[Off-Topic] Tech Startups, B2C overcrowding. Boring.

When I was in San Francisco in 2012, I attended Techcrunch Disrupt (personally, boring). Among the few things I remember, one was a comment from Reid Hoffman, founder of LinkedIn. I don’t remember the exact phrase, but in summary it went something like this:

"Everyone's doing B2C startups, almost no one is solving the 'Enterprise' problem, the billion-dollar B2B market."

Let me simplify. I’m treating “B2C,” business to consumer, as all the common sites we see today: social networks, instant messaging, content management, everything whose final target audience is the mass of individual consumers. And “B2B,” business to business, as the software solutions that solve both a corporation’s internal problems and problems that connect multiple corporations, where the target audience is legal entities. It’s a simplification, but it serves my purpose.

I’ll repeat something I tweeted recently: “entrepreneur” is a state, not a career or a profession. Any person, individual or legal entity, by definition, is entrepreneuring. Even a student is, building their own knowledge to solve some problem in the future. A house cleaner is an entrepreneur, and today some even earn at scale by subcontracting others and distributing services.

So it’s not only software developers who, by chance, won this “privilege.” In practice, there’s nothing special about being an entrepreneur, you just have to not be a procrastinator.

Many young people, many not even in college yet, are dazzled by the false “glamour” of this short period, which could well be a bubble, or at least a temporary market anomaly. If you’re in this group, I recommend my previous article, the translation of Alex Payne’s post, Letter to a Young Programmer Considering a Startup.

The exercise here is simple. Why do you think the overwhelming majority of tech startups invest in B2C web applications? And why are almost all of them so similar to each other? Basically, if you swap the logo, the name, and a few colors, many of them come out practically identical. Ecommerces are obvious. Vertical social networks. Mix a network-of-acquaintances component with verticals like jobs, classifieds, transportation (taxi), exercise and health.

The answer is frighteningly simple: it’s all an inexperienced person knows. Their day-to-day boils down to using Facebook, Instagram, Medium, and Tumblr. To taking the bus and the subway. To going to an emergency room or getting some exams. To going to the gym. To attending a university. And all of it from the consumer’s point of view, never the provider’s or producer’s. That’s why everything comes out more or less the same.

The Corporate World Is Very Boring

The most frightening side effect is that “tech startups” and the pseudo-career of “entrepreneur” come as the salvation of whoever read blogs, tweets, and Facebook posts about how ‘horrendous’ the life of a worker at an agency, at a big company, at a corporation is. The bureaucracy, the politicking, the hierarchical structure. All of it painted as if getting a job were walking down death row, and as if being employed at a corporation were being tortured daily in cruel ways.

And worst of all: most young, inexperienced people believe it. TL;DR: it isn’t entirely true.

To make it worse, Black Swans really do show up along the way. Facebook, Tumblr, Snapchat, Twitter. That gives the impression the feat can be repeated. Not understanding the Law of Large Numbers can be fatal.

In short: given millions of people trying to win the lottery, one eventually wins. But there’s no repeatable process that gets you there. It’s a dead-end of randomness. Thank Bernoulli and Poisson for warning us about it, even though few know it today.

I’m not saying there’s no value in B2C. Of course there is, just far more limited than people imagine. The other side of the coin, the corporate world, is almost immune to startups. We know the big names: SAP, Oracle, Microsoft, Totvs. On the purely technical side, this is very low-quality software that, ‘magically’ for some, moves billions of dollars. And it’s a market that has seen little or almost no disruption in decades.

The reason is simple: few have stopped to understand how this world works. Think about someone trying to break into ecommerce. The shallow understanding is that an ecommerce is a “virtual store.” I see it differently: I understand ecommerce as one more distribution channel.

Behind it there are countless consolidated processes that anyone who has worked in retail knows well. Distribution centers, Supply Chain, pricing strategies, taxation and material transport, purchase approval, inventory and warehouse management. Familiar territory for anyone who has worked with Sales and Distribution. Alien to everyone else.

Job sites. Few grasp what that means, but it’s a small leg of the area known as HR, Human Resources. It means understanding labor law, labor liability, benefits, recruitment and selection, training, payroll, timesheets, travel.

Understand this: you have no chance of offering anything to the corporate market without having actively taken part in it. To someone who has never been there, a corporation is a black box. And most immediatist people tend to back away from what they don’t understand instead of exploring it. A “hacker” does the opposite: cracks black boxes open. Whoever just consumes stays a script kid thinking they’re more than they are.

When you pass through several companies, several contexts and situations, different processes at different stages, only then do you start to understand the problem domain. Do this a few times and maybe you start to see how to improve or, better yet, “innovate” in this segment.

Innovation in the corporate market starts with simple process optimization, and can end in the complete replacement of an old process or the creation of an entirely new vertical. But innovation, on its own, is a process, with stages that have to be cleared one by one. And the first stage is invariably acquiring knowledge.

There are no shortcuts. Even in B2C it amazes me to see someone try to build a product for the masses without understanding the persuasion techniques accumulated in the body of knowledge called “marketing.”

The shortcut of building copy-cat tech startups, blindly believing in a nonexistent promise, is raising a generation that’s ignorant of the processes that govern this enormous market. And some things are time-dependent. I took advantage of that by entering the market early, aiming to figure out how its gears work.

When you’re the youngest, mistakes weigh less and wins are overvalued. Once you’re past that age, mistakes become intolerable and wins are treated as the expected norm. And the later it gets, the less chance you have of understanding how the world works, with more and more doors closed.

Obviously I’m generalizing. There are exceptional cases where this works differently, but if you don’t yet know whether you’re an exceptional case, the odds are that you aren’t.

Serendipity only happens when you expose yourself to the widest possible variety of situations, creating opportunities. In a single startup, a single product, a single unproven idea, the chances of serendipity collapse.

The advantage of an SAP, over its several decades of existence, was accumulating the knowledge of every process, of every industry, sweeping through nearly everything important in the corporate world. And even so there are areas it still can’t quite touch, which opens room for a Salesforce.com to stand out. Now picture whoever is artificially limiting themselves.

More than that: with no knowledge at all and the illusion that “mistakes” are good because they turn into learning, we forget the obvious. Erring is human. Erring at what is already notoriously wrong is stupidity, pure and simple.

Charging a client without having signed a contract first, then calling them dishonest for not paying in full, shows the stupidity of whoever didn’t sign the contract. Spending the money up front as “investment” and then running into payroll trouble is amateurism from someone who ignores the basics of cash flow.

Rewriting entire systems without knowing what it will cost in development hours, user training, integrations, data migration, and opportunity cost is another huge blunder from someone who can’t do basic cost analysis. All of this is plain stupidity, you don’t need to err to learn it. Seeing it happen once was enough: every company does this, for decades, long before you were born.

This is inexperience, which is normal, nobody is born knowing everything. That’s why acquiring experience matters so much. Without it you’re always at a disadvantage, because you wanted a shortcut you thought would save 5 years and it’ll leave you 10 years behind.

The B2C world is over-saturated. The B2B world will stay free of important startups for a few more years, since this generation is also wasting time and effort in inefficient ways, throwing away everything we’ve known for years. And remember: avoiding waste, as I recall, is the pillar of “Lean.”