I operate my business on such a tight budget it seems almost criminal for a business to fail with $40 million to work with. I could spend many lifetimes growing my business with that kind of money.
IMO you don't force a market to grow. You accept what the market gives you and then you grow into the market as it allows you to grow. Not the other way around.
This is one of the biggest flaws in how investors expect their businesses to grow. I would argue that having a small business that one day will be a big one (perhaps 10-20 years later) is far better than shoving a ton of money at a problem and if it doesn't grow fast enough then pull the rug from beneath them.
I think it's also a sign that investors who are actually in SV are not dictating how things are run. While this may be common knowledge, I'm unaware of precisely where money is flowing in from. But if I had to guess, I'm almost certain it's big money coming in from all over the world who expect VCs to treat startups like they would treat stocks and bonds.
You can take one to the point where it's clear that business growth is constrained by available resources and not by market demand, though. At that point, investing in the business becomes a no-brainer.
Uber, Google, Facebook, and Twitter all had working products that were attracting users faster than they could service them before they took VC money.
I'm not saying forego funding, but what I am saying is if VCs took a longer view and didn't throw tons of money at companies that haven't proven the need for it, expecting unrealistic returns, we would probably have a much higher success rate in SV startups than is the case today.
Even though funding was required in the businesses you listed, none of them would've grown to the size they are unless the market demanded it.
I know this sounds obvious, but it seems to be a counter point to the behavior I see in SV startup stories.
I actually think within the next 5-10 years companies that require scale like Google, Facebook, etc. will be possible at very low cost. Low enough even that the project can be bootstrapped without funding.
They of course won't start out at that scale, but given the ease with which one can scale cloud products (or have it done automatically for you via things like Elastic Beanstalk) and how cheaply it can be done, I will be surprised if within 10 years there won't be legitimate competitors to all of those companies that were formed in the hypothetical garage startup scenario.
I don't think the big problem will be trying to get people to use the system.
I think the whole thing (especially with social networks) rides on just how hard they want to fight to keep their users' data off of other networks.
If, for example, Facebook decides to prevent other social networks from pulling user data off of Facebook, then I think that will in large part drive end users' desire to find alternatives.
Well there's that too. But to get people to use a new social network in the first place, you either need to hope for a viral effect or spend on advertising. Unless I'm missing something.
I kind of think these days people generally understand the "groups" or "communities" or "family members" they are usually in contact with.
So I kind of envision that new social networks don't need to grow in that "all or nothing" model.
Also I see great potential for "glue networks". Or, in other words, networks responsible for facilitating the seamless transmission of data to / from different social networks depending on which one people decide they want to use.
I think it will get old real fast if people can only interact with people in Facebook while they're signed on to Facebook.
I want a social network that can seamlessly integrate with all of them so I don't have to worry about where all my friends are. I just decide I'm going to try something new and if it works well for me I might stick with it. In the meantime I'll continue to be able to communicate with people on other social networks because "I, as the consumer, should be allowed to dictate where my data can and can't go".
IMO you don't force a market to grow. You accept what the market gives you and then you grow into the market as it allows you to grow. Not the other way around.
This is one of the biggest flaws in how investors expect their businesses to grow. I would argue that having a small business that one day will be a big one (perhaps 10-20 years later) is far better than shoving a ton of money at a problem and if it doesn't grow fast enough then pull the rug from beneath them.
I think it's also a sign that investors who are actually in SV are not dictating how things are run. While this may be common knowledge, I'm unaware of precisely where money is flowing in from. But if I had to guess, I'm almost certain it's big money coming in from all over the world who expect VCs to treat startups like they would treat stocks and bonds.