I don't know about the rest of the world, but we sure are in a bubble here at Hacker News. There seems to be a real disconnect between what people want to build/invest in and what people in the real world actually need and want to pay for. Just as sample of what I've witnessed in the past few years:
Ask HN: How do you like my file sharing app?
Ask HN: How do you like my social app for niche <x>?
Ask HN: How do you like my twitter app?
Ask HN: How do you like my facebook app?
Ask HN: How do you like my iphone app?
Ask HN: How do you like my facebook app that writes twitter apps?
Ask HN: How do you like my game?
Ask HN: How do you like my photo sharing app?
Ask HN: How do you like my video sharing app?
Ask HN: How do I monetize my free flashcard app?
Ask HN: How do you like my app that helps other hackers to do <x>?
Ask HN: How do I get traffic to my freemium app?
Ask HN: How do I get angels/VCs interested?
Ask HN: Look what I wrote this weekend!
Ask HN: Look what I wrote in one night!
Ask HN: Look what I wrote in 7 seconds!
Customer 1: How can we sell through Amazon.com?
Customer 2: How can we reduce inventory by $300 million?
Customer 3: How can we increase conversion from 2% to 4%?
Customer 4: How can we use software to reduce energy costs?
Customer 5: How can we migrate one app into another?
Customer 6: How can we get our phones to talk to our legacy apps?
Customer 7: How can we take orders through the internet?
Customer 8: How can we get our software package to do <x>?
Customer 9: How can we reduce credit card fraud?
Customer 10: How can we increase SEO effectiveness?
Customer 11: How can we connect fulfillment and ecommerce?
Customer 12: How can we increase revenue?
Customers 13-200: How can we increase profitability?
To add, approximately one half of people in the real world share a common demographic category with a sliver of HN users and a fraction of a sliver of what we create.
Women have money. Go take it. Nobody else wants it in tech. (Well, aside from Groupon, Zynga, and a few other companies that missed the opportunity to make an iPhone app that you could wiggle to share photos.)
It's about what humans want. Humans act the same, for the most part, accounting for cultural differences. (Fashion is an example of a cultural difference, In Turkey, for example, men often place as much importance on being stylish as American women do.)
So, think culture development. Talk To Customers. (And don't try to flirt. Look at their faces. Write notes.) Talk to them both individually and in groups.
This is common advice, but I find it frustratingly vague. Talk to people? I talk to people all the time. Heck, I talk to women all the time — half my friends are women, I currently live with two female housemates and used to live with a third, and my mother is a middle-aged office manager. After years of talking to them, I can only conclude that I've missed the boat on making Facebook, Etsy, The Sims and Model Mayhem.
I imagine a lot of people are in the same boat. It's hard to talk to people in a way that reveals product opportunities. That's why they make things for the only people who will actually tell them what they want — themselves.
I know what you mean. When I've suggested targeting a female demographic with things that are somewhat silly, but most women just go crazy over (seen by how many women get into similar thing in several businesses) I was dismissed out of hand.
The Palm Pre used this strategy. Not that it's necessarily bad, but I don't think it's necessarily an instant cash-in either. You have to do things correctly and carefully, and I think the difference between appealing primarily to women and appealing to men is fundamentally a stylistic one.
I don't know how the hell they did it, but it worked for Palm. I was watching 'born rich' recently and one of the celebutantes says, referring to a handbag, 'it has room for my palm pilot, or paper, if you are still into that'.
They do, it's just not what you'd expect. For example, here in the UK, Volvo are big sponsors of the Twilight franchise. How does that make any sort of sense!? Well of course it does, because Twilight's core readers aren't teenagers at all, they're 30-something women. Same demographic that're buying all the Kindles.
Any ad you see that you don't understand, any product you think is irrelevant, someone must be buying it or it wouldn't exist. So, pause for a second and think, this is not for me, who is it for?
People are taught to focus on a market they understand, specifically themselves if nothing else. Women, on the other hand, are hard to understand, even to other women.
They pretty much do, it's just that women aren't the only target demographic that you can do this with. Think comic book movies, etc. They're all aiming at a very specific subset of the population and tailoring films to that group.
You may not be aware but there are a lot of other websites taking money from women. IE. shoe website innovations. I recall there was also some fashion site at TC Disrupt that reminded me of Swoopo. I wonder what happened to it.
Women are interested in much more than fashion and shoes (and there are many men who are interested in fashion and shoes). The market seems pretty poorly understood by tech innovators.
There is also a huge (multi-Billion dollar) "industry" for corporate level software that is under serviced in many areas (i.e. the software is churned out by large development houses and is below par).
Yet very few startups seem to target these areas.
We took a product into a badly serviced industry and were wildly profitable within about a year on minimal funding. I always worry that there is a growing amount of speculation on "great teams"/social media and less focus on creating useful stuff that companies/people want/need (and, damn, there is a lot of it).
My boss always moans when I talk to him about startups and VC's, he usually says "if you give me $100,000 and 6 months I could come out with at least 5 profitable pieces of software and sales to return your investment by the end of the next year".
"Yet very few startups seem to target these areas."
Perhaps you're seeing an artifact. Generally the startups you hear about on HN and elsewhere are trying to generate 'buzz' and 'raise awareness' to get to 'closing a funding round.'
As you yourself demonstrate when one starts a company to solve a problem for which there are already customers in pain (and thus willing to buy the product), they can generally, if they execute well, get started and get profitable early on and then grow organically by expanding out from their customer base to adjacent markets. All without any big funding round or 'buzz gathering.'
Solving known problems well, gets you a steady paycheck, its not 'sexy' and its not usually 'disruptive' and it is very very rarely even brought up in places like this.
Because the problems are known it also means are are usually several players trying to get to the same dollars and margins are limited right from the start as people compete to be the chosen solution out of a variety of solutions.
Disruptive changes on the other hand, take a market with a reasonable capital flow and shift it all to a single player. Depending on how long that shift lasts, the return on investment for that player is 10, 100, even 1000 times higher.
The other problem here is that if you are a VC fund you can't leave the money you've raised in T-bills forever, you really really do need to invest it. So there is pressure to put it out there and get it working for you, and if its been getting 2 - 3% in T-bills and your clients were expecting 20 - 30% then the longer its been sitting the bigger a pop you want to spend it on. A very strange but measurable forcing function.
Selling software to large corporations however requires significant support effort and bending over backwards to make the sale. I seem to recall an article about hunting elephant versus deer that covered the issues quite well.
Dealing with just the development side of it in my day job, no way does dealing with them on my own or in a small startup team appeal.
It depends which industry you pick - but often the problems are over-hyped. It's true; I had the same trepidation you talk about when first having to face doing sales... and at the start it can be a disaster ;) but you can soon pick up the tips & tricks needed to sell to corporates.
In fact; as hackers we are actually at an advantage selling to corporates, so long as you "get" the process, because they tend to be "attuned" to the sort of tactics employed by sales types. Often you can cut through that using feigned ignorance and a little simple social engineering :)
And at the end of the day... once you have a little traction hiring a dedicated sales guy is easy :) Many startups do exactly that when completing the first major round.
I may well be somewhat jaded because my job is coding for the financial side of things. When you're dealing with money and banks things... suck. A lot.
There's no real secret to any of it (that's the first pointer).
The few things that spring to mind:
Be polite but persistent
Procurement people at corporates are used to really pushy sales people; so if you barely make any effort you won't get through at all :)
Judge who you are talking too
Most people you talk to won't be able to give you a "yes", get past them as fast as you can (I usually just ask straight out to speak to their superior/boss etc.), they are there mostly as a filter. Also consider what sort of firm you're calling - in a 50+ person company it is likely to be a specific department who buy things (even if it is just an individual), below that the person probably has a different day-to-day job. I've had a lot of success, when talking to smaller firms, with the line "lets just drop all the corporate nonsense, we're both small firms and there is no need for me to make this the normal pain in the neck".
Forget all the marketing nonsense
You'll see a lot of "marketing best practices"; I mostly ignore them, they are designed for a company with a number of sales people to normalise the sales routines. You're hacking the sales routine, so take it naturally.
I particularly advise avoiding the template emails that you stick a name in front of... keep the templated stuff to short paragraphs in your emails & material you attach (i.e. PDF's) and try to write an honest "personal" note.
Honesty does get noticed BTW, it can set you apart from the usual inundation of marketing they get.
Be open to adaption, but have a firm limit
I once committed us to a normal sale but "with a few tweaks", it took me the best part of a month to get the tweaks in place. :) Accomodating companies requirements gets you a good name, but really consider if it is worthwhile, and be happy to say no.
Be prepared to walk away
You can't sell every time. And if you are desperate to sell then they can take advantage of it! Either by getting impractical modifications (see above point) or drumming down your price. Either that or they are just not interested, and you end up sounding desperate and silly.
Invest in CRM
Biggest piece of advice IMO; it is so so so so so easy to forget who you contacted & about what. It might take you weeks to find the right person to talk to at a firm, but in 6 months when you try to upsell them the new product you don't want to have to do all that work again :) Plus I had a silly incident a while back where I kept emailing the same introductory email to a poor CEO; I think he got it about 86 times before calling to ask me to stop :)
Call the CEO
Doesn't work all the time, but sometimes (particularly in smaller firms) you can get things moving (and seal a sale) by calling the CEO. It takes a bit of balls and a fast pitch (or social engineering) to stop them hanging up :)
My favourite line was "X suggested I call you about this product, Y, we're selling you so you can have an idea of how it will improve your business"
Where X is someone in the middle of the food chain who has, at some point, said "you need to talk to my boss". :)
That's really unfair. Whilst I agree there's a disconnect, I wouldn't say it's specific to HN, but rather to the entire industry. The reason why you see those Ask HN posts is because people are looking around and realizing that those types of services have been getting tons of funding and attention.
There's a disconnect, but it's in the social web world, not just HN. And I would say HNers are trying to capitalize on the hype.
I think the reason you see those kind of posts is that those kind of applications are low-hanging fruit. The development of Yet Another File-Sharing App or Social Media Service can be accomplished by anyone with a "Learn Rails In 21 Days" book and a credit card.
Companies that are also getting tons of funding right now are biotechnology and solar energy startups, but I have never seen anything along the lines of a "Ask HN: Review my research on getting 3.3% more current per solar flux unit by doping gallium with boron" post, despite the fact that such an accomplishment would likely garner extremely good investment and/or business prospects.
More to the point, people lack any domain experience.
Don't get me wrong: it's cool to be an awesome hacker... but if you don't know about anything outside of hacking.. chances are some neck-beard somewhere has already solved all of the problems of which you are aware.
> if you don't know about anything outside of hacking.. chances are some neck-beard somewhere has already solved all of the problems of which you are aware.
The other issue with domain knowledge, at least in my experience, is that it takes a significant effort to become sufficiently knowledgeable in a new domain to discover and solve the real problems faced by people working in that domain.
This is very true. I can give another example(maybe bit-offtopic for HN).
A very good friend of mine worked in IT for like 10 yrs. He was quite good programmer, CTO etc.
One day he decided to radically change his carrer and opened... 5 Subways in Eastern Europe (he is originally from there). FFW 2 yrs => his restaurants making him $400-500k/yr, he spends zero time managing them and just focused on opening new ones.
His lesson: IT industry has one of the hardest competition rates cause all super-smart geeks are competing on relatively small marktets. Other industries competition (esp in emerging markets) is seriously overrated.
Another example - my very stupid app for selling video files just crossed $1000/day mark in sales. Ppl just need simple tools to get things done.
Argh, don't remind me about Subways in Eastern Europe. When Subway opened in Indiana, I told my (Hungarian) wife that if she wanted to make serious money, we'd open a Subway franchise in Budapest. She said, "Why would you try to sell crappy bread like that in Hungary?"
B2C (and tools for programmers) is overrepresented amongst hackers because it is easier to gain domain knowledge in these territories especially for young hackers.
I also think that B2B is still underrepresented, and I am more interested in that. But we should also note that solving Customer n's problem is very different than solving Customer M's problems at once where M is s big set of customers. The first is 'consulting', the second is building a product and a scalable startup. The second is much harder than the first, that may be also a reason for not being there that much B2B startups (but lots of consulatants).
I also think that B2B is still underrepresented, and I am more interested in that.
It is, but there are a few of us around. I'm working on an enterprise software startup, focused on information retrieval and knowledge management. Pretty far removed from the typical HN "location aware, social photo-sharing with gamification" stuff, but I think it's actually more interesting. But that's just me...
b2b startup here! We got our idea b/c 2 of my cofounders worked in the industry, and spent 3 years noting the problems with their field.
That's a very difficult thing for a 23 year old hacker to get exposure to. In order to get that job in the first place, you'd need a mechanical engineering degree, then spend several years at the plant.
On the flip side, we've just started to place ads on our sites via google's adsense, and we're getting > $15 RPM already.
B2B is where the easier money is, in my opinion. (That also applies to women-focused companies).
Definitely agree. There are lots of large problems and lots of behind the times applications being used by businesses. There is a lot of room to improve efficiency and cut down on costs.
I have a couple ideas for B2B type systems, my real problems are how to market and sell those applications. I guess I don't really have knowledge in how companies adopt technology. It seems easier (although less profitable) to sell to individuals since it's one person's decision process, not an entire organization.
Most geeks that I know aren't trying to build apps that make money, they're trying to build apps that are fun, and that their friends think are fun.
If you offered me two choices
A) Make a million dollars a year doing something you hate that nobody will know about or care about
B) Make no money doing something you love that your friends think is cool.
I will almost always choose B, and I think most hackers will also always choose B. I would go as far as saying that choosing B is one of the defining characteristics of a hacker.
I got into computers because it was fun, not because I saw dollar signs at the end of it. Writing a video sharing app is a lot more fun than writing a software that reduces credit card fraud.
A) Make a million dollars a year doing something you love that nobody will know about or care about OR
B) Make no money doing something you hate that your friends think is cool?
...
If the question that you're trying to ask is, with all other things being equal, would you:
A) Make a million dollars a year doing something that none of your friends would know about or care about OR
B) Make no money doing something that your friends think is cool.
I would choose A every time. Also I'm not sure how you can say that writing a video sharing application is a lot more fun that writing software that reduces credit card fraud without knowing about the techniques used in the particular pieces of software. I'm interested in algorithms and neat techniques, not sharing videos or credit card fraud.
I'm still vain enough to think I'm a hacker, though:)
When I was younger, all I wanted to do was make video games. But as I got older, I found I had writing business apps was more fun (especially when I picked the language).
A) Make a million dollars a year doing something you hate that nobody will know about or care about
If you got million dollars paid for the thing you built, that is million times "know about" + million times "care about"
B) Make no money doing something you love that your friends think is cool.
I will almost always choose B, and I think most hackers will also always choose B.
I would go as far as saying that choosing B is one of the defining characteristics of a hacker.
One can find the golden path to make something one loves, something his friends think it is cool and yet, something which million people will find it worth paying a dollar a year.
Doing cool things, things "friend think it is cool" is nice, but you cannot go to the grocery with, nor pay your bills with it, right?
Besides, that cool thing, will soon loose it glory to something cooler unless it will be maintained and evolved. Money is a great way having one stick to a project and keep it up and running.
Can't you have both? Take option A for a few years. Save most of that money, then quit. Take option B for a lot longer than you could have if you didn't take option A first.
But seriously, I understand that option A almost never pays that well and is usually not guaranteed. For example, working for stock options that you'll most likely never see vest.
Also option B is not guaranteed to make no money either, and at least you like option B. So, I'd take B too.
Am I correct in my opinion that people following option A tend to be, though perhaps not universally, driven by a certain kind of greed that promotes cold, unfeeling non-authenticity? These effects ripple throughout our society at a deep level.
Some superficial examples--Zynga, advertisements for female facial creams, etc. But I feel it goes much deeper. It's like an emergent phenomenon, a parasitic infliction upon our society. Imagine where those dollars and energies and attentions could go.
I haven't looked for the article I am talking about since I last read it (back when dead trees still dominated). So I can't vouch for its veracity anymore. Its essence may be interesting or jog someone else's memory. (I may try to find it later)
The article stated that a group of college (MBA perhaps) students was surveyed and asked "would you work for the highest paying salary once you graduate?", or "would you work for what you want to do and enjoy after you leave college."
The answers were compared against reality and the respondents life after a few years - It showed that whoever chose to do what they were interested in were more successful in monetary and career terms than people who chose to follow just the cash.
It does have further support, in that we generally value passion and drive as key predictors of success over someones ability to choose better paying jobs.
Writing a video sharing app is a lot more fun than writing a software that reduces credit card fraud.
I knew a guy who wrote software to reduce credit card fraud and he thought it was great fun with lots cool statistical analysis and data mining problems to play with. And personally I think that sounds a lot more fun than writing video sharing apps.
I would take A without question. After just a year or two I'd have enough money to work on my own fun-as-can-be-but-will-never-make-money projects for a decade or two.
The customers in your first list are individual consumers, and the customers in your second list are businesses.
You're right about the triteness of those Ask HN examples, but let's not go so far as to suggest that we should all be building for businesses, and only businesses.
A1) Well, this [file sharing/social/twitter/facebook/iphone/game/photo/video] application sure has people's attention. Their developers are wicked smart and have a plan for monetization by utilizing the geo/demographic/taste data of their customers to make it easier for you, the b2c business to target them with advertisements.
Q2) How can we increase revenue?
A2) See A1.
Q3) How can we increase profitability?
A3) See A1.
See also: why should anyone publish this magazine, TV show, blog?
Back in the old timey days, you made a product people needed or you were through making said product. Today, I'm astounded by how many products/apps do the same thing as their competitors. Take iphone camera apps for example; why are there so many? Why are they getting funding? Do people need a sepia toned camera app? Is it making their lives easier?
This is not so say that innovative and "cool" apps don't have a place - they do. But it is to say that there's something concrete about making a product people need that solves a basic human problem. “My damn phone won’t take a sepia toned picture,” is not a basic human problem. In terms of a bubble, and more so, in terms of revenue – making a product someone needs assures revenue and harkens back to the old timey adage.
So is there a bubble? Yeah. Can it be quelled by a return to making products that help people with basic needs? Yeah. Do I want a camera app with sepia tone? Sure. Do I need it? No.
Those needs are dismissed as lifestyle businesses that can be bootstrapped and/or cater to enterprises and SMB. It's more glamorous and HN-friendly to be working with the latest technologies and recreational uses of them for consumers.
Who would take pleasure in reading Hacker News if it became about almost any of that customer stuff? All that stuff could be getting submitted and just not upvoted, because it is boring.
Charge for something- Building a consumer property dependent upon advertising has easily made many millionaires, but it isn’t the surest path. It takes a lot of time and scale, which due to cashflow issues will require large outside investment probably before you are a millionaire. Build something that you can charge for. That’s how business has worked for thousands of years prior to the 1990s.
Make Sure You’re Robbing A Bank- When Willie Sutton was asked why he robbed banks, he said because that’s where the money is (Thanks to edw519 for this phrase). Make sure whatever you’re going after is where the money actually is ie- a customer that will pay you. Consumer markets are tough, especially with web based products. People expect everything to be free. Businesses are usually your best bet.
If you buy into that, then reading about customers (and business customers in particular) is VERY interesting.
Which is why you never engage in business ventures based on what customers claim they need/want. How many companies expressed a need that would make Twitter or Facebook happen? Yet these services are nowadays a crucial part of many companies marketing efforts simply because a bunch of business people had a vision or scratched their own itches.
Re: Customer 2: How can we reduce inventory by $300 million?
I'm wondering if anyone has explored the outsourcing of inventory? In other words, would it be viable to establish a giant warehouse of all things that people could use as their own personal warehouse... like co-locating a server.
Yes, "pick and pack" warehousing / shipping facilities will store your stuff and even put it in boxes and ship it to your customers for you. The problem isn't storing the inventory, the problem is owning the inventory. Ultimately, reducing inventory must go along with having a quick delivery time from your upstream suppliers...
This is how a lot of businesses work. You place an order with company A. Company A orders from company B, then delivers to you.
There are reasons some companies do well at this. A lot of it has to do with setting expectations, and giving accurate information about pricing and availability.
Company B may only ever sell to a handful of other "retailers".
If you were at YC demo day this week, you would have seen some very solid companies that are addressing those 'Customer' issues that you list below. I was expecting bubble when I walked into the door at YC, but walked out of there thinking the total opposite.
I can't speak for all the other companies out there.
Agreed. It's not to say these products aren't successful, but you and I seem to be very traditional business people. I always find at least a few customers willing to pay for what I'm going to build and some sort of a competitive advantage I have over the potential competition.
I'm fairly often here, but I've never, even once, saw "How do you like my game?" except for that little airplanes game (but it was mentioned in the comments, not a post)... care to provide me with some links to those games? I'm interested to see those.
I come to Hacker News to see what interests a small demographic with whom I share some. To find out everything else, I go out on the street and interact with people.
That does not a bubble make. Hackers are hacking a lot != we're in a bubble. A bubble is a stock market bubble based on mass amounts of over-investment by VCs and the public.
