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I think the second part of your comment hits the nail on the head: labs might actually be safer because of that lack of total commitment to a single idea. This

by angli 15y ago

I think the second part of your comment hits the nail on the head: labs might actually be safer because of that lack of total commitment to a single idea. This lets them seek out value in areas that might be too risky, or with product/market fit that's hard to predict in advance. Essentially, it lowers the chance of failure for the startup.

mechanical_fish 15y ago
The business model you're describing is YCombinator's business model: Invest in ten or twenty experimental businesses at a time, to hedge against each individual business's probability of failure. The problem with this model was described by the OP: It's hard to sell "Product/Market Fit in a Box" because so much of product/market fit is tied to specific products built by specific teams. YCombinator finds product/market fits, but they don't just sell the ideas: They sell the specific companies and products along with the ideas, because these things are not separable. Indeed, PG's explicit belief is that even a valuable idea like, say, Dropbox is less valuable than the specific team of people who built Dropbox. Because the value is in the people and the brands and code they create – these things are your real product – your "labs business" will need a constant stream of fresh recruits to replace the veterans who graduate. You're basically running a school. (Incidentally, it's no coincidence that, even in actual laboratory science, so much funded research gets done at schools.) However, in case you haven't noticed, it's not that easy to find a constant stream of smart founders, each with the skills to find a product/market fit and grow it into a business. And there's a big cash flow problem. Poor people do not get to be angel investors, no matter how good the angel-investing business model is. Perhaps funding ten startups at once is less risky than funding just one, but it also costs ten times as much up front, and it will take years to find out if you have a winner. Better have years worth of living expenses in the bank. Better have a lot of money you can afford to lose.

by angli 15y ago

mechanical_fish 15y ago

The business model you're describing is YCombinator's business model: Invest in ten or twenty experimental businesses at a time, to hedge against each individual business's probability of failure. The problem with this model was described by the OP: It's hard to sell "Product/Market Fit in a Box" because so much of product/market fit is tied to specific products built by specific teams. YCombinator finds product/market fits, but they don't just sell the ideas: They sell the specific companies and products along with the ideas, because these things are not separable. Indeed, PG's explicit belief is that even a valuable idea like, say, Dropbox is less valuable than the specific team of people who built Dropbox. Because the value is in the people and the brands and code they create – these things are your real product – your "labs business" will need a constant stream of fresh recruits to replace the veterans who graduate. You're basically running a school. (Incidentally, it's no coincidence that, even in actual laboratory science, so much funded research gets done at schools.) However, in case you haven't noticed, it's not that easy to find a constant stream of smart founders, each with the skills to find a product/market fit and grow it into a business. And there's a big cash flow problem. Poor people do not get to be angel investors, no matter how good the angel-investing business model is. Perhaps funding ten startups at once is less risky than funding just one, but it also costs ten times as much up front, and it will take years to find out if you have a winner. Better have years worth of living expenses in the bank. Better have a lot of money you can afford to lose.