Do They Solve Hard Problems?
There are many questions investors (Angels and Venture Capitalists) ask you and themselves when determining whether to provide financing. One that is often heard is, “Are they solving a really hard problem?”
A startup is a small company that takes on a hard technical problem.
- Paul Graham
Investors believe if you are solving something really hard it loosens people’s wallets. People want to pay for things that make their lives easier. A great example is Netflix. Netflix was originally a way to avoid paying late fees from Blockbuster. People hate late fees.
I have been told, Solving a hard problem is the number one thing investors look for in startups. If this is true, why do so many successful (well-funded, lots-o-traction) startups not seem to solve a fundamentally hard problem?
There are many problems Facebook solves internally which are challenging. The invention of Cassandra is a testament to some of their hard problem sets. But, what hard problem does Facebook solve for their users?
Do people have a dying need to know what their high school friends are up to? Do people want to stay informed to the lives and happenings of their acquaintances? Neither of these seem like a hard problem their users have.
So what really hard problem does Facebook solve?
FourSquare
Before foursquare, I didn’t know I had a problem with letting my friends know where I was. Once I started using foursquare I realized there was a simpler solution than sending text messages to my friends letting them know I have arrived.
However, virtually checking into different venues doesn’t resonate as having a market.
It seems the hard problem foursquare is actually solving is being a data broker or a PaaS. Other startups can use their APIs, thus exposing all of the juicy user data regarding trafficking patterns. I will concede that this is a hard problem being solved.
Twitter is essentially a curated, shortened, RSS feed. Identifying and reading only interesting news which you care about was and still is a hard problem to solve. Twitter solves the “news I care about” problem by allowing each of its users to specify who they want to help curate their news feeds.
Twitter ins’t the most elegant solution to a hard problem, but, twitter has proposed a solution.
Does anyone have a hard time organizing and sharing things they love with anonymous strangers or friends?
This seems to be a derivative of Twitter, a way for users to find and identify products they want to purchase through others curation. If we have a problem identifying products we want to buy then, as Louis CK states, we seriously do have “white people problems”.
Here is an outlier. Google does do something incredibly hard, “Indexing the known internet.” However, When they were building, there were already solutions which existed, namely Yahoo and Altavista.
This must mean investors think it’s acceptable to solve a hard problem where solutions already exist. Prepare to be displaced soon Twitter.
Conclusion
Upon initially writing this I was convinced many big name startups weren’t solving hard problems for their users. Upon writing and thinking on them, yes, some of the startups listed above do solve hard problems. Others don’t or at least I can’t identify what hard problem they are solving for their users. What are your thoughts on startups which are hugely successful? Do you think they solve hard problems?
Notes
I am only covering the topic of solving hard problems. I am not trying to state investors aren’t looking for other things, namely: market size and a smart founding team.