[HN Gopher] How to Beat Silicon Valley Competitors (2018)
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How to Beat Silicon Valley Competitors (2018)
Author : liumaiyi
Score : 61 points
Date : 2023-12-12 11:48 UTC (1 days ago)
(HTM) web link (www.alexcrompton.com)
(TXT) w3m dump (www.alexcrompton.com)
| mooreds wrote:
| Thoughtful and still true. Even within the USA, there are still
| places that can compete against SV by arbitraging talent and
| regulation.
|
| Lots of people don't want to move to SV and many SV startups want
| in-office workers.
|
| We're seeing a resurgence of industrial policy and I don't think
| tech is any different. Take for example Georgia's 'Alternative
| Fuel and Advanced Vehicle Job Creation Tax Credit'.
| https://afdc.energy.gov/laws/all?state=GA or Miamis focus on AI
| startups: https://www.foxbusiness.com/technology/watch-out-
| silicon-val...
|
| (I'm less sure about the third option, business models.)
| gwbas1c wrote:
| I found the "Arbitrage regulation" section very confusing.
| Perhaps some examples would have made it clearer?
| CM30 wrote:
| Maybe not a way to 'beat' them per se, but I wonder if support
| could be a good differentiator for some companies here? Silicon
| Valley companies, especially the FAANG ones, treat customer
| support as an afterthought at best, with Google and co doing
| everything in their power not to try and automate all of it.
|
| If you don't have a need to expand to everyone in the world in
| the chase for infinite growth, having a company that's actually
| possible to get in contact with can be valuable in many areas,
| especially if your customers are large corporations or those
| willing to pay more for the privilege.
|
| Similarly, see Kagi and their paid search offering. It's clear
| there's money to be made there, but it likely won't be enough to
| appeal to venture capitalists and FAANG companies, so that gives
| them something of a unique selling point/market.
| dylan604 wrote:
| I'm at a small scrappy little startup where the founders handle
| calls/emails/zooms and interact with the customers directly for
| any and all support issues. It absolutely makes a difference.
| Is it _THE_ difference? Probably not, but it is _A_ difference
| that customers definitely appreciate.
| ilrwbwrkhv wrote:
| A lot of VC is a Ponzi scheme. I don't think "venture scale" is
| a real thing. It's more or a gimmick to sell to the next sucker
| down the rounds. I think it is overall healthy for the real
| world to have real companies.
| tqi wrote:
| I think another way to beat silicon valley competitors is to not
| take as much VC funding. In some ways, it reminds me of when
| boxers try to move up weight classes beyond their "natural"
| weight. Often the abilities required at the new weight comes at
| the expense of the very things that made them excel at their
| previous weight. Similarly, successful companies who need to hit
| X00s millions in revenue to justify its funding level are forced
| to work on features or business models that aren't actually
| viable, and thus are vulnerable to smaller competitors.
| gtirloni wrote:
| How do you define "beat" here? It seems you're advocating for
| not playing the game at all so there's nothing to beat.
| tqi wrote:
| Fair point, by "beat" I mean create a sustainable business. I
| think that in a lot of cases orienting a company around
| building a $100M/yr business and a $1B/yr business are
| mutually exclusive, because product/sales/marketing teams
| invariably are incentivized to focus only on the high upside
| speculative future stuff rather than shoring up the existing
| business lines. So agreed, you're not really beating them at
| becoming the "Uber for X", you're just building a business
| that is in the X space?
| ignoramous wrote:
| The implication is that the _go big or go home_ pretenders
| may crash while you remain in the game.
| bdcravens wrote:
| Survive and prosper at the scale that makes sense for your
| business, rather than VC scale.
| tqi wrote:
| Yeah to expand on that a bit, I think VCs have a portfolio
| of bets and need extreme, outlier wins in order to come out
| ahead. So even if the scale doesn't make sense for a
| business, VCs will push them to pursue it because it is
| optimal for the VC.
| leetharris wrote:
| This works unless they have so much VC cash that they lower
| their prices into massively negative margins for long enough to
| kill competition. Then they either die or jack the prices up.
|
| This has happened to two companies I've worked at. It's the
| biggest problem with VC funding. It creates an unhealthy
| ecosystem.
| piva00 wrote:
| And that tactic is usually called dumping in international
| trade, it's one aspect of the VC-funding tech culture that I
| don't understand how hasn't been fought with regulation, it's
| incredibly anti-competitive since the price is artificially
| low and only sustained by losses through a massive amount of
| capital. It isn't healthy for the free market, it might lower
| prices for customers for the period while dumping makes sense
| and a competitor outlives others but it will inevitably lead
| to increased prices when a company finally engulfs a big
| enough marketshare to be safe.
|
| Predatory pricing is a ridiculous practice, killing a lot of
| innovation.
| hodgesrm wrote:
| Isn't making money the best way to beat VC-funded companies? (Or
| any competitor for that matter.) In other words, sell something
| people will pay for right from the start. You won't be building
| SpaceX or Tesla but you can build 1Password. Software companies
| in particular don't _have_ to be capital intensive.
| throwup238 wrote:
| Not when VC money subsidizes your competitors in the name of
| customer acquisition. They can slowly strangle you and then
| raise prices when you're dead. Classic trust behavior laundered
| through investment dollars.
| pphysch wrote:
| Is there any hope for the culture changing? Interest rates
| are up. "Enshittification" started trending this year.
| throwup238 wrote:
| I recommend reading _The Republic for Which It Stands: The
| United States during Reconstruction and the Gilded Age_ [1]
| if you 'd like some hope.
|
| All of this has happened before and all of this will happen
| again. It's mostly just part of the cycle between labor and
| capital. Teddy Roosevelt vs Bork. etc
|
| [1] https://www.amazon.com/Republic-Which-Stands-
| Reconstruction-...
| slumberlust wrote:
| A bit ironic you linked to Amazon no?
| advael wrote:
| Frankly I think the only reason the revival of antitrust
| legislation in the current administration isn't already
| tackling this is because this pattern has already gone on so
| long that there are much more impactful anticompetitive
| behaviors being done by the biggest entrenched players and
| they have to triage. Most people even passingly familiar with
| SV's ecosystem recognize this pattern and that it's a
| problem, and by any sane antitrust interpretation it's
| blatantly illegal. Just hard to enforce in a regulatory
| environment where antitrust law enforcement went through 50
| years of systematic gutting
| danenania wrote:
| How would this be legislated or enforced? You're not
| allowed to sell a product or service at a loss?
|
| Do we really want the government dictating a company's
| pricing? What about free tiers or loss leaders? Many small
| companies use these too.
|
| Not to mention that we're talking about private companies,
| so the government currently only has a very broad idea of
| unit economics from tax info. It would require a whole new
| level of reporting from private companies.
|
| Overall, I highly doubt such legislation would end up being
| beneficial for small companies, however good the intentions
| might be. Most likely it would make their lives even harder
| due to an increased reporting and compliance burden, and VC
| favorites would do even better by comparison since they can
| afford to hire people to fill out all the paperwork and
| make friends with the regulators.
| roland35 wrote:
| The main way to prevent this is to end 0% interest rates.
| Now that the cost of capital is higher, I think we will
| see a lot less of these "ZIRP" (Zero Interest Rate
| Policy) strategies. Some companies like Uber seem to have
| been able to transition out of that, but we'll see about
| others like Instacart and Grubhub...
| hodgesrm wrote:
| You don't need anti-trust violations to make this a problem.
| Well-funded companies can always undercut competitors at
| least for a while.
|
| The cure is to be able to survive at low[er] gross margins.
| Many VC-backed companies need monopoly rents to achieve
| return on investment.
| tqi wrote:
| I know that is a thing that companies do, but what are the
| examples of this actually working out?
|
| I have a hard time working out the economics of it. Unless
| there are strong network effects that advantage incumbents,
| as soon as they raise prices isn't there immediately an
| opportunity for another VC to swoop in and undercut?
| gen220 wrote:
| Yes, this is the way. Unit-profitability and patience. It's a
| long game.
|
| You won't grow nearly as quickly, but most middling-sized
| markets (you mention 1Password as an example) favor the
| tortoise over the hare in the long-run.
| bob1029 wrote:
| I feel like we "beat" our SV competitors (we have several) by
| simply providing better customer service. Everything else is
| secondary to us. My definition of a "win" in this context is a
| customer advocating for our solution over a competitor's solution
| at a trade show or lunch meeting.
|
| A lot of SV culture appears to me to be biased towards the shiny
| tech and less towards the customer relationship. My recent
| interactions with some SaaS enterprise sales teams really drove
| that home for me. The only tech vendor that "gets us" and the
| kind of business we do (B2B software/consulting w/ US banks)
| appears to be Microsoft.
|
| We constantly ask ourselves "what is the simplest thing that will
| still make the customer happy". After asking that for several
| years, we have arrived at a robust technology stack. Very few
| moving pieces. Server-side forms. SQL does most of the scary
| stuff. It's a profoundly boring flavor of SQL too. We spend far
| more hours per week thinking about the customer's problems than
| we do any particular piece of technology.
|
| Put more concisely, I think a key advantage non-SV companies have
| is that they aren't trapped in some shiny tech rabbit chasing
| olympics mindset. Boring tech + customer focus will likely beat
| most competition, regardless of where their offices reside.
| hodgesrm wrote:
| > I feel like we "beat" our SV competitors (we have several) by
| simply providing better customer service.
|
| That and refusing to give up. Grit counts for a lot.
| jyscao wrote:
| >Boring tech + customer focus will likely beat most
| competition, regardless of where their offices reside.
|
| Reminds me of this classic post: https://mcfunley.com/choose-
| boring-technology
|
| Your addendum on customer service feels spot on too. What good
| is any software, if its users are unsatisfied.
| argiopetech wrote:
| Word of mouth is the best advertisement. Focus on quality
| (product, support, etc.) is the best marketing strategy.
|
| Best wishes for your continued success.
| bdcravens wrote:
| Stay small. Aggressively fight cost centers, but pay good people
| well. Avoid high real estate costs unless it's a value-add. Hire
| outside of the Valley. Build amazing relationships with
| customers, and I don't mean funny memes or TikToks. I mean
| literal on-the-phone or face-to-face time with the people giving
| you money.
| Manuel_D wrote:
| I'm not sure how many of these claims are true.
|
| The article claims that hiring outside of Silicon Valley is
| easier. I agree that there's more competition from other
| companies inside of SV, but there's just a lot fewer people to
| hire if you're based outside of a big tech hub (Bay Area,
| Seattle, NYC, Austin). Less competition to entice prospective
| employees, yes, but there's a lot fewer prospective employees.
|
| I'm also totally not understanding how regulation is advantageous
| to non SV companies. Both companies in Silicon Valley compaines
| and non-SV companies are subject to regulation. I don't see why
| lobbying for favorable regulation would be an easier outside of
| SV. The examples given here (e.g China) are not advantages of
| non-SV companies, it's the advantage of a government deliberately
| favoring domestic companies.
| jandom wrote:
| If it was possible to beat silicon valley competitors we'd see a
| lot more unicorns outside silicon valley. You certainly can hide
| but you can't run ;-)
| dontupvoteme wrote:
| Most unicorn value is predicated upon the petrodollar/US Power
| and influence.
| jvanderbot wrote:
| Actually, this is indicative of the SV mindset where "biggest
| wins". I hope that's not the case for many businesses, and
| there are plenty where "successful" means having sustainable
| income growth, and "win" means "being the obvious choice in
| your niche".
| codingdave wrote:
| "Unicorn" is a term meaning a billion dollar valuation, without
| being listed as a stock. If I go spend a billion dollars on a
| company it is a unicorn, even if has zero success or
| sustainability.
|
| So of course there are fewer unicorns outside of SV. The entire
| concept of a unicorn is tightly coupled to VC dollars.
| lotsofpulp wrote:
| Do you even have to spend $1B? If you spend $100M for 10% or
| $10M for 1% of the company will get you to "unicorn" status,
| technically.
| codingdave wrote:
| Lets go all the way then - if I spend one dollar on one
| billionth of a company, it is a unicorn.
|
| OK, someone go launch UaaS - Unicorn as a Service: I'll buy
| a billionth of any company for a dolla, and you get to
| claim to be the latest unicorn!
| _fat_santa wrote:
| > a lot more unicorns outside silicon valley
|
| The problem I see is that the massive funding available to "SV
| Startups" often skews what a success really is. Say you have a
| startup that's received several rounds of funding and based on
| those rounds it's now valued at $1B+, what is that valuation
| really worth if you're burning cash so fast you're only 1 or 2
| failed rounds away from bankruptcy. Sure it's nice to be able
| to say "we have a 1 billion dollar company" but what is that
| worth if the valuation only holds if investors keep pouring
| cash into it? IMHO a company that is worth $100M and can stand
| on it's own feet without constant infusions of cash is
| inherently more valuable than a company "worth" $1B but needs
| to make every funding round to keep the lights on.
| mintycrisp wrote:
| The article doesn't really offer any alternatives to fighting
| fire with fire (money vs money). More like different approaches
| to how to use your fire money. Source talent outside of the
| Valley, compete in a newer market and utilize smaller governments
| to avoid regulations. They touch on culture at the end, but
| explains it only as having access to new/untapped talent to hire
| which is basically their first point.
|
| I think the best way to fight monoliths and huge money pits is
| with your company's ideals such as share everything, privacy at
| all costs, don't be evil tech, focused on the best user
| experience/optimization/features, building an open source
| metaverse, etc...
|
| As well as letting your users have a say in someway or another
| into what the end product is. Allowing them to be invested in how
| it turns out, the way it is used and whom it benefits the most. I
| believe this is the best way to get sticky users who are not just
| looking at the bottom dollar and those users become your biggest
| advocates helping you grow more and more.
| gen220 wrote:
| If you can outlive the capital returns cycle (10 years is the
| standard for VC), you'll beat all but the 1-2% of the investor-
| funded competitors that eventually develop into self-sufficient,
| "going concern" businesses.
|
| Obviously, this means you have to be continuously profitable, not
| take on outside capital yourself, operate lean, and be willing to
| work on the same project for 8+ years.
|
| May people "can" do it, I think, but it requires a lot more
| patience and determination than the alternative, so few do.
| bob1029 wrote:
| We've been at it for over a decade now. For the first time
| ever, we will turn a profit next year.
|
| We almost gave up many times. There is no way anyone involved
| today would walk away at this point.
|
| It feels to me like that part of the casual StarCraft match
| wherein we are about to warp our cloaked carrier fleet into the
| enemy base without any prior detection or hope for recourse.
| Quitting the game now would be absolutely insane.
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