nobody is using, funded and kept alive by EU grants just to show that "we can", is in no way comparable to the scale of Yandex.
adamsmith 6y ago
> I've tried to explain this to VC firms. Instead of making one $2 million investment, make five $400k investments. Would that mean sitting on too many boards? Don't sit on their boards. Would that mean too much due diligence? Do less. If you're investing at a tenth the valuation, you only have to be a tenth as sure. This turned out to be absolutely right, and the < $2M checks have ballooned in volume. They are invested by firms that do not take board seats and do comparatively less due diligence. That said with the benefit of more hindsight I think the reason there are no more Googles is that FAANG has a stronghold on the largest technology markets.
- chrisco255 6y ago
  Well, yes, but do they have that stronghold on the future of technology markets? I'm less convinced of that.
  - adamsmith 6y ago
    Super interesting question. I don't know. I suspect they will dominate all the largest technology markets for the long run, unless the government intervenes. I might be wrong. They may not dominate the future of "technology markets", though, if the sum of the long tail dominates. Right now FAANG is 42% of the NASDAQ Composite 100.
  - praptak 6y ago
    They filled the feasible niches for "internet-based monopoly". The next Google will have to find another way to get big.
    - lixtra 6y ago
      I remember a time when altavista was a the only serious search engine around. I recently switched from google to ddg on mobile because I got sick of clicking away the privacy waiver in private mode. If ddg would deliver better search results then google search would be in serious trouble (although it may take twice as long as yahoo to die). Of course it’s unlikely because if the talent google attracts, but that was true for IBM in the 80s as well.
sebmellen 6y ago
This article shows its age with the quote: > The median startup coming out of Y Combinator wants to raise $250-500k. I think raising comparatively small amounts stokes a kind of vigour you can't get when sitting on a few million in cash. I wonder how this dynamic has shifted the outcome of Y Combinator alumni companies. Perhaps we would have more Googles if this trend of raising less had persisted. Money breeding laziness is also what killed ICOs. Naive teams with revolutionary ideas (which may have changed the world in startup form) raised tens of millions of dollars. This money removed the need for groundedness and scrappiness in the development process. As a result, a lot of value and time was squandered on tech that hasn't panned out.
- entee 6y ago
  I think it really depends. Money in the right hands can be amazing because you can aggressively pursue an idea that takes a lot more money to get off the ground. This requires a clear idea of what matters to the business. If you don’t have that idea, money can allow you to pivot and tune your product quickly and hire the very best. The downside is the temptation to do everything, to not make decisions. Money enables you to do that too with disastrous results. In short, money is great. Not having a clear, disciplined strategy is the problem.
  - sebmellen 6y ago
    I'm not sure I agree with that. Of course there are many moonshot projects where money is of vital importance. But for most things, the market is the best signalling mechanism available. Having little money forces you to be very attuned to the signals of the market, giving you an advantage over those who might insulate themselves from that feedback mechanism with a buffer of money. It's hard to keep yourself attuned enough while also having money in reserve, though perhaps it is possible to have enough discipline to do so.
    - entee 6y ago
      I think that’s totally true in cases where the market is a rapid and reliable feedback mechanism. It’s a delicate balance, and I can see how a large bank account leads to avoiding the hard choices or the rapid iteration necessary to find a good product market fit. See Quibi. However,in some industries, the relationship isn’t quite as straightforward. I work in biotech, so in my case the market is realistically not going to be part of the story until we have a drug, which will be a long time from now. Until then our “market” is pharma partnerships or financing opportunities, both of which are only partially rational exercises in value determination. For us, lots of money is helpful to weather the storm and really build a great technology. There’s also little risk that if we treat a disease, we won’t have people want the treatment, so product market fit isn’t quite the same issue. That said, it’s easy to lose focus by forgetting that the tech isn’t the point (finding a good drug is) and that we can’t try all options. But those are in our control.
ZiiS 6y ago
Be good to stick the (2008) in the title, even if many here recognise the link.
- oh_sigh 6y ago
  A modern-day "Why There Aren't More (Or Fewer) $1.2T Companies" might be a good article too.
rStar 6y ago
Why There Aren't More Googles? flippant, sarcastic response: because google. actual response: I whole heartedly agree. when a founder/initial investor team turns down even a (mildly though truly) lucrative offer, it’s because they very strongly believe that they would be selling themselves short. if they turn down an (extremely) lucrative offer, even more so. Most people get into the game for money, ego, admiration and power. So, if someone is turning down any of these, it’s either because they are a ‘true believer,’ in which case, bet on them, or it’s because they imminently expect all or most of the others, in which case, bet, the f, on them.
bertr4nd 6y ago
Something I don’t understand in this article is the “People won’t understand your ideas if they’re any good.” Like, the idea behind Google is, “Let’s make another search engine, but make it really good.” That’s not a crazy idea, is it? Was the problem that VCs thought existing engines were good enough and that Google’s wouldn’t be enough better to be worthwhile?
- bryanrasmussen 6y ago
  That's not really an idea though, that's a goal, the idea is the description of how you will reach your goal, which in Google's case was PageRank.
  - bertr4nd 6y ago
    I was being glib in the description but it’s not like PageRank is a crazy idea either, is it? The reason I’m prodding at this is because there are different ways in which someone can fail to understand the value of an idea. The value proposition for Google doesn’t seem far-fetched at all, but I could believe that investors simply didn’t believe PageRank was a good enough idea to displace then market leaders.
    - bryanrasmussen 6y ago
      first of all from our viewpoint PageRank doesn't seem like a crazy idea, I suppose at the time it would have seemed not crazy but interesting and unproved, thus very risky. Furthermore it is my experience that people sometimes do not understand the value proposition of even simple things if those things are new, the value of the new must be demonstrated and often overwhelmingly.
- erik 6y ago
  In the late 90's starting a new search engine would have seemed crazy to many. It was a competitive market, there were major incumbents, profit potential seemed low, and it wasn't obvious that search could be significantly improved upon.
boltefnovor 6y ago
I often think about how YouTube was the bargain of the century. YouTube would be one if the biggest companies ever if it had remained independent.
- bruceb 6y ago
  Problem with them was the massive about of money they were burning on servers and being sued by RIAA (Music companies) and MPAA (Film companies) among others. They needed a big infusion of capital. Instagram on the other hand could have remained independent and succeeded.
  - prox 6y ago
    I think instagram is one of the (few) companies that could eventually have eclipsed Facebook really.
    - jiofih 6y ago
      Which is the exact reason they paid a billion dollars to acquire it.
- tehlike 6y ago
  I feel similar for android.
  - boltefnovor 6y ago
    Android needed google to grow, YouTube didn’t.
    - tehlike 6y ago
      Google acquired android for 50m$.
- GlitchMr 6y ago
  I don't think YouTube would have been one of the biggest companies if it remained independent. The problem is that YouTube is still not profitable, and also without a support from a big company like Google they would be sued into oblivion by MPAA and RIAA.
roenxi 6y ago
> From the evidence I've seen so far, startups that turn down acquisition offers usually end up doing better. I bet causality is reversed from what he is hinting at. Startups that can see a pathway to becoming insanely valuable are more likely to turn down offers. Startups that see no path and that are, effectively, putting on a brave face do not turn down a profitable escape route. By that dynamic alone, you'd expect startups turning down offers to be a very strong signal of success. How many idiots are there with the wherewithal to run a company but then try and turn down money in the face of going bankrupt?
three_seagrass 6y ago
This feels like survivor bias. Why aren't there more revolutionary startups? Well, it's because they sold out and some no longer exist. Why aren't there less revolutionary startups? Well, it's because they didn't sell out and some went on to became tech giants.
dang 6y ago
Discussed at the time: https://news.ycombinator.com/item?id=163552 https://news.ycombinator.com/item?id=163552
stareatgoats 6y ago
Earlier discussion (2008): https://news.ycombinator.com/item?id=163552 https://news.ycombinator.com/item?id=163552
randomsearch 6y ago
Speculative comment: if the product is advertising, then Google and Facebook have cornered that market and it looks like search and personal social network advertising could be natural monopolies. So there won’t be more Google’s, because there are already two and that’s what the market can support. If that’s true the only way to generate Google-like companies (in terms of innovation) is to find a different business model, which means both founders and investors have to be more open minded, more patient, and more brave. That’s your first problem. Probably the best alternative I can see is to charge individuals very small subscriptions for valuable products, but to make it at scale. Say you have 100m users and charge < 1 dollar each per month or even per year, and then you keep building new products using the great team that built the first one. Why hasn’t this happened? See above.
- sampsonitify 6y ago
  What about China? There is a western heliocentricity to so many comments.
  - randomsearch 6y ago
    What do you mean re: China?
graycat 6y ago
Yup: When I was looking for VC funding, lots of VC Web sites claimed to like innovation. Eventually I concluded much the same as in Phil's essay. The nutshell description I formulated was the VCs want a startup with a product/service easy enough for any grandmother to understand, traction growing up and to the right, in a huge market, with five founders, with all credit cards maxed out, with at least four of the spouses pregnant, about to go under, and desperate. For one step more, they are looking in the rear view mirror and want to bet on patterns. For one more, they want to fund the company to go to "the next level", i.e., the big go to market effort. The VCs in effect believe that any startup that is successful will, on the way to being a big success, say, worth 1+ billion, at some point nearly necessarily be desperate for some venture funding: Then that's where the VCs want to write a check and get on the BoD. Even if the VCs are willing to do seed funding, they believe that for each level more VC cash will be essential. Then they hope to be the best positioned to make the series A round with the up and to the right and go to market effort. Here is where I see the VCs failing: First, the patterns they are looking for are too rare to be promising. Instead, for the future, the main pillar of the success will be something new, powerful, and valuable for a large market. For this, it will be necessary for VCs to work effective with things that are new, powerful, and valuable. This is not always easy. Relatively few VCs are able to do that. Even if they are able, the limited partners of the VCs won't like that. Second, there really is a good pattern with fantastic evidence from the past. It is just that the VCs don't see this pattern. Third, let's look at this pattern with its fantastic evidence. At first, we will just use some examples and then later will explain with much more substance and meaning. (a) In WWII, the US had big need for some better weapons. The usual VC approach would have the US go to the designers of the 16" battleship guns and ask for 18" or 20". Well, the US was smart enough not to do that. Instead, Szilard, Teller, Wigner, Einstein, Fermi, etc. led the US to the A-bomb that ended the war in the Pacific in about a week. (b) Teller saw that fusion had promise of much more yield and in a few years had Castle-Bravo with 15 megatons of yield. (c) The WWII aircraft engines went from 9 cylinders in one row to four rows of 7 cylinders per row and extreme efforts with supercharging, intercooling, magnesium, huge propellers with tips moving close to the speed of sound, etc. But a few people in each of Germany, England, and the US saw the promise of gas turbines, and we got some fantastic jet engines. Four of these on an airplane quickly put the Atlantic passenger steamships out of business! (d) A few people saw that reproducing the marks on a sheet of paper would be a big advance in office work and ... we got Xerox with nearly a license to print money. (e) Ike wanted to see what the Soviets were doing. So, Kelly Johnson at Lockheed put some long, narrow wings on an existing jet airplane and gave Ike the U-2. When a U-2 got shot down, soon Kelly showed up with an armload of engineering drawings talking about titanium and a special engine that Pratt and Whitney had (a turbo jet up to about Mach 2.5 and then a ram jet to Mach 3.2 or so). Kelly got his check, and the US CIA got their SR-71 -- speed 3.2 Mach, altitude 80,000+ feet, range on one load of fuel ~2000 miles, and never shot down. (f) Word whacking was a pain, really expensive. The IBM correcting Selectrics were only a little better. But an early microprocessor, a simple operating system, some simple word whacking software, a floppy disk, and some simple printers quickly eradicated the typewriters. We got Intel, Apple, Microsoft, and more. The examples (a) -- (f) are only a few of the dozens we could list from military projects, biomedical projects, various tools, various services, etc. So, for each of (a) -- (f), at the beginning, the project had to be evaluated. The rear view mirror as VCs apply it would not help. Instead, the need was to work effectively with ideas that were new, powerful, and valuable. Fourth, let's look at some "substance" supporting the patterns illustrated by examples (a) -- (f). What is needed is a way to evaluate ideas that promise to be new, powerful, and valuable for a large market. Okay, one more example: GPS. If the USAF charged a penny for each commercial use, they'd soon own the world and everything in it???? Well, they'd have a lot. Uh, at one time I was working at the JHU/APL lab in the group that did the first version of GPS, for the US Navy, especially for the missile firing submarines. I heard the stories. The project was first on the back of an envelope. With not much more in ideas, it got funded and the rest is history. So how was the evaluation done? Sure, first some physics. Next some math. Next some engineering. Money allocated. Work done. Rockets launched. All done. So, here it is: The foundation of the pattern for the evaluation to confirm new, correct, and significant was some science and math that could be checked. That's the pattern: The crucial core of the project is an idea based on some science, math, and engineering on paper that can be checked. That's the pattern. In the more advanced countries, there are plenty of people who can generate such ideas, do the science, math, and engineering (e.g., the LHC) and plenty of people who can check the work with high accuracy. E.g., there are problem sponsors at the US NSF, NIH, DARPA, ONR, etc. that can do the checking or manage the checking done by others. Research university Ph.D. committees do such evaluations around the world daily. Surprise. Please sit down for this: US technology VCs just will not, Not, NOT, no matter what, not even under promise of $trillions, not with water torture, not with anything, do or manage such evaluations. Feet locked four feet deep in reinforced concrete, they won't do it. Results: First, from all I can see, the most promising path to the future is new ideas, presented just on paper, as science, math, and/or engineering, that are powerful and valuable for big parts of our economy and that can be evaluated accurately. Did I mention "just on paper"? That's what the JHU/APL did for the first version of GPS -- on paper. That's what Kelly Johnson (there's a picture) brought to the CIA for the SR-71 -- an armload of engineering drawings. On and on. The B-29 is what carried the A-bombs that ended the war in the Pacific. That plane cost ballpark as much to develop as the bombs! A joke about VCs is that they would say "You build it, drop the first bomb, and we will fund the gasoline for the flight of the second bomb." For entrepreneurs, paper and pencils are cheap! Can buy a lot of computing for $2000. A lot of Internet bandwidth is cheap. So, do the math, etc., write the software, build a server, plug it into the Internet, go live, get users, run ads, make money. To me that's the most promising path to success. But VCs will have nothing to do with it. For the VCs waiting to fund the big go to market effort, in the past a lot of companies that were successful grew just from retained earnings and never took equity funding. Now with cheap paper and pencils, computing, the Internet, etc., that path seems relatively promising now.
johbjo 6y ago
No. The reason there are few FANGS is that they are platform businesses, and the value of their services is proportional (or more?) to the size of their user bases. This means winner-takes-all. There were others, but they did not grow users as fast, so they lost. Another thing to point out is that while search and ads is Google's revenue, with chrome, gmail, android, etc they are achieving a form of lock-in. If anyone else "owned" these surfaces, replacing their search box would be much easier. The spread risk investment strategy is also correct, since the value of any platform market is low before the winner emerges. After the winner emerges, the value of that platform is the value of the entire market.
- MaxBarraclough 6y ago
  > they are platform businesses, and the value of their services is proportional (or more?) to the size of their user bases. I don't have much to add here, but this is known as a network effect. https://en.wikipedia.org/wiki/Network_effect https://en.wikipedia.org/wiki/Network_effect
  - agustif 6y ago
    nfx.com is a great source of different thesis on well, network effects in tech. They're also a VC
- dalbasal 6y ago
  There literally are more FAANGs than there were in 2008, when he wrote this. Even Google itself was much smaller than it is now. A google's in a 2008 sense would not qualify as a new FAANG in 2020 terms.
spirographer 6y ago
Companies fill ecological niches. When new technologies emerge there is room for a new apex species/(company), and a few smaller wannabes. There just isn't unlimited room for large companies to emerge, and that is the principal reason why there aren't more googles and facebooks around. In the end it has very little to do with VCs and entrepreneurs, except for the ones who happen to be in the right place at the right time to take an as yet non obvious idea and turn it into something huge.
- strikelaserclaw 6y ago
  I think this is probably the closest to the truth.
Bodhisattya 6y ago
Here is my reverse ask: Why should there be? Isn't being an extremely highly valued company with a near monopolistic grip on the search and ads market, an outlier? Also, I am just not sold on the idea that undervaluation is holding startups back. Money guys did undervalue Google, but betting that Google will "go google" is a rather outrageous bet by most standards.
BlueTemplar 6y ago
Using a different definition of Google than TFA : We have discussed recently a huge issue preventing new Google-like web crawling competitors from emerging : If you're not GAFAM(-like), and so aren't whitelisted, then anti-spam/DDoS filters like Cloudflare will simply prevent your crawler from working !
- easytiger 6y ago
  I've been working on a project that involves executing web crawling on a responsible scale but this has concerned me when I ramp to wider/regular fetching how will it be received by the web distribution mafia. I recall last time i set up my own mail server that it was very hard to do it in such a manner that emails from it were not automatically listed as spam
  - finnthehuman 6y ago
    >web distribution mafia [...] set up my own mail server One of the tragedies of the tech powerhouses is that their decision making that effects the rest of us is often thinly-veiled power tripping that they've convinced themselves is for the good of everyone. When in reality, they just haven't delivered good enough software to eliminate the problem entirely. It's like a large scale version of a bad corporate computer security team. They can't quite design all the inconveniences out of their "solutions." Which is normally fine (after all what software and/or human-managed process is perfect the first time?), but out of a refusal to admit to their limitations they've convinced themselves that bureaucratic interactions with them to get day-to-day work done are necessary and important features of the design. There are genuinely technical challenges with no good technical solution, so political ones are employed. But sometimes you start getting too many middle managers that think the answer to every problem that requires systems thinking is just more self-assured tough-talking or "we could make more money by NOT fixing this." And then suddenly all the nice properties of the system slowly start disappearing or have conditional access gates.
- wslh 6y ago
  Are in some way robots.txt and those Cloudflare measures anticompetitive and/or against net neutrality?
known 6y ago
https://en.wikipedia.org/wiki/Jewish_quarter_(diaspora) https://en.wikipedia.org/wiki/Jewish_quarter_(diaspora) is very powerful
jonplackett 6y ago
Isn't it also that Google/FB/Apple just buy all the startups that could conceivably threaten them. Even the ones where the founders did hold out for a lot of money they just buy them anyway. Like WhatsApp (they got about $22 billion in the end!)
- grishka 6y ago
  Now, I have no idea how this actually works, but everyone seems to be implying that startups don't have a say in whether they at all want to be acquired, regardless of the price. I don't understand why are there no companies that refuse any acquisition offers because they want to retain their independence.
  - jonplackett 6y ago
    I think there must be some degree of fear - for example Snapchat refused Facebook and now Facebook has copied every single thing Snapchat has done. But it also must be pretty tempting when someone dangles millions (or billions) of dollars in front of you. You could easily just sell, and then go whatever you want with the rest of your life, do whatever good you intended to do elsewhere. Or maybe you believe the hype and think you could fulfil your mission better with the might of a tech giant behind you.
rexreed 6y ago
> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain. There's no evidence that this is the case. Indeed, after founders are acquired their fierce competitive spirit and drive often starts to dissolve once the founders have gotten their exit and the teams run into the inevitable corporate realities that exist when teams are merged / integrated into a new culture. Simply "offering more" does not address the reason why there aren't more Googles. The hard truth is that technology incumbents fiercely defend their space making it very hard for new entrants to compete. Strong entrants either get acquired, and merged into the Borg, or are sidelined as the incumbents defend their turf sometimes through enhancements to the product / feature set, but often through somewhat anti-competitive actions that bar entry from new entrants. While I would like to think the world is a meritocracy ("let the best product win"), the truth is far from that. And I think a lot of this piece from 2008 rests on half-truths and wishful thinking.
- JohnJamesRambo 6y ago
  I know lots of founders will read this, please for the good of humanity stop being acquired. I know the money is so alluring, but how much is your soul worth and will that money make you happy? The future of humanity depends on tech people making tiny principled stands like this over and over. Don’t believe the lies spewing out from the acquiring company. Nothing will ever be the same again and your product will be either killed or mutated into something hideous. Read the WhatsApp and Oculus and Nest stories over and over again.
  - rexreed 6y ago
    While I totally agree with this comment, especially from experience knowing that the reality of an acquisition is far from the rosy picture promised to everyone, the truth is that founders and especially investors are motivated by the exit. Some founders start their companies to be flipped. Some start with the intention of going for the long-game but find the reality of competing in the market exhausting and emotionally draining. Some realize that they won't be able to capture the market share they want. Other times internal strife or conflicts with investors get in the way. There are many motivations for acquisition and the realities of the difficulties of startups make any good offer very appealing. It's very hard to resist.
Jugurtha 6y ago
>Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain. Well, this is obvious in hindsight. The same logic applies saying "Tip for YC: when you turn down a startup, consider letting them in, because there's a good chance startup will later become a unicorn". This is not a strawman argument because is there really a "good chance" when you consider the odds of startups and the value distribution.
meagher 6y ago
If you want a better formatted way to read (or print) this, I created a CSS proxy server https://pg-essays.now.sh/googles.html https://pg-essays.now.sh/googles.html
dalbasal 6y ago
A 2020 version of this might be "why there aren't more Teslas." Elon's might be a rare cat, but he's probably not one in eight billion. At this point, changing the world with a new FB or Google is more about dislodging monopolies then it is about innovation. Meanwhile, a promising startup in this space would find it quite easy to get big/late stage funding because of acquisitions. A "tesla" will have a hard time getting funded for precisely the reasons laid out by paul. The difference though, is that manufacturing is actually capital intensive. Google & Facebook needed investors to cover rent and salaries for a few years. Making lots of bets isn't as viable. You do actually need to make good bets. Meanwhile, in the google/fb space it is now more true that acquisitions and monopoly dynamics are a major hindrance to "more googles." Investors certainly aren't shy to make these investments. Investments in Teslas are depressed by conservativism and ability to pick winners.
- 0xquad 6y ago
  > A 2020 version of this might be "why there aren't more Teslas." It's interesting how many electric car companies are active in China, most of which westerners haven't heard of. (Check for example the video of the "Chengdu Motor Show" by FullyChargedShow on YT.) Relevant to the topic at hand, it seems that the "More Googles" are more likely to be arising in China, mostly outside my reality bubble. Some helped by market segregation enforced by the current political situation. That's orthogonal to the overall topic, but not irrelevant.
mac01021 6y ago
I don't have any visibility into the VC world. But I wonder if they've moved at all in the direction PG was recommending since 2008.
kuharich 6y ago
Past comments: http://news.ycombinator.com/item?id=163552 http://news.ycombinator.com/item?id=163552
modi15 6y ago
> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain. This isnt accurate at all. Google/Facebook turned down the offers because at the time the offers came, they were 'feeling' good about their business. This feeling changes over time and had google not chanced on the business model of selling ads next to search results, they would have probably regretted not selling earliers. No one at Google/Facebook knew that the companies would be as big as they became and most startups who say to an acquisition face failure exactly like the 99% of other startups, sooner or later.
cryptica 6y ago
This is an excellent article. The thing is that not only do VCs not fund startups which compete with big corporations, they don't even fund non-competing startups nowadays. They literally only fund startups whose only goal is to artificially launder revenue to corporations. For example, the startups load themselves up with debt and then they waste it all on Google or Facebook ads. Then they get acqui-hired just before they go bust so that the founders keep their mouths shut. Then the corporation shuts down the startup's product... They never cared about the startup or its product.
11thEarlOfMar 6y ago
> The low cost of starting a startup means the average good bet is a riskier one, but most existing VC firms still operate as if they were investing in hardware startups in 1985. This has become more and more true over time, in particular as industrial-grade open source platforms, both software and hardware, have made super-scalable operations nearly free to implement. It is still difficult for me to grasp the magnitude of the fact that I can build a web-based service and make it immediately available to 5 billion other humans.
ivanstame 6y ago
Because {insert big tech firm like google} buys them out.

175 points by allenleein 6y ago

Zhyl 6y ago

In related news, DuckDuckGo has gone up ~10m DAU in the last month (~12.5%) and has gone up ~30m average DAU since January (~60%). [0] [0] https://ddg.gg/traffic https://ddg.gg/traffic

BlueTemplar 6y ago
DDG doesn't have its own search engine though.
- dredmorbius 6y ago
  Quibble: it has crawlers, though for small and specialised search, mostly Instant Answers IIUC. https://help.duckduckgo.com/duckduckgo-help-pages/results/duckduckbot/ https://help.duckduckgo.com/duckduckgo-help-pages/results/du... Its primary SERPs are baased on Bing and Yandex. (I'm a heavy long-term DDG user myself.)
ant6n 6y ago
Whenever Google only give me garbage results, duck duck go does as well. Apparently You cannot discover information on websites with a search engine these days, unless it’s news Or Wikipedia entries.
- unishark 6y ago
  > Apparently You cannot discover information on websites with a search engine these days, unless it’s news Or Wikipedia entries. Certainly not if it's any search term that can be "monetized" with an automated scraping script. Web search seems like an extremely adversarial problem with people constantly hacking your search algorithm instantly as you change it. One would hope that the benefit a giant firm can provide is the amount of R&D they could afford to devote to countering this. But perhaps when they're paying for ads they don't seem so adversarial to google.

unnouinceput 6y ago

Except there is another. It's called Chinese Google also know as Alibaba. And with EU regulations coming up I suspect another one will rise in Europe as well in next decade. Just give it time, Splinternet will happen and then each country will have its own Google.

ChuckNorris89 6y ago
>And with EU regulations coming up I suspect another one will rise in Europe as well in next decade. lol, what?! Just because Europe loves to regulate itself to death so that the useless politicians can justify their salaries doesn't mean that will produce successful software companies. That's not how innovation works. Just look at Russia, who despite having less wealth than the EU, has managed to produce its own Google in the form of Yandex. The EU has no Google of its own. If we could have made our own Google we would have done it already, without regulations. But we can't. I mean, we could do it if we would put our minds and money to it just like we did with Concorde or Airbus but we're too cheap and ignorant to do it when we could just use and work for the OG Google from across the pond. Increasing regulation in tech will only benefit the huge and bloated big consultancy corps and no way help with innovation.
- multinational 6y ago
  Google has 80-90% of the market share. In practical terms, they control if your website gets visitors or not. If you throw Yandex in the ring, then Europe has several search engines Qwant, a French search engine Mojeek, a search engine in the UK YaCy, p2p search Koreans seem fond of Naveer. Chinese use Baidu
  - ChuckNorris89 6y ago
    Here's where you're wrong: Yandex is not just a search engine, it's the fifth largest search engine in the world(!) and is also an email provider, a social network service, a payment service provider, a smart assistant, a ride sharing service, a cloud provider, a ML/AI and autonomous vehicle researcher, a V.C. fund. Basically most if not all of what Google/FAANG is doing. Which European company does all those things and at such a large scale? Having some random small search engines that nobody is using, funded and kept alive by EU grants just to show that "we can", is in no way comparable to the scale of Yandex.

adamsmith 6y ago

> I've tried to explain this to VC firms. Instead of making one $2 million investment, make five $400k investments. Would that mean sitting on too many boards? Don't sit on their boards. Would that mean too much due diligence? Do less. If you're investing at a tenth the valuation, you only have to be a tenth as sure. This turned out to be absolutely right, and the < $2M checks have ballooned in volume. They are invested by firms that do not take board seats and do comparatively less due diligence. That said with the benefit of more hindsight I think the reason there are no more Googles is that FAANG has a stronghold on the largest technology markets.

chrisco255 6y ago
Well, yes, but do they have that stronghold on the future of technology markets? I'm less convinced of that.
- adamsmith 6y ago
  Super interesting question. I don't know. I suspect they will dominate all the largest technology markets for the long run, unless the government intervenes. I might be wrong. They may not dominate the future of "technology markets", though, if the sum of the long tail dominates. Right now FAANG is 42% of the NASDAQ Composite 100.
- praptak 6y ago
  They filled the feasible niches for "internet-based monopoly". The next Google will have to find another way to get big.
  - lixtra 6y ago
    I remember a time when altavista was a the only serious search engine around. I recently switched from google to ddg on mobile because I got sick of clicking away the privacy waiver in private mode. If ddg would deliver better search results then google search would be in serious trouble (although it may take twice as long as yahoo to die). Of course it’s unlikely because if the talent google attracts, but that was true for IBM in the 80s as well.

sebmellen 6y ago

This article shows its age with the quote: > The median startup coming out of Y Combinator wants to raise $250-500k. I think raising comparatively small amounts stokes a kind of vigour you can't get when sitting on a few million in cash. I wonder how this dynamic has shifted the outcome of Y Combinator alumni companies. Perhaps we would have more Googles if this trend of raising less had persisted. Money breeding laziness is also what killed ICOs. Naive teams with revolutionary ideas (which may have changed the world in startup form) raised tens of millions of dollars. This money removed the need for groundedness and scrappiness in the development process. As a result, a lot of value and time was squandered on tech that hasn't panned out.

entee 6y ago
I think it really depends. Money in the right hands can be amazing because you can aggressively pursue an idea that takes a lot more money to get off the ground. This requires a clear idea of what matters to the business. If you don’t have that idea, money can allow you to pivot and tune your product quickly and hire the very best. The downside is the temptation to do everything, to not make decisions. Money enables you to do that too with disastrous results. In short, money is great. Not having a clear, disciplined strategy is the problem.
- sebmellen 6y ago
  I'm not sure I agree with that. Of course there are many moonshot projects where money is of vital importance. But for most things, the market is the best signalling mechanism available. Having little money forces you to be very attuned to the signals of the market, giving you an advantage over those who might insulate themselves from that feedback mechanism with a buffer of money. It's hard to keep yourself attuned enough while also having money in reserve, though perhaps it is possible to have enough discipline to do so.
  - entee 6y ago
    I think that’s totally true in cases where the market is a rapid and reliable feedback mechanism. It’s a delicate balance, and I can see how a large bank account leads to avoiding the hard choices or the rapid iteration necessary to find a good product market fit. See Quibi. However,in some industries, the relationship isn’t quite as straightforward. I work in biotech, so in my case the market is realistically not going to be part of the story until we have a drug, which will be a long time from now. Until then our “market” is pharma partnerships or financing opportunities, both of which are only partially rational exercises in value determination. For us, lots of money is helpful to weather the storm and really build a great technology. There’s also little risk that if we treat a disease, we won’t have people want the treatment, so product market fit isn’t quite the same issue. That said, it’s easy to lose focus by forgetting that the tech isn’t the point (finding a good drug is) and that we can’t try all options. But those are in our control.

ZiiS 6y ago

Be good to stick the (2008) in the title, even if many here recognise the link.

oh_sigh 6y ago
A modern-day "Why There Aren't More (Or Fewer) $1.2T Companies" might be a good article too.

rStar 6y ago

Why There Aren't More Googles? flippant, sarcastic response: because google. actual response: I whole heartedly agree. when a founder/initial investor team turns down even a (mildly though truly) lucrative offer, it’s because they very strongly believe that they would be selling themselves short. if they turn down an (extremely) lucrative offer, even more so. Most people get into the game for money, ego, admiration and power. So, if someone is turning down any of these, it’s either because they are a ‘true believer,’ in which case, bet on them, or it’s because they imminently expect all or most of the others, in which case, bet, the f, on them.

bertr4nd 6y ago

Something I don’t understand in this article is the “People won’t understand your ideas if they’re any good.” Like, the idea behind Google is, “Let’s make another search engine, but make it really good.” That’s not a crazy idea, is it? Was the problem that VCs thought existing engines were good enough and that Google’s wouldn’t be enough better to be worthwhile?

bryanrasmussen 6y ago
That's not really an idea though, that's a goal, the idea is the description of how you will reach your goal, which in Google's case was PageRank.
- bertr4nd 6y ago
  I was being glib in the description but it’s not like PageRank is a crazy idea either, is it? The reason I’m prodding at this is because there are different ways in which someone can fail to understand the value of an idea. The value proposition for Google doesn’t seem far-fetched at all, but I could believe that investors simply didn’t believe PageRank was a good enough idea to displace then market leaders.
  - bryanrasmussen 6y ago
    first of all from our viewpoint PageRank doesn't seem like a crazy idea, I suppose at the time it would have seemed not crazy but interesting and unproved, thus very risky. Furthermore it is my experience that people sometimes do not understand the value proposition of even simple things if those things are new, the value of the new must be demonstrated and often overwhelmingly.
erik 6y ago
In the late 90's starting a new search engine would have seemed crazy to many. It was a competitive market, there were major incumbents, profit potential seemed low, and it wasn't obvious that search could be significantly improved upon.

boltefnovor 6y ago

I often think about how YouTube was the bargain of the century. YouTube would be one if the biggest companies ever if it had remained independent.

bruceb 6y ago
Problem with them was the massive about of money they were burning on servers and being sued by RIAA (Music companies) and MPAA (Film companies) among others. They needed a big infusion of capital. Instagram on the other hand could have remained independent and succeeded.
- prox 6y ago
  I think instagram is one of the (few) companies that could eventually have eclipsed Facebook really.
  - jiofih 6y ago
    Which is the exact reason they paid a billion dollars to acquire it.
tehlike 6y ago
I feel similar for android.
- boltefnovor 6y ago
  Android needed google to grow, YouTube didn’t.
  - tehlike 6y ago
    Google acquired android for 50m$.
GlitchMr 6y ago
I don't think YouTube would have been one of the biggest companies if it remained independent. The problem is that YouTube is still not profitable, and also without a support from a big company like Google they would be sued into oblivion by MPAA and RIAA.

roenxi 6y ago

> From the evidence I've seen so far, startups that turn down acquisition offers usually end up doing better. I bet causality is reversed from what he is hinting at. Startups that can see a pathway to becoming insanely valuable are more likely to turn down offers. Startups that see no path and that are, effectively, putting on a brave face do not turn down a profitable escape route. By that dynamic alone, you'd expect startups turning down offers to be a very strong signal of success. How many idiots are there with the wherewithal to run a company but then try and turn down money in the face of going bankrupt?

three_seagrass 6y ago

This feels like survivor bias. Why aren't there more revolutionary startups? Well, it's because they sold out and some no longer exist. Why aren't there less revolutionary startups? Well, it's because they didn't sell out and some went on to became tech giants.

dang 6y ago

Discussed at the time: https://news.ycombinator.com/item?id=163552 https://news.ycombinator.com/item?id=163552

stareatgoats 6y ago

Earlier discussion (2008): https://news.ycombinator.com/item?id=163552 https://news.ycombinator.com/item?id=163552

randomsearch 6y ago

Speculative comment: if the product is advertising, then Google and Facebook have cornered that market and it looks like search and personal social network advertising could be natural monopolies. So there won’t be more Google’s, because there are already two and that’s what the market can support. If that’s true the only way to generate Google-like companies (in terms of innovation) is to find a different business model, which means both founders and investors have to be more open minded, more patient, and more brave. That’s your first problem. Probably the best alternative I can see is to charge individuals very small subscriptions for valuable products, but to make it at scale. Say you have 100m users and charge < 1 dollar each per month or even per year, and then you keep building new products using the great team that built the first one. Why hasn’t this happened? See above.

sampsonitify 6y ago
What about China? There is a western heliocentricity to so many comments.
- randomsearch 6y ago
  What do you mean re: China?

graycat 6y ago

Yup: When I was looking for VC funding, lots of VC Web sites claimed to like innovation. Eventually I concluded much the same as in Phil's essay. The nutshell description I formulated was the VCs want a startup with a product/service easy enough for any grandmother to understand, traction growing up and to the right, in a huge market, with five founders, with all credit cards maxed out, with at least four of the spouses pregnant, about to go under, and desperate. For one step more, they are looking in the rear view mirror and want to bet on patterns. For one more, they want to fund the company to go to "the next level", i.e., the big go to market effort. The VCs in effect believe that any startup that is successful will, on the way to being a big success, say, worth 1+ billion, at some point nearly necessarily be desperate for some venture funding: Then that's where the VCs want to write a check and get on the BoD. Even if the VCs are willing to do seed funding, they believe that for each level more VC cash will be essential. Then they hope to be the best positioned to make the series A round with the up and to the right and go to market effort. Here is where I see the VCs failing: First, the patterns they are looking for are too rare to be promising. Instead, for the future, the main pillar of the success will be something new, powerful, and valuable for a large market. For this, it will be necessary for VCs to work effective with things that are new, powerful, and valuable. This is not always easy. Relatively few VCs are able to do that. Even if they are able, the limited partners of the VCs won't like that. Second, there really is a good pattern with fantastic evidence from the past. It is just that the VCs don't see this pattern. Third, let's look at this pattern with its fantastic evidence. At first, we will just use some examples and then later will explain with much more substance and meaning. (a) In WWII, the US had big need for some better weapons. The usual VC approach would have the US go to the designers of the 16" battleship guns and ask for 18" or 20". Well, the US was smart enough not to do that. Instead, Szilard, Teller, Wigner, Einstein, Fermi, etc. led the US to the A-bomb that ended the war in the Pacific in about a week. (b) Teller saw that fusion had promise of much more yield and in a few years had Castle-Bravo with 15 megatons of yield. (c) The WWII aircraft engines went from 9 cylinders in one row to four rows of 7 cylinders per row and extreme efforts with supercharging, intercooling, magnesium, huge propellers with tips moving close to the speed of sound, etc. But a few people in each of Germany, England, and the US saw the promise of gas turbines, and we got some fantastic jet engines. Four of these on an airplane quickly put the Atlantic passenger steamships out of business! (d) A few people saw that reproducing the marks on a sheet of paper would be a big advance in office work and ... we got Xerox with nearly a license to print money. (e) Ike wanted to see what the Soviets were doing. So, Kelly Johnson at Lockheed put some long, narrow wings on an existing jet airplane and gave Ike the U-2. When a U-2 got shot down, soon Kelly showed up with an armload of engineering drawings talking about titanium and a special engine that Pratt and Whitney had (a turbo jet up to about Mach 2.5 and then a ram jet to Mach 3.2 or so). Kelly got his check, and the US CIA got their SR-71 -- speed 3.2 Mach, altitude 80,000+ feet, range on one load of fuel ~2000 miles, and never shot down. (f) Word whacking was a pain, really expensive. The IBM correcting Selectrics were only a little better. But an early microprocessor, a simple operating system, some simple word whacking software, a floppy disk, and some simple printers quickly eradicated the typewriters. We got Intel, Apple, Microsoft, and more. The examples (a) -- (f) are only a few of the dozens we could list from military projects, biomedical projects, various tools, various services, etc. So, for each of (a) -- (f), at the beginning, the project had to be evaluated. The rear view mirror as VCs apply it would not help. Instead, the need was to work effectively with ideas that were new, powerful, and valuable. Fourth, let's look at some "substance" supporting the patterns illustrated by examples (a) -- (f). What is needed is a way to evaluate ideas that promise to be new, powerful, and valuable for a large market. Okay, one more example: GPS. If the USAF charged a penny for each commercial use, they'd soon own the world and everything in it???? Well, they'd have a lot. Uh, at one time I was working at the JHU/APL lab in the group that did the first version of GPS, for the US Navy, especially for the missile firing submarines. I heard the stories. The project was first on the back of an envelope. With not much more in ideas, it got funded and the rest is history. So how was the evaluation done? Sure, first some physics. Next some math. Next some engineering. Money allocated. Work done. Rockets launched. All done. So, here it is: The foundation of the pattern for the evaluation to confirm new, correct, and significant was some science and math that could be checked. That's the pattern: The crucial core of the project is an idea based on some science, math, and engineering on paper that can be checked. That's the pattern. In the more advanced countries, there are plenty of people who can generate such ideas, do the science, math, and engineering (e.g., the LHC) and plenty of people who can check the work with high accuracy. E.g., there are problem sponsors at the US NSF, NIH, DARPA, ONR, etc. that can do the checking or manage the checking done by others. Research university Ph.D. committees do such evaluations around the world daily. Surprise. Please sit down for this: US technology VCs just will not, Not, NOT, no matter what, not even under promise of $trillions, not with water torture, not with anything, do or manage such evaluations. Feet locked four feet deep in reinforced concrete, they won't do it. Results: First, from all I can see, the most promising path to the future is new ideas, presented just on paper, as science, math, and/or engineering, that are powerful and valuable for big parts of our economy and that can be evaluated accurately. Did I mention "just on paper"? That's what the JHU/APL did for the first version of GPS -- on paper. That's what Kelly Johnson (there's a picture) brought to the CIA for the SR-71 -- an armload of engineering drawings. On and on. The B-29 is what carried the A-bombs that ended the war in the Pacific. That plane cost ballpark as much to develop as the bombs! A joke about VCs is that they would say "You build it, drop the first bomb, and we will fund the gasoline for the flight of the second bomb." For entrepreneurs, paper and pencils are cheap! Can buy a lot of computing for $2000. A lot of Internet bandwidth is cheap. So, do the math, etc., write the software, build a server, plug it into the Internet, go live, get users, run ads, make money. To me that's the most promising path to success. But VCs will have nothing to do with it. For the VCs waiting to fund the big go to market effort, in the past a lot of companies that were successful grew just from retained earnings and never took equity funding. Now with cheap paper and pencils, computing, the Internet, etc., that path seems relatively promising now.

johbjo 6y ago

No. The reason there are few FANGS is that they are platform businesses, and the value of their services is proportional (or more?) to the size of their user bases. This means winner-takes-all. There were others, but they did not grow users as fast, so they lost. Another thing to point out is that while search and ads is Google's revenue, with chrome, gmail, android, etc they are achieving a form of lock-in. If anyone else "owned" these surfaces, replacing their search box would be much easier. The spread risk investment strategy is also correct, since the value of any platform market is low before the winner emerges. After the winner emerges, the value of that platform is the value of the entire market.

MaxBarraclough 6y ago
> they are platform businesses, and the value of their services is proportional (or more?) to the size of their user bases. I don't have much to add here, but this is known as a network effect. https://en.wikipedia.org/wiki/Network_effect https://en.wikipedia.org/wiki/Network_effect
- agustif 6y ago
  nfx.com is a great source of different thesis on well, network effects in tech. They're also a VC
dalbasal 6y ago
There literally are more FAANGs than there were in 2008, when he wrote this. Even Google itself was much smaller than it is now. A google's in a 2008 sense would not qualify as a new FAANG in 2020 terms.

spirographer 6y ago

Companies fill ecological niches. When new technologies emerge there is room for a new apex species/(company), and a few smaller wannabes. There just isn't unlimited room for large companies to emerge, and that is the principal reason why there aren't more googles and facebooks around. In the end it has very little to do with VCs and entrepreneurs, except for the ones who happen to be in the right place at the right time to take an as yet non obvious idea and turn it into something huge.

strikelaserclaw 6y ago
I think this is probably the closest to the truth.

Bodhisattya 6y ago

Here is my reverse ask: Why should there be? Isn't being an extremely highly valued company with a near monopolistic grip on the search and ads market, an outlier? Also, I am just not sold on the idea that undervaluation is holding startups back. Money guys did undervalue Google, but betting that Google will "go google" is a rather outrageous bet by most standards.

BlueTemplar 6y ago

Using a different definition of Google than TFA : We have discussed recently a huge issue preventing new Google-like web crawling competitors from emerging : If you're not GAFAM(-like), and so aren't whitelisted, then anti-spam/DDoS filters like Cloudflare will simply prevent your crawler from working !

easytiger 6y ago
I've been working on a project that involves executing web crawling on a responsible scale but this has concerned me when I ramp to wider/regular fetching how will it be received by the web distribution mafia. I recall last time i set up my own mail server that it was very hard to do it in such a manner that emails from it were not automatically listed as spam
- finnthehuman 6y ago
  >web distribution mafia [...] set up my own mail server One of the tragedies of the tech powerhouses is that their decision making that effects the rest of us is often thinly-veiled power tripping that they've convinced themselves is for the good of everyone. When in reality, they just haven't delivered good enough software to eliminate the problem entirely. It's like a large scale version of a bad corporate computer security team. They can't quite design all the inconveniences out of their "solutions." Which is normally fine (after all what software and/or human-managed process is perfect the first time?), but out of a refusal to admit to their limitations they've convinced themselves that bureaucratic interactions with them to get day-to-day work done are necessary and important features of the design. There are genuinely technical challenges with no good technical solution, so political ones are employed. But sometimes you start getting too many middle managers that think the answer to every problem that requires systems thinking is just more self-assured tough-talking or "we could make more money by NOT fixing this." And then suddenly all the nice properties of the system slowly start disappearing or have conditional access gates.
wslh 6y ago
Are in some way robots.txt and those Cloudflare measures anticompetitive and/or against net neutrality?

known 6y ago

https://en.wikipedia.org/wiki/Jewish_quarter_(diaspora) https://en.wikipedia.org/wiki/Jewish_quarter_(diaspora) is very powerful

jonplackett 6y ago

Isn't it also that Google/FB/Apple just buy all the startups that could conceivably threaten them. Even the ones where the founders did hold out for a lot of money they just buy them anyway. Like WhatsApp (they got about $22 billion in the end!)

grishka 6y ago
Now, I have no idea how this actually works, but everyone seems to be implying that startups don't have a say in whether they at all want to be acquired, regardless of the price. I don't understand why are there no companies that refuse any acquisition offers because they want to retain their independence.
- jonplackett 6y ago
  I think there must be some degree of fear - for example Snapchat refused Facebook and now Facebook has copied every single thing Snapchat has done. But it also must be pretty tempting when someone dangles millions (or billions) of dollars in front of you. You could easily just sell, and then go whatever you want with the rest of your life, do whatever good you intended to do elsewhere. Or maybe you believe the hype and think you could fulfil your mission better with the might of a tech giant behind you.

rexreed 6y ago

> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain. There's no evidence that this is the case. Indeed, after founders are acquired their fierce competitive spirit and drive often starts to dissolve once the founders have gotten their exit and the teams run into the inevitable corporate realities that exist when teams are merged / integrated into a new culture. Simply "offering more" does not address the reason why there aren't more Googles. The hard truth is that technology incumbents fiercely defend their space making it very hard for new entrants to compete. Strong entrants either get acquired, and merged into the Borg, or are sidelined as the incumbents defend their turf sometimes through enhancements to the product / feature set, but often through somewhat anti-competitive actions that bar entry from new entrants. While I would like to think the world is a meritocracy ("let the best product win"), the truth is far from that. And I think a lot of this piece from 2008 rests on half-truths and wishful thinking.

JohnJamesRambo 6y ago
I know lots of founders will read this, please for the good of humanity stop being acquired. I know the money is so alluring, but how much is your soul worth and will that money make you happy? The future of humanity depends on tech people making tiny principled stands like this over and over. Don’t believe the lies spewing out from the acquiring company. Nothing will ever be the same again and your product will be either killed or mutated into something hideous. Read the WhatsApp and Oculus and Nest stories over and over again.
- rexreed 6y ago
  While I totally agree with this comment, especially from experience knowing that the reality of an acquisition is far from the rosy picture promised to everyone, the truth is that founders and especially investors are motivated by the exit. Some founders start their companies to be flipped. Some start with the intention of going for the long-game but find the reality of competing in the market exhausting and emotionally draining. Some realize that they won't be able to capture the market share they want. Other times internal strife or conflicts with investors get in the way. There are many motivations for acquisition and the realities of the difficulties of startups make any good offer very appealing. It's very hard to resist.

Jugurtha 6y ago

>Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain. Well, this is obvious in hindsight. The same logic applies saying "Tip for YC: when you turn down a startup, consider letting them in, because there's a good chance startup will later become a unicorn". This is not a strawman argument because is there really a "good chance" when you consider the odds of startups and the value distribution.

meagher 6y ago

If you want a better formatted way to read (or print) this, I created a CSS proxy server https://pg-essays.now.sh/googles.html https://pg-essays.now.sh/googles.html

dalbasal 6y ago

A 2020 version of this might be "why there aren't more Teslas." Elon's might be a rare cat, but he's probably not one in eight billion. At this point, changing the world with a new FB or Google is more about dislodging monopolies then it is about innovation. Meanwhile, a promising startup in this space would find it quite easy to get big/late stage funding because of acquisitions. A "tesla" will have a hard time getting funded for precisely the reasons laid out by paul. The difference though, is that manufacturing is actually capital intensive. Google & Facebook needed investors to cover rent and salaries for a few years. Making lots of bets isn't as viable. You do actually need to make good bets. Meanwhile, in the google/fb space it is now more true that acquisitions and monopoly dynamics are a major hindrance to "more googles." Investors certainly aren't shy to make these investments. Investments in Teslas are depressed by conservativism and ability to pick winners.

0xquad 6y ago
> A 2020 version of this might be "why there aren't more Teslas." It's interesting how many electric car companies are active in China, most of which westerners haven't heard of. (Check for example the video of the "Chengdu Motor Show" by FullyChargedShow on YT.) Relevant to the topic at hand, it seems that the "More Googles" are more likely to be arising in China, mostly outside my reality bubble. Some helped by market segregation enforced by the current political situation. That's orthogonal to the overall topic, but not irrelevant.

mac01021 6y ago

I don't have any visibility into the VC world. But I wonder if they've moved at all in the direction PG was recommending since 2008.

kuharich 6y ago

Past comments: http://news.ycombinator.com/item?id=163552 http://news.ycombinator.com/item?id=163552

modi15 6y ago

> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain. This isnt accurate at all. Google/Facebook turned down the offers because at the time the offers came, they were 'feeling' good about their business. This feeling changes over time and had google not chanced on the business model of selling ads next to search results, they would have probably regretted not selling earliers. No one at Google/Facebook knew that the companies would be as big as they became and most startups who say to an acquisition face failure exactly like the 99% of other startups, sooner or later.

cryptica 6y ago

This is an excellent article. The thing is that not only do VCs not fund startups which compete with big corporations, they don't even fund non-competing startups nowadays. They literally only fund startups whose only goal is to artificially launder revenue to corporations. For example, the startups load themselves up with debt and then they waste it all on Google or Facebook ads. Then they get acqui-hired just before they go bust so that the founders keep their mouths shut. Then the corporation shuts down the startup's product... They never cared about the startup or its product.

11thEarlOfMar 6y ago

> The low cost of starting a startup means the average good bet is a riskier one, but most existing VC firms still operate as if they were investing in hardware startups in 1985. This has become more and more true over time, in particular as industrial-grade open source platforms, both software and hardware, have made super-scalable operations nearly free to implement. It is still difficult for me to grasp the magnitude of the fact that I can build a web-based service and make it immediately available to 5 billion other humans.

ivanstame 6y ago

Because {insert big tech firm like google} buys them out.