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The Perfect Business (2014) [pdf]

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31–38 of 38 posts

Re: The Perfect Business (2014) [pdf]

#31
If you have demand (aka, product market fit) the rest is are optimization problems. When you look at someone like Musk who is in multiple businesses, he's essentially the head of a private equity firm that manages products. He bets that certain unsolved problems are composed of solved ones, and where they aren't, it's a hack or an minor breakthrough away. Every breakthrough has non-linear effects, so it's a smart way to take risks.

Start with a counterfactual with nobody in the market, run the numbers on what it would look like if it were true, and then manage the demand to fullfill it. Politicians are similar. They manage donors off voters, where their real promises are to the donors, and the story and hope is what they sell to voters. Makers make, but managers manage, and I don't think most of us on the maker side really have an apprehension of what managing actually is.

Re: The Perfect Business (2014) [pdf]

#32
The example is a chemical company, which still need a laboratory, some equipment and storage, and possibly some people (sellers) to keep the deals on with the other companies - I don't think other chemical companies will just click a button in a system, they will want to talk with a seller. Everyone here is reading with the lens of a software company, but I think rarely software fits 3 and 2.

Re: The Perfect Business (2014) [pdf]

#33
post #27
post #24

Earlier quoted context omitted.

At the time, we didn't know where else to get $500K-$1.5M. Turns out $220K and some pain and hustling was enough. Thank God the fundamentals are really sound and upside is really there. Now we're more looking into nondilutive funding and our lines of credit are burgeoning so it's possible VC won't be needed altogether. Not ready to close the door yet though, especially to the most selective programs and institutions…

Why can't you fund the business out of cash flow?

Stability, runway, my father had a bankruptcy where he was accused of having his hand in customer funds. I strongly believe the right kind of partner can unlock incredible wealth in this case.

Re: The Perfect Business (2014) [pdf]

#34
post #26

>>(3) The ideal business sells a product which cannot be easily substituted or copied. This means that the product is an original or at least it's something that can be copyrighted or patented. The principle is excellent, but the concept of protecting your product with patents is entirely invalid since about 2001 when China was admitted into the WTO. I have personal knowledge of several, and I can't count the number…

Even if you can't sue Chinese manufacturers violating patents, very few products are bought directly from China then shipped to the USA. There are USA middlemen and retailers involved. Why couldn't a patent holder go after the USA middlemen in court?

Re: The Perfect Business (2014) [pdf]

#35
post #12

I spent a long time thinking about business like this after a decade and a half of hard knocks in SaaS and marketplaces where I simply hadn't been thinking clearly at all. That's how we came up with Best Parents (www.bestparents.com) in 2020. It's the first marketplace for high-end, in person, short courses and travel experiences for teenagers worldwide. My wife has expertise in the education sales industry from Turk…

Your criteria for a good business includes barriers to competition and low capital requirements that make venture capital unnecessary.

Re: The Perfect Business (2014) [pdf]

#37
post #26

>>(3) The ideal business sells a product which cannot be easily substituted or copied. This means that the product is an original or at least it's something that can be copyrighted or patented. The principle is excellent, but the concept of protecting your product with patents is entirely invalid since about 2001 when China was admitted into the WTO. I have personal knowledge of several, and I can't count the number…

Even if you can't sue Chinese manufacturers violating patents, very few products are bought directly from China then shipped to the USA. There are USA middlemen and retailers involved. Why couldn't a patent holder go after the USA middlemen in court?

Sure, you can probably go after them for the US part of your market.

But:

First, it is very hard to get an early preliminary injunction to halt sales, so they keep selling against you the whole time.

Second, the costs of pursuing a federal lawsuit are huge (typically six-figures+), it takes years to get to a judgement, and the result may be a pyrrhic victory where you are awarded damages and a cease-&-desist on a company that simply goes bankrupt and reorganizes under some other corp. entity.

Sure, if they got into a major US retailer instead of you, you might get something, but then you are still going up against not only the competitor's attnys but also the major retailers, so probably add a zero to the left of the decimal in your legal costs.

IOW, they still stole your IP, undermined your market, made money off of it, and suffered minimal penalties for doing so.

We should also notice that SpaceX explicitly stated that they are going the trade secret route vs patents, and said that patents would simply be treated by the Chinese like an instruction manual, and they could never stop them or recover anything.

Re: The Perfect Business (2014) [pdf]

#38
post #28
post #22

Earlier quoted context omitted.

True, it only misses to meet number 3 (it's easily copied and just getting cheaper to build software as technology advances). I think the document also misses to mention saturation of the market, which software is also very saturated and this makes it hard for new businesses to get going...

The only thing I can think of that would prevent easy copying in the SaaS world would be to have most or all of your data generated by users, and then doggedly protecting that data from scraping, and/or hiding it behind a login. Otherwise, if your business relies on scraping other peoples data and then presenting a nice UI around that, it could just as easily be replicated by others (no moat, as we're saying nowadays…

>> protecting that data from scraping, and/or hiding it behind a login

And even behind a login can still be scraped. (The proverbial "If I can do it anyone can" applies here along with "where there is a will there's a way")

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