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The great Paul Graham has a piece of good advice for startups: Do things that do not scale. Paul recently stepped down from Y-Combinator, and I want to use this article to pay some respect to his sage advice on http://paulgraham.com.
Paul's argument is mostly about how founders should go extra miles and persevere in order to make a startup successful. I want to take a spin to argue that a combination of scaling and non-scaling is where a startup can find the sweet spot for success. If all elements of your startup can be scaled, then a wiz kid in a whaky t-shirt from Y Combinator can take everything away over night. If all elements of your startup cannot be scaled, then the incumbent (presumably inefficient and manual) can compete against you effectively with great resources and domain expertise.
When you have elements that both scale and do not scale, then you are in a sweet spot, for the simple observation that the wiz kid and your incumbant do not work with each other. It is for this philosophy that I believe that my startup Tenantify will carve out a niche and be successful. Following the transparent startup philosophy that I laid out, here is an excerpt of Tenantify's business plan.
"Tenantify is unique in its ability to assess tenant’s current ability to pay. This ability is unmatched by any competitors in the market. If you scrutinize the current tenant screening products out there, they are essentially the same product originated from three credit bureaus (TransUnion, Experian and Equifax). The only advantage of these incumbents has is that they are integrated in the current rental workflow (and the property management software they use).
If Tenantify is unique and differentiated, then the only fear of competition is that competitors will get into the same space. We doubt it for the following logic. Tenantify business is a perfect combination of two district elements: a technology that scales and an operation that does not scale. The technology is slick, user-friendly, and mobile-optimized. It allows landlord to send request and gets notification within 1 business day. It allows tenant to spend only 5 minutes to fill out an online form and we seamlessly pull an authenticated bank statement behind the scene. On the other hand, we have a high-touch verification process compared to a traditional credit report pull. Our operations will call employer to verify employment and manually look through the bank statement to estimate income. Our founders gain the operational expertise while working in the subprime lending space where such verification is critical.
We believe that it is difficult for the existing incumbents and young startups to have the combination of technological innovation and operational excellence for such a niche market."
The takeawy advice is the following: If you are a developer who can automates everything, try to find something you cannot automate. Learn why it cannot be automated, find the best manual proxy, and make it efficient. If you are an operator with domain expertise, be humble and understand that there are probably 100 people out there with the same domain expertise. In a world that the software is eating everything, find something that has not been scaled before and scale it.
