In today's globalized world - if you are not one of the bigger players and do not have moat (govt contract, some other kind of exclusivity) - other bigger players will come after you.
Basically no one is competing in NZ because no one cares about the NZ market. It's simply not large enough. Until it is.
I do think there is a lot to be said about not trying to build these giant world-eating companies that require you selling your soul to the devil. Companies like Craigslist I have a ton of respect for. A lifestyle company should be the dream of most, not the crazy disconnected-from-reality VC world we're seeing today.
I simply think anyone betting on their market being small enough to fly under the radar is making a very tenuous bargain.
Living in Poland, I see so many good ideas and good teams, that go absolutely nowhere because they begin with the local market, and struggle to achieve ramen profitability, while their global counterparts achieve scale and funding to ultimately take over the market.
There is a small niche of successful copycats that grabbed the local niche, and maintained the lead over the years due to strong network effects - like a local reddit clone (wykop.pl), or a local ebay clone (allegro.pl), but that's almost it.
All the other projects either failed to get off the ground, or got killed when globally oriented startups entered our country.
Ebay like marketplaces still have a big physical world component present. Even if it isn't ebay, it might be some other company in Australia. Or maybe trademe becomes the company which tries to take over in Austrlia. It's inevitable and just a matter of time!
Xero, however, has massive potential for growth, because it's international.
I don't understand why that is necessarily a bad thing. If someone is looking to make a shit ton of money, have a chance to monopolize or dominate the international market, then yes, that makes sense. But if you're happy and content serving nationally, and so are your customers, I really don't see why someone would want to expand internationally.
2) The internet may scale worldwide, by that doesn't mean any service can do so while maintaining that value per user. Hell, it may not scale beyond a neighborhood, let alone a country.
I don't think this is born out by the evidence. There are many social reasons that smaller markets prefer a local solution--both because of network effects and just because of branding.
In the Swiss case, Swiss people (often) don't use Google; they use Search.ch. They don't use Amazon (which is mostly unavailable in Switzerland); they use Galaxus. They don't use OkCupid; they use Parship. They don't use Zappos; they use Zalando (which is European, not Swiss, admittedly). They don't use eBay; they use Ricardo.
Many larger examples do involve the kinds of moats you describe--the Chinese Internet is a key example of that (where censorship and government backing contribute to the superiority of local alternatives)--but I think the phenomenon of Swiss startups having what an American might consider to be reduced ambitions has to be viewed in the context of Swiss _consumers_ also often preferring local options.
I would also add a subtler point here: to an American observer, the often-American-centric perspective of American startups--which are often slow to expand to foreign markets, but for whom "America" and "the world" are often near-synonyms--is less glaring than the Swiss-centric perspective of a Swiss startup. Americans--both entrepreneurs and their observers--are just less likely to realize the extent to which American companies equate national and international markets; it's far more obvious when observing a foreign company, especially one with as small a national market to dominate as Switzerland's.
[Amazon] has signed a cooperation agreement with Swiss Post, which means the postal agency will carry out customs clearance for Amazon in the near future.
Customs clearance is said to take a maximum of three hours, which makes 24-hour delivery from abroad possible. Amazon offers this delivery method as part of its Prime offer in Germany[1] I'm not referring to YC specifically, but investors and incubators who are comfortable with Uber-esq behavior.
The post you're responding to is about economics, though, and VC math doesn't work for funding modest successes.
A VC can fund 10 businesses and have 9 of them fail (high risk) as long as the remaining one provides 100x+ return (high reward).
If you don't fund that one blockbuster then you can't fund the failures.
If you want to be in low-risk and low-reward business, then you're a bank and you're providing loans, not giving out no-strings-attached cash.
We already have that. They're called banks.
Sure you can, you just bootstrap through monetising the ground work. For example, if you want a product company you can start out as a freelance design agency. The bulk of the initial design work will be for clients, but you can be involved with low volume manufacturing on the side. As the company grows, not only do you have the funds to take on progressively more ambitious product manufacturing projects, you've also built up a team of designers that can help push these projects forward. You're going to need designers right? Why not get them making you money from day one.
To give an alternative example, let's say you want to manufacture mobile phones. A good way to start small would be to manufacture accessories for existing phones. This is within the grasp of anyone within the Western world, given enough drive to do it. The revenue and knowledge you can gain doing so allows for increasingly sophisticated accessories to be built until the point where you have your own manufacturing premises (or have access to one at low rates, due to the volume of products you're pushing). The step from this point to manufacturing mobile phones is not that great.
Does this require more patience than burning through VC money? Sure, but it's also lower risk. Building a company gradually from the ground up means you get a better sense of what it takes to run a successful business (or in other words, experience is the best teacher).
Not only that, but the buyers of product and services are often different as well.
Sure, building up a huge services company lets you squirrel off some funds for product development, but how often do you see this in practice? The only example I can think of is IBM, and they're moving in the other direction.
https://en.wikipedia.org/wiki/Adafruit_Industries#History
A similar example being this product company, which started out in 2012 with two people and a laser cutter, growing to a product company that employs 30+ people within the space of 5 years:
As a side note, thank you for founding Hackaday also, it's one of my favourite websites.
As for examples of design consultancies morphing into manufacturing companies, Cambridge Audio is one such example:
Except for every company that came before the current dot-com cycle.
Yes, if you have plenty of receivables, and they're diversified, you can find banks to fund some working capital. But not operating expenses.
I'm not referring to operating expenses. I'm referring to investment in growth. The idea is to prove you have a business that can turn a profit by bootstrapping it yourself, then get a small business loan from a bank to take it to the next level.
There are also other sources of business loans. Here's one example:
https://www.fundingcircle.com/uk/businesses/
Here's another:
https://www.nerdwallet.com/blog/small-business/3-potential-b...
The idea that VC money is needed to grow a certain type of business simply isn't true. If you're prepared to be patient, you can avoid any VC involvement.
What a bizarre statement. So highly educated people can't be passionate about food?
Also, what I suggested is not limited to expansion through a franchise model. Let's go back to product manufacturing to explore why. Imagine you have just received an initial order of 100,000 units of Product X. You can meet this order with your current supply chain, but in order to cut costs in future orders you'd like to manufacture a greater proportion of the finished product in-house. Let's say for the sake of argument that you've identified potential savings if you can create injection molded cases for Product X. If you go to the bank with a low-risk plan to grow the business, including an analysis of the current health of the company and forecasts of future profits, you can reasonably expect that you can find a bank (or other business loan lender) willing to lend you the money to invest in your company to help it grow.
What a bizarre deduction. I'm passionate about food, I have no interest in starting my own restaurant.
It was a generalization based on my own observations, most banks lend to safe well-established models, university graduates tend to gravitate towards newer things.
That's your choice of course, but why do you think that is?
> "university graduates tend to gravitate towards newer things."
I don't think that's an accurate generalisation. For people who have STEM degrees, I'd agree, but there are a large proportion of people who followed other degrees (English majors, History majors, Philosophy majors, etc...) where I'd suggest that bias towards the new is not as prominent.
My original point was that people were attempting ideas which were in the realm of potential global mega corps. If you don't grow to be one, you get eaten up!
Not true. Domestic alternatives are often preferred over foreign competition. Two examples that leap to mind are eBay and Uber. Both failed in Japan because people preferred Yahoo! Japan auctions, and the Japanese taxi system. eBay and Uber can't compete there.
To take it down to the niche level, the big national real estate blogs all failed in Houston because they can't compete against HAIF or Swamplot.
One is better off building something smaller, where work and talent is enough to maintain it.
There are more opportunities in those companies (e.g. a $1 to $50 million dollar business) of which there are tens of thousands, than to build the 1 in 100 behemoth.
You'll have more chances of success, and you'll live and sleep better. Because money, above a certain amount, also has a marginal utility curve and diminishing returns.
$1..50 million dollar businesses: I agree, great stuff. I'm just not sure that such businesses have realistic long-term moats against the Amazons of the world.
In addition, having a few world conquerers around helps bring talent and money which is then turned into startups - there are a lot of great companies and non-profits that make SV what it is because some founder or early employee exited with retirement money and decided they wanted to apply their skills to helping society.
Not that's the norm, mind you, or that world-conquerers are amazing. Just, why having the occasional "big vision" around helps out.
SF locals that are priced out of their city would have likely different opinion.
Yet, while uber operated in Germany, they could get basically 100% of the customers – simply by throwing billions of VC money at the task to subsidize rides.
If competitors use such methods, there’s little you, as smaller company, can do.
There are two sides to a coin: while Uber has world-dominating ambition, that also means they aren't anywhere near as flexible to local market conditions as a local startup is. And I wouldn't consider Uber an unmitigated success yet - they still depend on VC cash to keep going, we'll see what happens when it runs out.
They refused to pay insurance for their drivers? That's the reason why Uber stopped. Because they didn't want to pay for the time between the driver leaving their home and entering the car, and the time that the driver picked up the first customer.
Which meant that during this time the driver was entirely uninsured, which in turn is illegal.
If even having this in their favor, small players are finding it difficult to survive - imagine if a bigger player comes in a space where there is a play for global level market place.
They could get a large market share, while they're heavily subsidizing their rides. The tricky part is keeping hold of the customers. Certainly where I live Uber made a pretty big push a couple of years ago, offering ridiculously cheap rides. During that period lots of people I know used Uber a lot. Once they stopped offering the subsidies and the prices rose back to 'normal' levels everybody went back to using taxis and public transport.
Works against them towards what? Not wanting to conquer the world is legitimate, I don't see why everyone should absolutely want to become the next Bezos.