Sunday, September 14, 2008

Sunday Startup Aphorism: Forget a Space That Already Has Five Companies in It

Forget a Space That Already Has Five Startups in It.

This piece of advice comes from SGN's CEO Shervin Pishevar.

I had been talking to Shervin about my belief that a virtual goods infrastructure company was good bet. When you're dealing with an industry with a lot of content risk like games, it's usually a smart bet to provide infrastructure rather than content. Take Offerpal and Superrewards, two monetization services companies that are pulling in millions from offering CPA offers via social games while avoiding content risk.

Surveying the landscape, we named a few companies entering the space. That's when he busted out the aphorism.

The view is that if there's already that many companies in the space, there are probably more of whom you're not aware. And they're will be even more. Not only don't you have a headstart, but you're behind the curve.

Big opportunities attract a lot of competitors. Unfortunately, so do smaller opportunities with lower bars of entry. Take to-do list sites. There's tons of them. And yet, people still make them. It used to baffle me, until I realized how easy they were to make. Don't fall for the fallacious argument that just because there's a lot of competitors means that it's a space worth winning.

Unless you have a completely innovative approach to the problem that is cheaper, faster, and better, don't get caught up in the landgrab for a new space.