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Why is so much of Silicon Valley obsessed with small ideas that don't solve a problem?

  • The world does not need another mobile photosharing app or SMS-based event planning system.  The truth is that it's not that hard to get into commercialization of more complex technology if you're willing to invest time and energy into getting the background.  Why do the vast majority of startups seem to settle for low-success-rate vanity apps that solve no real problem? Though the tone of this question is intentionally accusatory, there's a real effect here that I think can be discussed without making a value judgement.  That is, without saying that mobile local photosharing is "less important," it's qualitatively different from tech transfer, which when done successfully is usually higher economic value as well as "impact."  Why do so many fewer people pursue this?

  • Answer:

    ------------ Update: May 21, 2012 ------------------------- I wrote the Original Answer below 6 months ago.  Today, the eminent wrote a far more eloquent piece supporting the exact same argument: If investors have a choice of investing in a blockbuster cancer drug that will pay them nothing for fifteen years or a social media application that can go big in a few years, which do you think they're going to pick? If you're a VC firm, you're phasing out your life sciences division. The title of Steve's article is simply: Why Facebook is Killing Silicon Valley. http://steveblank.com/2012/05/21/why-facebook-is-killing-silicon-valley/ On the one hand - it's an honor to be in the company of great minds like Steve Blank. On the other - it's sad that this is the current state of early stage life sciences and technology investing. As Steve says: And for Silicon Valley the investor flight to social media marks the beginning of the end of the era of venture capital-backed big ideas in science and technology. Steve's post is definitely more eloquent - and I would encourage everyone who participated in this debate to read it. ------------ Original Answer: November 18, 2011 ------------------------- I wasn't going to dive into this one - but then I changed my mind ;-)  Warning:  very long answer - so either grab a coffee - or bounce to the next question.  SV (and the U.S. more generally) is fascinated (if not obsessed) with small ideas because they're typically easier - and because the odds of financial success are just way better than tackling some of the larger - more systemic problems.  Three big ones that come to mind (in no particular order) are: Energy and dependence of foreign oil (a finite global resource at escalating costs to find/extract) Education - where the U.S. continues to fall behind on key metrics relative to other countries - especially in the sciences (and math) Healthcare - which is likely to eclipse 18% of U.S. GDP sometime in 2012 I actually don't know as much about Energy and Education - but the statistics around healthcare are eye-opening and eye-popping.  This single chart (from Mary Meeker's incredible report earlier this year - U.S.A., Inc.) goes a long way to highlight the dilemma (with thanks to Gabe Ruane for the graphic refresh): I encourage everyone to read her report here: http://www.kpcb.com/usainc/  Several noted economists have gone as far as to say we don't have a debt problem in this country - we have a healthcare problem.  I tend to agree. So how does this tie in to the question?  Also from earlier this year - GigaOM produced a great infographic titled:  The New Startup Ecosystem.  You can see the full infographic here ( http://gigaom.com/2011/06/10/startup-ecosystem/ ) but it's the 6th graphic that highlights WHERE the rocket fuel (early stage funding) is going: This is only one data point - but we have some pretty compelling anecdotal evidence as well.  Ron Conway - one of Silicon Valley's most prolific and early stage investors has a list of startups in his current portfolio.  That list recently became public.  I've seen it in the wild before - but this is the most recent version.  The categories alone are pretty insightful - but here's the breakdown by number of companies in each: E-Commerce - 45 Social Media - 39 Content Platforms - 39 Enterprise SaaS - 28 LBS / Mobile - 22 Ad Tech - 22 Media / Video - 20 Search / Discovery - 16 Cloud Computing - 16 Gaming - 16 Local - 8 Security - 7 Life Sciences / Healthcare - 6 284 Companies.  That's prolific - and fairly representative of early stage Silicon Valley investing.  The Money Tree report (most often used) is also valuable - but it tends to lump Start Up/Seed AND Series A altogether - into a single category it calls Early Stage.  That's a bit broad in terms of analyzing the true early stage pipeline.     So - while Healthcare represents 18% of GDP (and it is clearly NOT producing the tangible results that other countries are able to with a significantly smaller % of GDP) - true early stage healthcare funding is a minuscule 2-3%.  The same is true of Education and Training.  In many ways - those are the foundational bookends of a culture (Education - Healthcare).  Early stage investors (and later stage VC's) are no fools.  Social Commerce, Advertising, Sales & Marketing, Data Storage and Gaming are all MUCH better (and easier) financial bets.  The casino is humming along nicely.  Almost everything OTHER than Healthcare and Education is like shooting fish in a barrel. In fact, there's another question here on Quora that's also somewhat related - The #1 answer by far (with 68 votes) is this one: I have been asked to answer this, and I am trying to do this as polite as possible. Your value proposition to a developer / technical co founder is not good. On the one hand any decent ruby developer can find a job at a funded startup that pays in the six figures and stock options and a nice view. something like this:   Yeah, there are Ruby jobs even on Sunset in WeHo. Here you get the money, you get a great environment, you get stock options, you get to work with a great team. Now - dripping condescension aside - the answer is absolutely correct but it doesn't factor in anything other than a very narrow, short-term view of how we chose to spend our time on this spinning marble.  Ruby (and any number of other Computer Science skills) are in short supply - high demand.  Bravo!  Learn to program and enjoy the Sunset view (and perks) in WeHo.  Sign me up! But ... there's a longer term problem ... and it's this.  Given its current trajectory, healthcare insurance (in general what pays for actual healthcare) is getting to be a really BIG problem.  Here's the graph (again thanks to Gabe Ruane) that highlights this larger problem: In about 13 yrs. the annual cost of HC Insurance will equal the average annual household income. Yikes! Lest you think that doesn't affect the startup world - I would suggest reading the TechCrunch series by on Healthcare Reform - starting with one of his earlier pieces on the effect of Healthcare Insurance on the talent wars (which absolutely does include startups): How DIY Health Reform Can Help You Win The Talent Wars:  http://tcrn.ch/jTZLiq  Now - some will say - heck - with the $Millions I make from my startup - I'll be able to afford any healthcare I damn well want.  Unfortunately, we have a cautionary tale here too.  You may have heard the name Donna Dubinsky.  She was CEO of Palm, Inc. and Co-Founder of Handspring (and more recently Numenta).  Her longer bio here: http://en.wikipedia.org/wiki/Donna_Dubinsky  Needless to say - she has some pretty amazing startup credentials - right?  So healthcare insurance for her should be absolutely no issue - right?  From earlier this year - just read her NYT Opinion piece titled:  Money Won't Buy You Health Insurance:  http://www.nytimes.com/2011/02/20/opinion/20Dubinsky.html    Lest you think that wealth alone can pay for its own healthcare (ie: sans insurance), be advised that healthcare expenses are the single leading cause of bankruptcy in the country.  A recent study in the American Journal of Medicine highlights these 2 sobering statistics: Healthcare expenses account for 62% of Personal Bankruptcy (NB:  Medical BK is really unique to the U.S. alone) 75% of the people who filed for bankruptcy had some type of HC insurance http://www.cbsnews.com/stories/2009/06/05/earlyshow/health/main5064981.shtml Yikes again!  Most of us (certainly not ALL) - are a single major medical event away from BK7. As Vinod Khosla said (and continues to say) ... "... as a country, we need to stop innovating around the edges."  His point is - we need to start tackling some of these larger, systemic issues.  They are hard work.  They are not going to self-correct - and they often don't include a Sunset view in WeHo.  That does not mean that they are destined to fail - or that they are any more or less important (or less rewarding) than another photo-sharing app or SMS tool.  It just means that the objectives at the outset are different - and take a larger more global view.  In terms of that more global view - I would suggest one last article - an OpEd piece by Thomas Friedman aptly titled:  Something's Happening Here (obligatory nod to Buffalo Springfield):   http://nyti.ms/t91Anm As Steve Jobs so famously said to John Sculley - "... you can keep selling sugar water - or come with me and change the world."  His clarion call is often quoted - and still true - even today.  Maybe especially today.  We can all try (in our own way) to honor his memory with that one thought.  Or not - but it is a choice.  What's yours?

Dan Munro at Quora Visit the source

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Because fun ideas spread like wildfire that pass the time for people. It's those accessible time consuming ideas that you can share with friends, that are easily accessible, that make a lot of money. They work great for advertisers who want to reach a lot of people, and they allow developers to sell loads of their smartphone applications. The best part is that they are the cheapest to produce, and yet are the most attention grabbing. Update Joel Spolsky explains how “Internet Startups” actually work. An accurate explanation, when you think about it. He unintentionally explained the answer to this question. It’s as easy as that. Now, different Internet Startups have different rules governing which screens the words are copied to. The “email companies” require you to type, separately, a list of which people’s screens you want your words copied to. The “twitter” internet startup company lets the recipients of the words decide whose words they want copied onto their screens, but in exchange the typers of the words are only given a very tiny box in which they can only squeeze a few words. On The Facebook, the words are copied from one screen to another by mutual agreement of both parties who have a pre-arranged agreement, that can be terminated at any time and by either party, that all of party A’s typed words can be copied onto party B’s computer screen. https://plus.google.com/117114202722218150209/posts/KhMRNmgGniP?hl=en#117114202722218150209/posts/KhMRNmgGniP Now which would you rather help to create, manage and control? The words or the technology behind the words? Also, because the whole business model and point of startups, is to transfer A's typed words to person B; they don't really have to do anything else. Startups are doing, and will continue to do, their purpose of what they've been initially intended to do.

Adisa Nicholson

Quite simply, simply and demand.  As soon as the market stops demanding these simple, fun apps, the market will stop supplying them.  We''ll probably deem this moment a bubble burst....

Brett Bernstein

I would rather say its all depends on ease and availability. Working on any IT startup is very easy as you need one computer and you are good to go as there are numbers of open source available in market to support your idea. to tweak your idea you can change few lines of code and you can see the effect of your work in few hours or in few day. But working in other industries startup like in aerospace, health or any other than IT, you need lots of funds and lots of expensive measuring instruments. You also need industry experts having real field experience. While working on prototypes takes lots of effort comparative to IT startup and takes lot more time in months or in years.

Dharmesh Gohil

If we look back to insanely succesful startups, there's a clear trend which shows that innovation was much rather in their business model than in the tech part itself. Before Facebook, there was Friendster and MySpace. Before Tumblr, there was a ton of blogging platforms. What was the innovation in Zappos? The business model. DollarShaveClub? Polyvore? Dropbox? LendingClub? Pinterest? Either they did something on a much comfortable, simple way, or used a new business model. Investors know that new technology is difficult to implement sometimes. Startups that excel from an existing space is often a more predictable business.

Peter Kadas

This has probably already been said, and said better, but here goes - Small ideas are cheap to implement. Small investment, relatively large returns. And no one gets really pissed off that they wound up wasting 99 cents. Solving problems means the requirements are defined for you. Not solving problems means you get to define them yourself. When the goal is simply to make money, choosing requirements you know you can fulfill is the smart way to go.

Matt Wasserman

A remark about "smallness". The ideas humans are obsessed with have a certain size and complexity, regardless of the size and complexity of actual challenges. When systems become larger and more complex, our thinking seems small in comparison, though it's really a constant. In fact, we're already doing our best - and the fact that this statement sounds at once comforting and ominous gives a taste of what humans are capable of.

Edo A. Elan

When writing about the importance of passion for the market, Venture Hack's Naval Ravikant wrote, "Every single simple thing that can be done is being done, or has been done."  As others have said, doing the simple has been the path to profit. Among Fred Wilson's points when speaking about an internet bubble was, "There are a lot of 'me too' investments out there. And the delineation between startups is getting narrower. Almost every investment that comes  our way these days causes us to ask ourselves "is this too close to xyz?" with xyz being one of our exisiting portfolio companies. The startup market is hypercompetitive. The user base is finite at some level. The capital markets are finite at some level. And the number of startups chasing these markets seems to have doubled or tripled in the past couple years."  Naval's simple things seem related if not identical to Fred's 'me toos.' The Y Combinator type accelerators seem to me to promote the "me too's" both in investing and in developing.  It is easy for developers to pitch "me too" products.  They can point to existing products' market traction and hint at their own likely success.  They can assess the weaknesses of existing products and fairly easily introduce improvements.  The two-founder model preferred by the accelerators also seems to promote simple developments.  Investors regarding accelerators see others of their breed making money off these small investments, so it is an attractive model.  I'm not sure either the applicant or the investor is thinking about the long-term consequences of this use of developer resources and capital. In Washington, there is a fear of voter reprisal for tackling big problems.  Citizens, too, have trouble getting their heads around systemic problems like healthcare and education, and even more trouble believing they can affect change.  It seems as though entrepreneurs and investors are not immune to that belief, or at least believe the solution cycle is so long as not to be profitable.  Society's loss. When people lose hope, they need release and seek entertainment.  During the great depression, the government included artists and entertainers in their jobs programs.  The cheap entertainment this afforded helped people forget their troubles.  This, to me, is why games and entertainment apps are thriving.

Steven V Deal

Tech transfer? The free market cares nothing about "need" -  only "demand".   It's "need" when you think people want it.   It's "demand" when they actually do. A generation ago, people suggested that Television should be flooded with mostly educational content.   It was what people needed. They disagreed and switched channels.   There was no demand.

Christopher Reiss

My phone is rife with apps, but they've just become overlapping efforts these days. Too many checkin apps that pretty much do the same thing and offer little to pull me away from 4SQ or Gowalla, although the latter is losing my interest due to a new shiny exterior that causes constant interior functionality issues. And the new apps that are coming down the pipes: Well, I just saw a Car Wash On Demand App today, serious? Reminds me of the Brian Regan rant on microwaving Pop Tarts, "If you don't have that kind of time..." Totally agree with Rohit about the Gold Rush Idea, but let us remember that the Gold Rush wash just the first http://pre-dot.com bubble and it surely burst, just as the app start-ups will. However, backend app coders such as Kiip, they have potential because of their ability to run within other apps and offer realtime rewards within ads. I'd like to see a donation app or something, so we can once and for all get rid of the stupid fund-raising rubber wrist band. What a waste of resources there. All these little startups sound like fun and have an angle but offer very little reasonable difference from their competitors. They're playthings, toys for a generation of perpetual teens, continuing to crave new sources of entertainment and mindsuckage.

Kelly Strodl

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